From 6 April 2027, the UK’s tax landscape changes in some significant ways — particularly for those with large pension funds or farming and business assets.
Last reviewed: May 2026. Confirmed changes are marked ✅. Changes to be confirmed in autumn 2026 are marked 🟡.
Confirmed Changes from April 2027
✅ Pensions Enter the IHT Estate
The biggest structural change to IHT since the 1980s. From April 2027, unused defined contribution pension funds are included in the deceased’s estate for IHT purposes.
What this means:
- Pension pots no longer pass IHT-free to beneficiaries via nomination
- The pension fund’s value is added to the rest of the estate
- IHT at 40% applies to the combined value above the nil-rate band
- The deceased’s pension provider and executors will jointly be responsible for calculating and paying IHT on the pension element
Who is most affected:
- People with large DC pension pots who do not need the money in retirement (previously used pensions as IHT-efficient legacy tools)
- Higher earners who have made substantial pension contributions specifically to avoid IHT
- Families expecting to inherit pension funds
Note: Defined benefit (final salary) pensions typically pay a spouse’s pension or a lump sum death-in-service benefit — the IHT treatment depends on the scheme rules.
✅ APR and BPR — Cap on Full Relief
Agricultural Property Relief and Business Property Relief are reformed from April 2026 (not April 2027). The combined 100% relief is capped at £1 million of qualifying assets. Above £1 million, qualifying assets receive 50% relief — effectively taxed at 20% IHT.
For 2027/28, this reform continues and estates are assessed under the new rules.
✅ Income Tax Thresholds — Final Year of Freeze
2027/28 is the final confirmed year of the income tax threshold freeze:
- Personal allowance: £12,570 (unchanged since 2021/22)
- Basic rate upper threshold: £50,270 (unchanged since 2021/22)
- Additional rate threshold: £125,140
From April 2028, thresholds are expected to begin rising again — though the scale depends on the autumn 2026 Budget.
What Will Be Confirmed in Autumn 2026
| Item | Current 2026/27 figure | 2027/28 | When confirmed |
|---|---|---|---|
| State Pension | £221.20/week | TBC — triple lock | Autumn 2026 |
| National Living Wage | £12.21/hour | TBC | Autumn 2026 |
| Universal Credit standard allowance | £400.14/month (single 25+) | TBC — CPI-linked | Autumn 2026 |
| Child Benefit (first child) | £26.05/week | TBC — CPI-linked | Autumn 2026 |
| SMP/ShPP flat rate | £187.18/week | TBC | Autumn 2026 |
| PIP rates | TBC | TBC | Autumn 2026 |
| Pension Credit | TBC | TBC | Autumn 2026 |
Planning Actions to Take Before April 2027
| Action | Why |
|---|---|
| Review pension nomination forms | Pensions now affect IHT estate — ensure nominations are correct and estate plan updated |
| Consider pension spending strategy | Taking pension income in retirement may reduce IHT exposure from April 2027 |
| Maximise ISA allowance (£20,000) | ISAs are still outside the estate (unless spouse exemption applies) |
| Review wills | IHT liability may change materially for pension holders |
| Check APR/BPR position | If farming or business assets exceed £1m, review with accountant |
| Use 2026/27 CGT exempt amount | £3,000 annual allowance — use before 5 April 2027 |
| Pension carry forward | Use unused allowances from last 3 years before April 2027 |