Millions of Britons could face a bigger inheritance tax bill when a major change to pension rules comes into force in just six months.
From April 2027, most unused pension funds and death benefits will be included in inheritance tax calculations, potentially leaving more families facing a tax bill when a loved one dies.
Standard Life has warned that the changes, alongside rising property values and frozen tax allowances, are “creating the conditions for a ‘perfect storm’.”
Inheritance tax receipts are expected to rise from £8.7billion in the 2025/26 financial year to £14.5billion by 2030/31.
Neil Jones, tax and wealth planning specialist at Standard Life, said the combination of these pressures could leave more families facing inheritance tax.
The tax is generally charged at 40 per cent on the value of an estate above the available tax-free allowances.
The standard inheritance tax-free threshold has remained frozen at £325,000 for years, meaning rising property prices and other asset values are bringing more estates within its scope.
The growing burden was highlighted in June 2026, when the Government recorded its highest monthly inheritance tax receipts.
Under the new rules, unused pension savings will generally be counted alongside property, savings and other assets when calculating the value of an estate.
Financial advisers have been preparing for the changes, with estimates last year suggesting around 40 per cent of their clients would need to review their financial plans.
These discussions have covered how people withdraw money from their pensions, whether alternative products such as bonds or trusts might be suitable, and ways of passing on wealth through gifts.
Mr Jones said much of the preparation had already taken place but urged families not to make rushed decisions ahead of the deadline.
Families face bigger inheritance tax bills | GETTY
He said: “The next six months will be about refining plans rather than rushing into decisions that could have long-term consequences.”
Despite the concerns, he stressed that most estates would remain unaffected by inheritance tax.
Mr Jones added: “Amid all the noise, it’s important not to lose sight of the fact that pensions are designed to provide a sustainable income throughout retirement, and the majority of estates will remain unaffected by the change.”
He warned that families should focus on making informed financial decisions while ensuring their pensions continue to provide enough income throughout retirement.
Mr Jones emphasised that pensions should continue to serve their main purpose of providing an income throughout retirement, rather than being treated primarily as a way of passing wealth to the next generation.
Experts say the next six months will be about refining plans rather than rushing into decisions that could have long-term consequences
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GETTYStandard Life has published a checklist for advisers and their clients to work through during the remaining six months. It recommends assessing potential IHT exposure by valuing pensions alongside the broader estate and available allowances.
Retirement income plans should be stress-tested to ensure they still provide sufficient flexibility, including a buffer for unexpected costs.
The checklist also highlights the need to reconsider the order in which pension and non-pension assets are accessed, as longstanding assumptions may no longer hold.
Wealth transfer goals should be revisited, with gifting, trusts and other estate-planning tools considered where appropriate
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GETTYWealth transfer goals should be revisited, with gifting, trusts and other estate-planning tools considered where appropriate.
Finally, pension administration should be tidied up. Clients with multiple pension pots are advised to ensure their arrangements are clearly documented, though consolidation may not always be suitable as it could mean surrendering valuable guarantees or features.