New Inheritance Tax Rules for Pension Death Benefits: What Trustees Need to Know About Information-Sharing
Major changes to inheritance tax (IHT) are on the way. From 6 April 2027, most death benefits paid by registered pension schemes will be treated as part of the deceased member’s estate for IHT purposes. This applies whether the benefits are paid at the trustees’ discretion or not.
There are some important exceptions. Death in service benefits will remain outside the member’s estate for IHT, whether paid at the trustees’ discretion or not. Dependants’ scheme pensions will also be excluded, including where they are commuted and paid as a lump sum.
The member’s personal representatives (PRs) will be responsible for reporting and paying any IHT due on death benefits. They will also have important new powers, including the ability to direct schemes to withhold up to 50% of any lump sum death benefits that may be subject to IHT, for up to 15 months. Both PRs and beneficiaries will be able to direct schemes to pay IHT directly out of a lump sum death benefit, provided certain conditions are met.
To make all this work, new rules will require PRs and schemes to share information with each other. HMRC has now published draft regulations setting out these information requirements, and is consulting on them. The key details are set out below.
What are the Proposed New Requirements?
Under the draft regulations, schemes will need to provide information to three groups: the PRs, the beneficiaries, and HMRC. The tables below summarise what must be provided and by when.
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Information to Be Provided to PRs |
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Required Information |
Deadline |
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Information about the scheme and the value of the benefits payable that are potentially subject to IHT. |
28 days from receipt of the PRs’ request for this information. |
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The split of the value of the death benefits payable that are potentially subject to IHT between exempt and non-exempt beneficiaries. |
The later of:
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Information about the scheme, the death benefits that have been paid and the beneficiaries. |
The later of:
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Information about lump sum death benefits paid, the beneficiaries, the amount of the member’s lump sum and death benefit allowance expended by those payments, and any reductions to those lump sums to reflect IHT paid by the scheme. |
Three months from payment of the final lump sum death benefit. |
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Confirmation of receipt of a withholding notice and information about its validity and the amount being withheld. |
14 days from receipt of the withholding notice. |
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Where the scheme pays IHT pursuant to a payment notice given by the PRs, information about the member, the amount of IHT paid and the consequential reductions to the death benefits payable. |
14 days from payment of the IHT. |
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Where the scheme pays IHT pursuant to a payment notice given by a beneficiary, information about the member, the amount of IHT paid and the beneficiary. |
14 days from payment of the IHT. |
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Information to Be Provided to Beneficiaries |
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Required Information |
Deadline |
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Information about the date of receipt of a withholding notice and the person who gave the notice. |
The later of:
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Where the scheme pays IHT pursuant to a payment notice given by a beneficiary, information about the member, the amount of IHT paid, and the consequential reduction to the death benefits payable to the beneficiary. |
14 days from payment of the IHT. |
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Where the scheme pays IHT pursuant to a payment notice given by the PRs, information about the member, the PRs and the amount of IHT paid on behalf of the beneficiary. |
The later of:
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Information to Be Provided to HMRC |
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Required Information |
Deadline |
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Information about any death in service payments made and the member. |
30 days of the end of the quarter in which the payment was made. |
What Else is Still to Come?
The consultation on the draft regulations closes on 11 June 2026. The government plans to publish the final regulations later in 2026, and they will come into force on 6 April 2027.
In addition, the government and HMRC plan to publish:
- Clarifications to common questions raised by the pensions industry (expected in spring 2026); and
- Detailed guidance for scheme administrators (a draft is expected in autumn/winter 2026).
The government has published a technical note which explains how the legislation will operate in practice and gives some early indications of the likely content of the detailed guidance.
What Should Trustees Be Thinking About Now?
The good news is that the draft regulations do not impose unrealistic deadlines. Where the information that must be provided depends on the trustees having decided who will receive the death benefits, the clock does not start ticking until that decision has been made.
However, once that decision is made, the relevant information must generally be provided within 14 days. That is a tight turnaround, and trustees will need to make sure they have the right processes and controls in place to meet it.
There is another practical time pressure which is likely to arise. PRs must pay any IHT within six months of the member’s death, so they are likely to push trustees to decide on the distribution of death benefits as quickly as possible. Trustees will need to handle these enquiries sensitively, balancing the need to act promptly with the importance of following a proper decision-making process.
How Can Mayer Brown Help?
We can help trustees get ready for these changes. In particular, we can assist with:
- Training and knowledge sessions to help trustees, in-house pensions teams and administrators understand the new rules;
- Reviewing administration agreements (including service level agreements) and advising on any updates needed;
- Advising on any changes needed to death benefit decision-making procedures; and
- Drafting and reviewing communications to members, PRs and beneficiaries.
