Inheritance tax will hit twice as many families under Labour’s policies

From 6 April 2027, almost all pension wealth will be included in the deceased’s estate – non-crystallized defined contribution pensions, crystallized defined contribution pensions not invested in annuities, and lump sums on death from defined benefit pensions.

In the same case as above, with the addition of £100,000 of unused pension benefits, this rises to £43,600.

For a person whose estate consists solely of a house with an average price of £300,000, who dies with a pension fund of £50,000, his heirs’ tax bill increases by £10,000.

For the Treasury, the change is the most lucrative of them all, estimated to generate £1.5 billion when changes in behavior are taken into account.

The government estimates that 10,500 additional estates will be subject to inheritance tax in the first year, 2027-28, compared to if the tax code had remained unchanged.

On top of this, around 38,500 estates are likely to find themselves paying more than they would otherwise, with contributions increasing by £34,000 from £169,000 to £203,000.