Thousands of Britons are in the firing line of a £82,000 tax bill under reforms introduced by Chancellor Rachel Reeves, which are set to come into effect in the coming years.
New analysis has revealed that inheritance tax (IHT) changes to be implemented in 2027 will leave single homeowners facing substantial tax bills when pensions are included in estate calculations for the first time.
A person owning an average-priced property in England worth £290,395 alongside a moderate pension pot of £415,000 would owe £82,158 in inheritance tax under the new rules, according to calculations by wealth management firm Quilter.
These changes, announced by Reeves in the Autumn Budget last year, particularly affect unmarried couples and cohabiting families who lack the spousal exemptions available to married couples.
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Britons could be hit with a £82k inheritance tax bill following the Chancellor's reforms
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Previously, pensions could be passed on tax-free if the holder died before age 75, but HM Revenue and Customs (HMRC) has confirmed that from April 2027, pension savings will count towards estates regardless of the deceased's age.
In scenarios where cohabiting partners jointly own their home, only half the property value counts towards the deceased's estate. Even with this arrangement, a typical English family would still face a £24,079 inheritance tax bill solely due to the pension inclusion.
The burden intensifies dramatically for sole property owners. In London, where the average home costs £565,637, combining this with a £415,000 pension creates a tax liability of £192,254.
Joint ownership reduces this to £129,127, still representing a severe financial blow for bereaved families lacking married couples' protections.
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From 2027, pension pots will no longer be exempt from inheritance tax | GETTY Similar patterns emerge across the UK, with joint-ownership cases in Wales, Scotland and Northern Ireland facing bills of £23,891, £21,392 and £20,007 respectively, despite previously having no liability.
These calculations emerge against a backdrop of steadily increasing inheritance tax revenues, which reached £7.5billion in the year to June 2025, up from £6.7billion in 2022/23 and more than double the figure from a decade ago.
The surge stems partly from property value increases combined with tax thresholds that have remained static at £325,000 since 2009, creating what experts describe as "fiscal drag" that gradually pulls more estates into the tax net.
Reeves extended the threshold freeze for an additional two years until 2030 last year. Labour faces pressure to generate over £50billion without breaching its commitment to avoid increasing headline taxes on workers, making inheritance tax an increasingly attractive revenue source.
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Nigel Green, the CEO of deVere Group, previously cautioned that inheritance tax no longer affects only the ultra-wealthy.
"Rising property prices, frozen thresholds, and the steady erosion of reliefs mean many middle-income households - particularly in areas with high property values - are now caught," he stated.
Analysts have claimed the pension changes appear particularly harsh for those who die before reaching retirement age, unable to access funds they'll never use.
Jon Greer, a retirement expert at Quilter, 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."
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The Treasury is under fire over looming changes to inheritance tax
| PA"It is politically simpler to change the structure of inheritance tax than to touch headline rates."
The situation proves especially dire for cohabiting families with young children who receive no spousal relief or transferable tax allowances. Greer warned: "A grieving family with young children and an average priced home could face six-figure IHT bills at the most distressing time."
He called for policymakers to introduce carve-outs or transitional reliefs for working-age deaths, particularly where 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," he added.