Pensions Enter the Estate for Inheritance Tax in April 2027. The £2.5m Business Relief Allowance Stayed.

What the Autumn Budget 2026 confirmed for estates, and how the £2.5m Business Relief allowance works

From 6 April 2027, most unused pension funds and death benefits will sit inside the estate for inheritance tax. This is already law under the Finance Act 2026, and the Autumn Budget 2026 did not reverse it.

For many investors, the pension was the estate-planning tool: spend other assets first and leave the pension to the children. From April 2027, that strategy is largely gone.

The Budget also left the Business Relief allowance alone. Since 6 April 2026, each individual has had a £2.5m allowance for assets that qualify for 100% relief from inheritance tax after two years of ownership.

The key figures

• 6 April 2027: most unused pension funds and death benefits come into the estate
• 40%: inheritance tax on the amount above the available nil-rate bands
• £325,000 and £175,000: nil-rate band and residence nil-rate band, both still frozen
• £2.5m: individual allowance for 100% Business Relief
• £5m: what a couple can shelter at 100%, because unused allowance transfers to a surviving spouse
• 50%: relief above the allowance, and the rate for AIM-listed shares
• 2 years: the minimum holding period for relief

What does the change cost?

Take £1m left to the next generation, assuming the nil-rate band is already used.

• In a pension, from April 2027: £400,000 of inheritance tax at 40%
• In qualifying EIS shares held for two years or more: £0, under 100% Business Relief within the £2.5m allowance

These two assets are not like for like. A pension can hold diversified, liquid investments. EIS shares are high risk and illiquid, and can lose all of their value, in which case there is nothing left to pass on. The example shows the tax treatment only, and tax should not be the reason for taking investment risk.

What qualifies for Business Relief?

• Unquoted trading company shares, EIS and SEIS shares: 100% relief on the first £2.5m of the combined allowance, and 50% above it
• AIM-listed shares: 50% relief across the board, and they do not use the allowance
• Unused allowance: transferable to a surviving spouse

Qualifying is a matter of fact, not intention. The shares must be in a trading company that meets the conditions, and they must have been held for two years at death.

What else changed for pensions?

• 25% tax-free lump sum: unchanged, with a maximum of £268,275
• Relief rates and the annual allowance: untouched
• Two-year rule on death benefits: removed for payments from 28 October 2026
• Minimum pension access age: rises to 57 from April 2028
• Salary sacrifice: free of National Insurance only on the first £2,000 a year from April 2029
• Triple lock: becomes a double lock from April 2030

What should you ask your adviser?

• What does my estate look like with the pension inside it from April 2027?
• Should the order in which I draw on my assets change?
• Is any of my £2.5m Business Relief allowance already used by a business or farm I own?
• Could my spouse's unused allowance transfer, and how would that work in practice?
• Given my liquidity needs and tolerance for loss, is any private-company exposure suitable at all?

FAQ

Will my pension be subject to inheritance tax?

From 6 April 2027, most unused pension funds and death benefits come inside the estate for inheritance tax. How much tax is due depends on the whole estate and the allowances available.

Did the Autumn Budget 2026 change Business Relief?

No. The £2.5m allowance, in place since 6 April 2026, was left as it was.

Do AIM shares qualify for 100% relief?

No. AIM-listed shares get 50% relief and do not use the £2.5m allowance.

Can a couple use £5m?

Unused allowance transfers to a surviving spouse, so a couple can shelter up to £5m at 100%, provided the assets qualify.

Related reading

• Autumn Budget 2026 for Investors: Cash and Property Income Taxed Harder, Building Companies Rewarded

Get the full guide

The guide covers pensions, inheritance tax and Business Relief alongside every other measure, and ends with a checklist for your adviser. Download the free Autumn Budget 2026 investor guide.

Sustainable Wealth Group introduces qualifying investors to private companies. It does not advise investors or carry out due diligence on their behalf.

Sources: HM Treasury, Autumn Budget 2026 (28 October 2026); Finance Act 2026; KPMG, APR and BPR allowances increased to £2.5m; Octopus Investments, Business Relief guide; St. James's Place and Hargreaves Lansdown Budget notes (October 2026).

EIS, SEIS and unquoted investments are high risk and illiquid, and may lose all of their value. This article is for information and education only. It is not financial, tax, legal or investment advice, or an offer or solicitation to invest. Measures announced on 28 October 2026 are proposals subject to enactment in a Finance Bill and may change. Tax treatment depends on individual circumstances and may change. Worked examples are illustrative. Seek independent advice before acting.