Upcoming pension reforms could bring millions more estates within the scope of inheritance tax (IHT) from 2027, according to the latest Transact Inheritance Tax Index.
The Index, first launched in 2022, tracks changes in British household wealth using data from the Office for National Statistics’ Wealth and Assets Survey. Its 2025 edition highlights the impact of including pension wealth in estate valuations from April 2027.
Until now, IHT exposure had been easing. Excluding pension wealth, the proportion of households potentially liable for IHT fell from 9.4% in 2014–16 to 6% in 2020–22, largely due to the introduction of the residence nil rate band. The 2027 reforms will reverse that progress in a single step.
The number of households projected to fall into scope is expected to more than triple, from 1.6 million to 5.1 million. At the same time, the total value of estates potentially liable for IHT could rise fourfold, from £472bn to £1.9trn.
Regional disparities will be significant. London and the South East are expected to be hardest hit, with more than a quarter of households in both regions projected to exceed the £1m threshold.
Despite the scale of the change, public awareness remains low. A nationally representative survey of 1,500 people, conducted by Trajectory and included in the Index, found that fewer than 30% of homeowners are fully aware of the 2027 reforms, while a third are completely unaware. Pensions and property together account for most UK household wealth.
Advisers responding to the Index reported rising demand for estate planning strategies. Trust-based planning, gifting from surplus income and investment bonds are already emerging as leading tools to manage liabilities.
Almost half of advisers believe the reforms will also create opportunities for intergenerational planning, albeit with greater complexity.
Andrew Cullen Jones, chief development officer at Transact, said: “The 2027 reforms represent a fundamental transformation in estate planning. With a dramatic increase in both the number of affected estates and the scale of potential liabilities, individuals, particularly those with significant pension assets, must reassess their financial strategies.
“Steps such as lifetime gifting, reviewing pension withdrawal strategies and using investment bonds alongside careful trust planning can help mitigate the impact. Professional financial advice will be essential to navigate this evolving landscape and to ensure families can maximise the inheritance passed on to future generations.”
