HMRC has published further detail on how pension schemes, personal representatives and beneficiaries will be expected to manage inheritance tax (IHT) on pension death benefits from 6 April 2027, including new information-sharing, withholding and direct-payment requirements.

The second technical note on the reforms sets out the processes that pension scheme administrators will need to follow once they become aware of a member’s death, as well as the responsibilities of personal representatives and beneficiaries.

Under the new framework, pension scheme administrators will need to provide information that allows personal representatives to establish the value of the deceased’s estate and determine whether an IHT account is required.

HMRC said basic information, including the value or estimated value of the deceased’s 'notional pension property', must generally be provided within 28 days of a valid request.

Where beneficiaries have not yet been determined, relevant information must instead be provided within 14 days of the point at which beneficiaries are identified.

If an IHT account is required, personal representatives can request further information, including the share of the notional pension property attributable to individual beneficiaries.

Beneficiaries receiving pension assets will be jointly liable with the personal representative for IHT attributable to those benefits.

The technical note also confirms how withholding notices will operate.

A personal representative, or prospective personal representative, will be able to instruct a registered pension scheme to withhold up to 50 per cent of relevant pension death benefits if they know, or have reason to believe, that IHT may be due.

A withholding notice may remain in place for up to 15 months after the end of the month in which the member died, although excluded benefits and payments to exempt beneficiaries cannot be withheld.

HMRC also provided further details on the Pensions Direct Payment Scheme, through which either a personal representative or a pension beneficiary can instruct a scheme to pay IHT attributable to pension assets directly to HMRC.

Payment notices must relate to IHT and any associated interest attributable to the deceased member’s notional pension property.

The facility can only be used where the IHT and interest being paid total at least £1,000, while schemes will have 35 days from receiving a valid payment notice to make the payment.

HMRC warned that pension scheme administrators who fail to comply with a valid payment notice can themselves become jointly liable for the unpaid IHT and interest.

The note also clarifies that pension schemes will need to respond to certain information requests and notices before a Grant of Representation has been issued.

From April 2027, administrators will therefore need processes for verifying the identity and authority of personal representatives and prospective personal representatives without necessarily relying on probate documentation.

HMRC said pension schemes could use their own withholding and payment notice templates or incorporate the requirements into existing digital processes, provided the minimum prescribed information was included.

Further guidance is expected before implementation - HMRC confirmed that a third technical note, covering areas including international issues, the interaction between IHT and income tax, intestacy, charities and trusts, is expected in autumn 2026.

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