Happy New Tax Year! And the 365 Day Countdown That Could Change Everything for Your Family

Happy New Tax Year!

I know, not exactly the greeting you expected on an Easter Monday morning. But stay with me because today marks the start of something that most families with pensions and property have no idea is coming.

As of today, 6 April 2026, you have exactly one year. One year before your pension pot that you've spent decades building. The one you were told sits safely outside your estate, gets pulled into the Inheritance Tax (IHT) net.

From 6 April 2027 unused pension funds and most pension death benefits will be included in the value of your estate for IHT purposes. That's not a rumour. It's not speculation. It's in the draft Finance Bill and it's coming. The implications of this are potentially enormous. The pension that your family would currently inherit largely tax free could from next April push your estate over the threshold and trigger a 40% tax charge.

Why this matters more than most people realise

Right now pensions are one of the most powerful tools in estate planning precisely because they sit outside your estate. That's why so many people quite sensibly have been drawing down other assets first and leaving their pension untouched for as long as possible. It's not a loophole. It's been the design of the system for years.

From April 2027, that design changes. The government estimates that around 10,500 estates will face an IHT bill for the first time as a direct result of this change. A further 38,500 estates will pay more than they would have done under the current rules. The average increase? Roughly £34,000 in additional IHT per estate.

And here's the part that catches people off guard, if you're married or in a civil partnership, transfers to your spouse or civil partner remain exempt. So do pension death benefits paid to a registered charity. But for everyone else such as your children, your grandchildren, the people you probably had in mind when you were building that pension, the rules are about to get significantly less generous.

The most brutal sting in this change isn't the 40% headline rate it's what happens when your beneficiaries actually try to access the money. If you die after age 75 your pension has already crossed what planners call the "age 75 cliff edge" meaning any beneficiary drawing from an inherited pension pays income tax at their marginal rate on withdrawals which is up to 45% for higher earners (as at 6 April 2026). Stack that on top of an IHT charge of 40% on the same pot, and the combined effective tax rate can reach 64% to 67%, or higher still for large estates. So the pension you spent decades building, the one you sacrificed other spending to protect, could ultimately be handed to the taxman twice over before your children see a penny. The draft legislation does include a provision to prevent the same slice of money being fully taxed twice. Income tax won't be charged on the exact portion used to pay the IHT bill. But that's cold comfort when the overall erosion can still be more than half the pot.

What hasn't changed (yet)

There are some exclusions worth knowing about. Death in service benefits payable from a registered pension scheme are not included. Dependant's scheme pensions from defined benefit arrangements are also excluded. And the spousal exemption means that for many couples the immediate impact may not hit until the second death which is precisely why it's so easy to ignore until it's too late.

The real issue isn't the tax. It's the timing.

I've worked with enough families to know that the biggest risk here isn't the headline rate. It's the gap between hearing about a change and actually doing something about it. A year feels like a long time, until it isn't. If your pension is a meaningful part of your estate the next twelve months are a window. Not to panic. Not to make rushed decisions. But to look at your whole picture including property, pensions, investments, gifts, trusts and understand what the new rules mean for your family specifically. Because the right response to this change is different for every family. It depends on the size of your estate, who you want to benefit, what other assets you hold and whether you've already used your allowances. There is no single "fix." There's just a plan. Or if you do nothing, the absence of one.

One more thing.

This change is one of the reasons I’ve been writing my third book, with some help from a seasoned wealth manager. Current working title is Taxed to Death. Yes, the title is exactly as pointed as it sounds. We've been watching these shifts in IHT policy stack up over the past few years, not just with pensions but with agricultural property, business property and AIM shares, and the picture they paint is clear. The rules are tightening, the thresholds are frozen and the families who don't plan ahead are going to feel it.

The book is our attempt to cut through the noise and give you something that actually helps. Not jargon. Not scaremongering. Just a clear, honest guide to how Inheritance Tax really works, who it affects and what you can do about it. We’ve written it for real people, not tax professionals.

More on that very soon. For now, just know it's coming. Drop me a message to be notified when it launches.

So, happy new tax year.

Make it the year you look at the whole picture. Make it the year you stop assuming your pension is untouchable. And if you've been putting off that conversation about estate planning with your partner, your parents or your children maybe today is the day to start.

You've got 365 days. The clock is ticking.