Kirk Rice Blog

Calling executors & personal representativesWritten on June 11, 2026 by Michael Powell

Michael Powell – Financial Planning Partner

Key Points

• From April 2027, most unused pension funds and death benefits are expected to fall within the scope of inheritance tax (IHT).
• The changes may create additional responsibilities and risks for executors managing estates that include pension assets.
• Withholding notices are intended to help prevent pension death benefits being distributed before the inheritance tax position is fully understood.
• Payment notices may allow pension schemes to pay inheritance tax directly to HMRC where tax is due.

If you have accepted this role for a family member or friend act now to protect yourself from personal liability to pay inheritance tax to HMRC on pensions. Learn what the new regime could mean and understand the terms you need to know.

From April 2027, inheritance tax (IHT) will undergo one of the most significant changes in recent years. For the first time, most unused pension funds and death benefits will be brought into the scope of IHT, meaning they will form part of an individual’s estate on death.

This shift fundamentally changes how estates are administered—and explains why new tools such as “withholding notices” and “payment notices” are necessary.

A More Complex IHT Landscape

Historically, pensions sat outside of the estate for IHT purposes, making them a valuable planning tool for passing wealth efficiently. From April 2027, however, these assets will be treated as “notional pension property” and assessed alongside the rest of the estate.

This creates an immediate practical problem: pensions are currently paid quickly to beneficiaries irrespective of the rest of the estate; from April 2027 this cannot happen anymore.

Inheritance tax (IHT) on the overall estate may take months to calculate. Executors (personal representatives) are responsible for determining and paying the tax, yet they may not have full visibility of all pension assets at the outset. Many people don’t keep track of all their pensions and until you have all the details you must tell each pension scheme how much tax to pay before beneficiaries can receive any money.

Even with all the pensions information you will also need the rest of the estate valuation too. Historically it is this area that often takes time and often exceeds 6 months. From 6 months after death interest is charged for late payment of inheritance tax.

In this article I focus on safeguards, there is a real risk that beneficiaries could receive funds before the tax position is clear—leaving HMRC underpaid and executors exposed to this tax liability.

The Role of Withholding Notices

A withholding notice is designed to manage this risk. It allows executors to instruct pension providers to temporarily hold back part of the death benefits—typically up to 50%—until the IHT liability has been calculated.

This serves several important purposes:

• Protecting the estate: It ensures that sufficient funds remain available to meet any IHT liability.
• Reducing executor risk: Executors avoid the danger of distributing assets prematurely and becoming personally liable for unpaid tax.
• Creating time to calculate: IHT calculations often depend on valuing multiple assets across the estate, which cannot be done immediately after death.

In essence, the withholding notice acts as a financial “pause button,” preventing irreversible distributions until the tax position is clear.

Why Payment Notices Are Also Needed

Alongside withholding, the reforms introduce mechanisms for pension schemes to pay IHT directly to HMRC. This is where payment notices (or equivalent instructions) come into play.

These are necessary because:

• Pension providers hold the liquidity: Unlike other estate assets (such as property), pensions are often cash-based and readily available to settle tax liabilities.
• Executors may lack cash flow: Estates can be asset-rich but cash-poor, particularly if the main value lies in property or pensions.
• Deadlines are strict: IHT must typically be paid within six months of death to avoid interest charges.

By enabling direct payment, the system ensures tax can be settled efficiently without forcing the sale of other assets.

A System Built for Control and Fairness

Ultimately, withholding and payment notices are not just administrative additions—they are essential features of a new IHT framework. By bringing pensions into the tax net, the government is closing a long-standing gap in estate planning.

These tools ensure:

• Tax is collected accurately and on time
• Executors can manage estates responsibly
• Beneficiaries receive distributions with clarity and certainty

The key takeaway is clear: while pensions remain a powerful financial planning tool, their role in estate planning is evolving. Understanding these new processes will be crucial to avoiding surprises—and ensuring wealth is transferred as efficiently as possible.

Action

If you are an executor take time to ask your family member or friend where they have worked; whether they have traced all their pensions and encourage them to consolidate them into one pension, if practicable.

Ask them if they have considered the financial impact of the delay to pension payments after death to beneficiaries. Beneficiaries will look to you to act quickly to determine the tax charge for each pension.

Until you are sure you have located all the pensions AND valued everything else in the estate you cannot calculate the tax on each pension and cannot release all the money. If you get it wrong and release too much money any inheritance tax due becomes your responsibility to pay. The legislation expects you to demand the beneficiaries pay the tax due back to you but does not make them responsible.

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