A working age single homeowner with an average priced home and a moderate pension is set to receive an inheritance tax (IHT) bill of £82,158 from 2027, following changes announced in the Budget, Quilter research has revealed.

The wealth manager and financial adviser said that this bill would still be issued even if this person died before reaching pension age.

Quilter said that until now, unspent pensions were typically passed on tax-free if the saver died before the age of 75, and especially before they could access them.

However, HMRC has now confirmed that from April 2027, pension savings will count towards a person’s estate for IHT purposes, regardless of age at death, unless covered by existing exemptions.

This means that cohabiting families with young children, who do not benefit from the spousal exemption or a transferable nil-rate band, will be far more exposed.

Quilter stated that in many cohabiting households, the property is jointly owned, meaning that only half its value is included in the estate. Even then, a typical family in England would still receive an IHT bill of £24,079, purely because of the pension inclusion.

Where the property is solely owned by the deceased, the bill is almost three times higher. These liabilities will also increase if house prices inflate before the rules take effect.

Head of retirement policy, Jon Greer, said: "Charging inheritance tax on a pension someone could not access and will never be able to use due to passing away before the minimum pension age is optically terrible for the government.

"It is even more unjust for cohabiting families who have no spousal relief or ability to transfer tax allowances. A grieving family with young children and an average priced home could face six-figure IHT bills at the most distressing time.

"Married couples are protected by exemptions and allowances; cohabitees aren’t. Policymakers should consider carve-outs or transitional reliefs for working-age deaths, particularly when young children are involved. Without change, this policy risks compounding the emotional toll of bereavement with a financial hit that can destabilise a family’s future despite raking in very little in additional revenue."

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