The value of future inheritance planning has been outlined by wealth manager and financial advisers Quilter who estimate a working-age single homeowner in England with an average-priced home and ‘moderate’ pension pot could be liable for over £82,000 in inheritance tax (IHT) once the current proposals to include pension savings within an estate for IHT purposes come into effect in 2027.
And the bill would still be payable even if someone dies before reaching pension age.
Quilter estimate someone who owns their own home based on the current Office for National Statistics average house prices (£290,395) and a moderate pension pot (£415,000), would be liable for an IHT bill of £82,158 from 2027.
“Charging inheritance tax on a pension someone could not access and will never be able to use due to passing away before the minimum pension age is optically terrible for the government… A grieving family with young children and an average priced home could face six-figure IHT bills at the most distressing time.”
said Jon Greer, head of retirement policy at Quilter
He added the scenario was even more ‘unjust’ for cohabiting families who have no spousal relief or ability to transfer tax allowances and who will be far more exposed as a result.
In many cohabiting households the property is jointly owned (joint tenants), meaning only half its value is included in the estate. Even then, a typical family in England would still face an IHT bill of £24,079, purely because of the pension inclusion. Where the property is solely owned by the deceased, the bill is more than three times higher.
The situation differs depending on location. In London, sole ownership of an average-priced home (£565,637) plus a £415,000 pension creates an IHT bill of £192,254 in 2027. If the home is jointly owned, that falls to £129,127 – still a severe hit for a grieving family without the protections available to married couples.
Across Wales, Scotland and Northern Ireland, where lower house prices meant there was previously no liability for families with similar pensions, bills in joint-ownership cases will still be £23,891, £21,392 and £20,007 respectively.
These liabilities will grow if house prices inflate before the rules take effect.
| Country and government office region | Price | NRB &RNRB | Current IHT | Pension | Excess Above NRBs | IHT | IHT (Joint Ownership) |
| England | £290,395 | £500,000 | £0.00 | £415,000 | £205,395 | £82,158 | £24,079 |
| Northern Ireland | £185,037 | £500,000 | £0.00 | £415,000 | £100,037 | £40,015 | £3,007 |
| Scotland | £191,927 | £500,000 | £0.00 | £415,000 | £106,927 | £42,771 | £4,385 |
| Wales | £209,580 | £500,000 | £0.00 | £415,000 | £124,580 | £49,832 | £7,916 |
| East Midlands | £242,052 | £500,000 | £0.00 | £415,000 | £157,052 | £62,821 | £14,410 |
| East of England | £339,747 | £500,000 | £0.00 | £415,000 | £254,747 | £101,899 | £33,949 |
| London | £565,637 | £500,000 | £26,255 | £415,000 | £480,637 | £192,255 | £79,127 |
| North East | £159,142 | £500,000 | £0.00 | £415,000 | £74,142 | £29,657 | £0 |
| North West | £209,498 | £500,000 | £0.00 | £415,000 | £124,498 | £49,799 | £7,900 |
| South East | £380,650 | £500,000 | £0.00 | £415,000 | £295,650 | £118,260 | £42,130 |
| South West | £304,237 | £500,000 | £0.00 | £415,000 | £219,237 | £87,695 | £26,847 |
| West Midlands Region | £244,262 | £500,000 | £0.00 | £415,000 | £159,262 | £63,705 | £14,852 |
| Yorkshire and The Humber | £203,836 | £500,000 | £0.00 | £415,000 | £118,836 | £47,534 | £6,767 |
“Married couples are protected by exemptions and allowances; cohabitees aren’t. Policymakers should consider carve-outs or transitional reliefs for working-age deaths, particularly when young children are involved. Without change, this policy risks compounding the emotional toll of bereavement with a financial hit that can destabilise a family’s future despite raking in very little in additional revenue.”
concluded Greer.
