On 18 August, new analysis reveals that HMRC could significantly penalise UK households, especially cohabiting families, by saddling them with a staggering £82,158 inheritance tax (IHT) bill.
This scenario affects homeowners with properties valued at £290,395 and pension pots of £415,000, under reforms taking effect from April 2027. In this article, we break down every detail, figure, and implication of this looming tax burden.
What’s Changing?
- From April 2027, unused pension pots and death benefits will be included in the deceased’s estate for IHT purposes—even if the individual dies before reaching pension age.
- This shift closes a long-standing loophole that previously allowed pensions to pass tax-free to heirs.
- The estimated impact: the average IHT liability could rise by around £34,000, while the total number of taxable estates could approximately double from 4% to nearly 10%.
The £82,158 Shock Explained
Here’s how a typical scenario unfolds:
| Parameter | Value |
|---|---|
| Property value | £290,395 |
| Pension pot | £415,000 |
| Combined estate value | £705,395 |
| Nil-rate band (IHT threshold) | Up to £500,000 |
| Taxable amount | £205,395 |
| IHT at 40% | £82,158 |
| Home jointly owned (50% estate inclusion) | Reduced bill: £24,079 |
- A single homeowner (working-age) with these assets would face an £82,158 IHT bill.
- In cases of joint ownership, only half the property is considered in the estate, significantly reducing the IHT to approximately £24,079, though pensions alone can still trigger tax.
Who’s Most Affected
- Cohabiting couples are especially vulnerable—they lack spousal exemption and transferable nil-rate bands afforded to married couples.
- Without legal protections, and with rising house values and frozen IHT thresholds since 2009, more estates are slipping into taxable territory.
- In higher-value regions like London, the impact could soar to £192,254, even with joint ownership reducing it to about £129,127.
Key Facts Snapshot
- Change effective date: April 2027.
- Typical property value: £290,395 (England).
- Pension pot value: £415,000.
- Estimated IHT bill: £82,158.
- Estate inclusion threshold: £500,000 (nil-rate bands combined).
- Taxable estate: £205,395 → taxed at 40%.
These inheritance tax reforms, introducing pensions into IHT, represent a profound shift. With the £82,158 hit looming for average homeowners in homes worth about £290,000, and vastly higher implications in expensive regions, the changes raise pressing concerns—especially for cohabiting couples.
Early estate planning, understanding nil-rate bands, exploring joint ownership, and seeking professional guidance have never been more vital.
FAQs
Why will a homeowner face an £82,158 inheritance tax bill?
Because from April 2027, their £415,000 pension counts as part of their estate, pushing the total above the nil-rate threshold.
Why are cohabiting couples hit harder?
Unlike married couples, they lack spousal exemptions and cannot transfer nil-rate bands, exposing them to tax even at lower estate values.
How can homeowners prepare now?
By reviewing estate plans, considering joint ownership, utilising gifting allowances, life insurance trusts, or seeking professional advice to mitigate the tax burden.