Plan your family's 2027 pension IHT hit before HMRC's calculator arrives
Model the new pension IHT rules in 60 seconds
Executive Summary
In a nutshell
From 6 April 2027 unused defined-contribution pension pots fall inside the estate for Inheritance Tax. Around 50,000 estates a year will be newly affected with an average £34,000 IHT uplift, and the post-75 interaction can push the effective rate above 60%. HMRC has promised calculators by April 2027 but they do not exist yet, so households are running the numbers on spreadsheets and asking strangers on MoneySavingExpert. A consumer-facing scenario engine that models drawdown, ISA conversion, gifting from excess income, and spouse exemption against a household balance sheet is a clean wedge into the gap left between free generic calculators and £1,500/year IFA cashflow software.
The Story
Meet the user
Helen is 67, retired last year, and has £640,000 spread across a SIPP, a stocks-and-shares ISA, and the family home in Surrey. Her husband Mark is 71, drawing the State Pension, with a £210,000 SIPP of his own. Until October 2024 their financial adviser told them the SIPPs were the best legacy asset they owned, sitting outside the estate and passing tax-free to their two daughters. After the Budget, that plan unravelled. Helen reads three MoneySavingExpert threads in a week and ends up more confused: should they draw the SIPP down faster, gift the surplus to the girls, top up ISAs, or pay £350 an hour for a paraplanner to model it?
Then her son-in-law sends her a link to a tool that asks ten questions about ages, pots, expected spending, and intended legacy, and produces a year-by-year plan with the IHT hit modelled three ways: do nothing, drawdown-and-gift, or accelerate ISA conversion. The tool flags the post-75 double-tax cliff for Mark and shows that a £20,000-a-year gift out of excess income, paired with a five-year drawdown of the SIPP into a joint ISA, saves their daughters £92,000. Helen books a one-hour call with a regulated planner to sense-check the output, but for the first time in six months she sleeps without doing mental arithmetic.
Scores
How does this idea stack up?
7.6/10
Around 50,000 newly affected estates a year, average +£34,000 each, plus a much larger anxious-but-not-yet-affected population already searching.
Forum threads multiplying, search volume spiked to 22,200 in July 2025, and the post-75 double tax can exceed 60% effective.
Tax rules are deterministic and well published. No special APIs. The hard bit is staying on the right side of regulated advice.
Hard deadline 6 April 2027. HMRC tools promised by then but not built. The 18-month window is the product.
Acute urgency runs to April 2027, then settles into a permanent planning need similar to general IHT calculators. Pivots to evergreen retirement-planning territory afterwards.
Solo-buildable scenario engine, but accuracy and the FCA boundary need real care.
Strongest
Timing
The 6 April 2027 statutory deadline is the marketing budget you do not have to spend, and HMRC has publicly admitted its own tools will not arrive any earlier.
Watch out
Durability
Once HMRC ships its calculator and the big IFA platforms add a 2027 module, the daylight closes. The product needs an evergreen retirement-planning pivot baked in from day one.
Pain Point
The problem
“Drawing money from your pension will not in itself have any effect on your liability for IHT. If you spend the money or give it away your IHT liability will be reduced.”
— MoneySavingExpert thread "Draw down pension before 2027", paraphrased from the top-voted reply
The 2024 Autumn Budget brought unused DC pension pots into the estate for IHT from 6 April 2027. Three problems collide.
First, the change reverses 10 years of "pension as legacy vehicle" advice, so households are unwinding plans they were told to put in place.
Second, the post-75 interaction is brutal: a beneficiary already pays Income Tax on inherited drawdown, and from 2027 the same pot can be hit with 40% IHT first, taking the effective combined rate above 60% for higher-rate heirs.
Third, the residence nil-rate band tapers above £2 million of estate value, so the new pension inclusion can knock a couple out of an £140,000 RNRB allowance entirely.
None of the free pension calculators on the market today model these interactions. The MoneySavingExpert "Pensions & IHT from 2027" thread has run for months with members admitting they are guessing. HMRC has promised "interactive tools by April 2027" but that confirms the gap rather than closing it.
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