Estate planning has always been about preparing for the future, but 2027 is set to bring one of the most significant changes to inheritance planning in recent years.
From 6 April 2027, new rules are expected to change how many pensions are treated for Inheritance Tax (IHT) purposes. For some families, this could mean larger tax bills and a need to rethink long-standing estate planning strategies.
If you already have a will or estate plan in place, now is an excellent time to review it to ensure it still reflects your wishes and takes account of the changing rules.
Pensions Will No Longer Be Automatically Outside Your Estate
For many years, unused pension funds have often been an efficient way to pass wealth to future generations because they were generally outside the scope of Inheritance Tax.
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Request Your Free Estate Planning ReviewFrom 6 April 2027, most unused pension funds and certain pension death benefits are expected to be included when calculating the value of an estate for Inheritance Tax purposes.
This represents a major shift in estate planning and may affect families who had intended to leave pension savings as part of their legacy.
More Families Could Be Affected by Inheritance Tax
Many people assume inheritance tax only applies to the very wealthy.
However, when you combine the value of a family home, savings, investments, and pension assets, more estates may exceed the available tax thresholds than people realise.
The Government has estimated that while most estates will still have no Inheritance Tax liability, thousands more estates are expected to pay inheritance tax—or pay more than they would have previously—once the new rules come into force.
Existing Estate Plans May Need Reviewing
If your estate plan was created several years ago, it may have been designed around rules that are about to change.
Now is a good opportunity to review:
- Your will
- Pension beneficiary nominations
- Any trusts you have established
- Your inheritance tax planning strategy
- Your overall financial arrangements
Regular reviews can help ensure your plans continue to reflect both your wishes and current legislation.
Don't Assume Your Current Strategy Still Works
Many financial strategies that were appropriate a few years ago may no longer produce the same outcome after April 2027.
For example, some people deliberately preserved large pension funds to pass on tax-efficiently to their families. The upcoming changes mean this approach may need reconsideration depending on individual circumstances.
This does not necessarily mean major changes are required, but it does highlight the importance of taking professional advice rather than relying on outdated assumptions.
Estate Planning Is About More Than Tax
Although inheritance tax often receives the most attention, good estate planning also helps to:
- Protect your loved ones.
- Reduce the risk of family disputes.
- Ensure your wishes are followed.
- Make the administration of your estate easier.
- Provide greater peace of mind for you and your family.
A comprehensive estate plan should consider your entire financial picture rather than focusing on a single tax issue.
Start Planning Before the Rules Change
The biggest mistake many people make is waiting until the rules have already changed.
Reviewing your arrangements now gives you more time to understand your options and make informed decisions if changes are appropriate.
Whether that involves updating your will, reviewing pension nominations, considering trusts, or discussing inheritance tax planning, acting early often provides greater flexibility.
