Draft Finance Bill 2025-26 published

The Government have now published the draft Finance Bill 2025-26 containing the changes to IHT, bringing unused pension funds into the IHT regime for the first time.

You can see the full text here:

Written statements – Written questions, answers and statements – UK Parliament

We will be publishing a full analysis shortly, but the Government’s own commentary is below. We have highlighted the area of main concern for ILM members, which is that personal representatives (PRs) will be liable to report and pay IHT, rather than Pension Scheme Administrators (PSAs). We have obvious concerns that this will significantly add to the PR’s duties and thus lead to delays in estate administration, at least initially.

We will obviously keep you informed as the situation develops and are very grateful to those members who have volunteered to be on the working group on this topic.

“Inheritance Tax – Unused Pension Funds and Death Benefits: The government is publishing draft legislation to bring most unused pension funds and death benefits within the value of a person’s estate for Inheritance Tax (IHT) purposes from 6 April 2027. Following technical consultation, and in line with the current treatment of pensions already in the scope of IHT, personal representatives, rather than pension scheme administrators, will be liable to report and pay IHT. All death in service benefits payable from a registered pension scheme, including those in scope of IHT under existing rules, will be excluded from the value of an individual’s estate for IHT purposes. This supports the government’s objective to build a fairer tax system by removing distortions which have led to pension schemes being increasingly used and marketed as a tax planning vehicle to transfer wealth, rather than for funding retirement. It also removes inconsistencies in the IHT treatment of different types of pensions.”