- Why estate planning matters now — the frozen bands catching ordinary families
- How Inheritance Tax actually works — the 40%, and what counts as your estate
- Your two tax-free bands — the £325,000 and the £175,000 home allowance
- Married couples — how you reach the £1 million
- The £2 million trap — how the home allowance quietly disappears
- Giving it away — the seven-year rule and the exemptions that work
- Gifts that don't count — the reservation-of-benefit trap
- Pensions come into the net — the April 2027 change
- Businesses, farms and AIM shares — the 2026 reforms
- Trusts, without the jargon
- Leaving money to charity — the 36% reduced rate
- Sorting your estate — the paperwork, the bill, and your action plan
- Sources & further reading
Here's one of the Playbook's core sections in full — so you can see exactly how it reads before you buy. We follow one example throughout: Margaret, 68 and widowed, with a home worth about £500,000, roughly £300,000 in savings and investments, a £200,000 pension pot and two adult children.
8Pensions come into the net — the April 2027 change
This is the single biggest change in a generation, and the reason many people's estate plans need revisiting. Today, most pensions sit outside your estate — they can usually be passed on free of Inheritance Tax, which has made them one of the most tax-efficient things to leave behind. From 6 April 2027, that changes: most unused pension funds and death benefits will be brought into your estate and counted for Inheritance Tax like any other asset.
- It applies to deaths on or after 6 April 2027.
- Your executors (personal representatives) will be responsible for reporting and paying any Inheritance Tax on the pension — though they'll be able to direct the pension scheme to pay HMRC directly from the pot.
- Some things stay outside: death-in-service lump sums from a workplace scheme, certain dependants' pensions, and — as always — anything passing to a spouse or civil partner or to charity remains exempt.
The practical effect is large. A pension that was a tax-free gift to your children becomes, from 2027, potentially a 40%-taxed asset. For people who deliberately ran down other savings and preserved their pension to pass on, the logic can flip…
Two responses make sense for Margaret: start drawing on the pension to fund the gifts she's making anyway, moving money out of the estate through the seven-year rule, and keep an eye on whether her total is drifting past £1,000,000…
Read the rest — the £1 million bands, the seven-year gifting rule, and the April 2027 pension change
The full 17-page Playbook covers how Inheritance Tax works and the 40% rate, the £325,000 and £175,000 tax-free bands, how a married couple reaches £1 million, the £2 million taper trap, the seven-year gifting rule and the exemptions that work, the reservation-of-benefit trap, the April 2027 pension change, the 2026 business and farm reforms, trusts, the 36% charity rate, and a step-by-step action plan.
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How much can I pass on before Inheritance Tax?
Everyone has a nil-rate band of £325,000 — the first £325,000 of your estate is tax-free, whoever you leave it to. On top of that there's a residence nil-rate band of up to £175,000 when you leave your home to direct descendants, so a single person leaving their home to their children can pass on up to £500,000. Anything above your available bands is taxed at 40%. Both bands are frozen until April 2031. The Playbook shows how the bands stack up and how to use them.
What is the residence nil-rate band?
It's an extra tax-free allowance of up to £175,000, on top of the £325,000 nil-rate band, but only when you leave your home — or a share of it — to your direct descendants: children, grandchildren and their descendants, including step-, adopted and foster children. Leave the house to a sibling, a niece or a friend and it doesn't apply. It's capped at the lower of £175,000 or the value of the home passing to descendants, and for larger estates it is tapered away above £2 million.
How does a married couple pass on £1 million?
Anything you leave to your spouse or civil partner is completely exempt, and when the first partner dies without using their tax-free bands, those unused bands transfer to the survivor. So the second to die can have two nil-rate bands (£650,000) and two residence bands (£350,000) — £1,000,000 in total — provided they own a home they leave to their children and the estate is under the £2 million taper threshold. It isn't automatic: the transfer must be claimed on the second death by the executors using the right HMRC forms.
What is changing with pensions in April 2027?
From 6 April 2027, most unused pension funds and death benefits will be brought into your estate and counted for Inheritance Tax like any other asset. Today most pensions sit outside the estate and can be passed on tax-free. It applies to deaths on or after 6 April 2027, and your executors will be responsible for reporting and paying the tax, though they can direct the scheme to pay HMRC from the pot. Anything passing to a spouse, civil partner or charity stays exempt. The Playbook explains how to plan for it.
How does the seven-year gift rule work?
Most gifts to another person are a potentially exempt transfer. Live seven years after making the gift and it falls completely out of your estate — no Inheritance Tax, whatever the amount. Die within seven years and it's added back and may be taxed, with taper relief reducing the tax on a sliding scale between three and seven years. The catch almost everyone gets wrong: taper relief only bites on gifts above the £325,000 nil-rate band, so for most ordinary gifts it does nothing — surviving the full seven years is what actually works.
Can I give my home to my children and keep living in it?
Not for Inheritance Tax purposes, if you carry on living there rent-free. HMRC calls this a gift with reservation of benefit: if you keep the benefit, the asset stays in your estate no matter how many years pass. The main ways round it are to give up the benefit entirely (move out) or pay a full market rent to the new owners, both of which have their own consequences. Done casually it achieves nothing for Inheritance Tax and can create capital-gains and family risks — this is precisely where you want proper legal advice.
Is this financial advice?
No. The Playbook is general information for the 2026/27 tax year to help you understand how Inheritance Tax and estate planning work. It is not personal financial, tax or legal advice, and it doesn't account for your own circumstances. Inheritance Tax and estate planning are areas where mistakes are costly and hard to reverse. Confirm current rules at gov.uk, and take qualified, regulated advice — a solicitor or STEP-qualified adviser for wills and trusts — before acting on anything that matters.
Can I get the Playbook for free, and which tax year does it cover?
Every WealthR Playbook can be read online in-app with WealthR Pro (£39.99/year), along with all the tools and future editions kept current each tax year. Or buy this Playbook on its own for £19.99 as a PDF that's yours to keep. It covers the 2026/27 UK tax year, published July 2026, including the government's published detail on the April 2026 business and farm reforms and the April 2027 pension change. Figures are checked against gov.uk.