Source: STEP.org 27th August 2026
The UK’s HM Revenue and Customs (HMRC) has issued a second technical note explaining the reforms to the inheritance tax (IHT) treatment of pensions coming in April 2027, when most unused pension funds and death benefits will be brought within the value of a deceased person’s estate for IHT purposes.
It discusses how unused pension funds and pension death benefits will be treated for IHT purposes; information sharing requirements; withholding notices and operation of the process; pensions direct payment scheme notices and operation of the process; and clearances.
The new information sharing framework is set out in a statutory instrument, the Registered Pension Schemes (Provision of Information) (Miscellaneous Amendments) Regulations 2026 (SI 2026/818) laid on 15 July 2026. It sets out the information that pension scheme administrators, insurance companies and personal representatives must supply to each other, to beneficiaries of pension schemes, or to HMRC after the death of a member, ensuring personal representatives can collect the necessary information about the deceased, and helping HMRC check the tax position. Some amendments were made to the final regulations following consultation responses; notably, pension scheme administrators will only have to inform personal representatives about any excluded benefits and provide details of these where an inheritance tax account is required.
- The new note deals with the five stages at which personal representatives and pension scheme administrators will need to share information.
- A withholding notice will also be necessary for the personal representative and beneficiaries if the personal representative instructs the pension scheme administrator to withhold up to half the notional pension property, or where there is a pension transfer.
- Payment notices will also be required if the personal representatives or beneficiaries instruct the pension scheme administrator to pay some or all of the inheritance tax attributable to the notional pension property.
- The personal representative will also need information on payments of tax-free lump sum death benefits to determine if the deceased’s lump sum and death benefit allowance has been exceeded.
The note also provides more information about establishing the identity of personal representatives and prospective personal representatives. The term ‘personal representative’ is defined by reference to two statutory references, because the regulations cover multiple tax areas. For income tax, the relevant definition is that in s.989 of the Income Tax Act 2007. This definition enables both personal representatives and prospective personal representatives to request, and receive, the relevant information required from a pension scheme administrator or insurance company, without necessarily accepting legal responsibility for IHT. However, for IHT, ‘personal representative’ is defined in s.272 of the Inheritance Tax Act 1984, and applies to acting named executors dealing with the estate administration instructing a third party to do so.
HMRC is also preparing guidance for evidencing a personal representative’s authority to the pension scheme administrators. A draft copy of this guidance is provided in the new technical note, distinguishing between situations where the individual is acting as a personal representative, or a prospective personal representative who is seeking a grant of representation on intestacy. The note also sets out what pension scheme administrators should do if they receive no contact from personal representatives.
Other sections of the note deal with valuing the notional pension property; reporting potentially exempt beneficiaries; initial assessment of IHT liability, its apportionment, and when an IHT account is required; issues arising when a beneficiary is a trust; excluded benefits; and clearance certificates discharging personal representatives from IHT liability relating to previously undiscovered pension benefits.
Other sections of the note deal with valuing the notional pension property; reporting potentially exempt beneficiaries; initial assessment of IHT liability, its apportionment, and when an IHT account is required; issues arising when a beneficiary is a trust; excluded benefits; and clearance certificates discharging personal representatives from IHT liability relating to previously undiscovered pension benefits.
A third technical note will be released this autumn, covering international issues where not all the parties are long-term UK tax residents; the interaction of inheritance tax with income tax, further guidance on intestacy, and clarification of matters relating to charities and trusts, among other topics. Draft guidance will be circulated with industry stakeholders in the autumn and winter, with additional regulations on split schemes and excepted estates to be published at the same time.
Communications activity to publicise upcoming changes to impacted groups will begin in winter 2026 and spring 2027, followed by guidance and other supporting materials.
Emily Deane TEP, STEP’s Technical Counsel and Head of Government Affairs, said: ‘We are pleased that HMRC has provided further clarification on the new IHT rules for pensions. The additional detail helps to address some of the questions faced by executors and provides greater clarity on how the new processes will work in practice. However, STEP remains concerned that the new rules place a heavy administrative burden on executors, and may make dealing with a loved one’s estate slower, more complex and more expensive.’
If need advice on an estate please contact Helena Grady at Fogwill & Jones (Legal Services) Limited for advice. Helena is a Solicitor and member of the Society of Trust and Estate Practitioners (STEP) with many years’ experience.
Please note that, although Fogwill & Jones (Legal Services) Limited operate from the same premises as Fogwill & Jones Asset Management Limited they are entirely separate businesses. The only connection is that both are owned by Colin Fogwill. If you are a client of Fogwill & Jones Asset Management Limited you are under no obligation to instruct Fogwill & Jones (Legal Services) Limited and you may choose to instruct alternative legal advisers.