Legislation – Finance Act 2026
Part 2Inheritance tax
Pension interests
68Withholding of benefits and payment of tax by pension scheme administrator
“226ATax on notional pension property: withholding of benefits
(1)
The personal representatives of a deceased person may give a notice to the scheme administrator of a registered pension scheme if they know that they are, or have reason to believe that they may be, liable for tax attributable to notional pension property of the deceased in relation to the scheme.
(2)
A prospective personal representative of a deceased person may give a notice to the scheme administrator of a registered pension scheme if they have reason to believe that, on becoming a personal representative, they would be, or might be, liable for tax attributable to notional pension property of the deceased in relation to the scheme.
(3)
In this section “withholding notice” means a notice under subsection (1) or (2).
(4)
While a withholding notice has effect, no benefit may be paid under the scheme to a person (“P”) if—
(a)
the total amount of benefits previously paid under the scheme to P on the deceased’s death exceeds 50% of P’s benefit entitlement, or
(b)
the payment of the benefit would result in the total amount of benefits paid under the scheme to P on the deceased’s death exceeding 50% of P’s benefit entitlement.
(5)
In subsection (4) a person’s “benefit entitlement” means so much of the value of the notional pension property of the deceased in relation to the scheme as is attributable on a just and reasonable apportionment, having regard to appropriate actuarial assumptions, to benefits that have been paid, or are or will be payable, to that person.
(6)
Subsection (4) does not apply to the payment of an excluded benefit or an exempt benefit.
(7)
A withholding notice has effect from the time when it is received by the scheme administrator until the earliest of the following—
(a)
any time when it is withdrawn by —
(i)
the personal representatives, or
(ii)
if the person who gave the notice was a prospective personal representative, that person;
(b)
any time when all the tax attributable to notional pension property of the deceased in relation to the scheme, and any interest due in respect of that tax, is paid;
(c)
15 months after the end of the month in which the deceased died.
(8)
A withholding notice does not have effect unless it complies with any requirements prescribed by the Commissioners for His Majesty’s Revenue and Customs as to form and content.
(9)
The rules of a registered pension scheme are void so far as they purport to require a benefit to be paid in breach of subsection (4).
(10)
A payment that would fall due but for a withholding notice instead falls due immediately after the notice ceases to have effect.
(11)
(12)
In this section—
“prospective personal representative”, in relation to a deceased person, means a person who has reason to believe that they will become a personal representative of that person;
“registered club” has the same meaning as in Chapter 9 of Part 13 of the Corporation Tax Act 2010.
226BTax on notional pension property: direct payment by scheme administrator
(1)
A person (“the taxpayer”) may by notice (a “payment notice”) require the scheme administrator of a registered pension scheme to pay any tax for which the taxpayer is liable and which is attributable to the value of the notional pension property of a deceased member of the scheme.
(2)
The scheme administrator must pay the amount of tax specified in a payment notice before the end of the period of 35 days beginning with the day on which they receive the notice, unless the notice—
(a)
is withdrawn by the taxpayer during that period (and before the amount is paid), or
(b)
does not comply with the requirements of subsection (3), or ceases to comply with them during that period (and before the amount is paid).
(3)
The requirements are—
(a)
that the payment notice specifies the amount of tax that it requires to be paid;
(b)
that the amount specified is not less than £1,000;
(c)
that the amount specified does not exceed the amount of tax for which the taxpayer is liable in respect of notional pension property of the deceased in relation to the scheme;
(d)
that where the taxpayer is a beneficiary the amount specified does not exceed the difference between—
(i)
the amount of the benefits payable to the beneficiary under the scheme on the deceased’s death, and
(ii)
the amount that has already been paid on the deceased’s death in benefits to or for the benefit of the beneficiary under the scheme, or that has already been specified in a payment notice given by the beneficiary in relation to the deceased;
(e)
that where the taxpayer is the deceased’s personal representatives the amount specified does not exceed the difference between—
(i)
the amount of the benefits payable under the scheme on the deceased’s death, and
(ii)
the amount that has already been paid on the deceased’s death in benefits under the scheme, or that has already been specified in a payment notice given by any person in relation to the deceased;
(f)
that the payment notice complies with any requirements prescribed by the Commissioners for His Majesty’s Revenue and Customs as to form and content.
(4)
The references in subsection (3)(e) to benefits do not include excluded benefits or exempt benefits.
(5)
(a)
include any amount that has been or will in future be payable, and
(b)
in a case where the exact amount of benefits that will in future be payable cannot be known, are to be read as references to the amount that, having regard (in particular) to appropriate actuarial assumptions, can reasonably be expected to be paid.
(6)
Where the scheme administrator pays an amount of tax under this section, a consequential adjustment may be made, on a basis that is just and reasonable having regard to appropriate actuarial assumptions and to any tax previously paid—
(a)
where the taxpayer is a beneficiary, to that beneficiary’s entitlement to benefits under the scheme on the deceased’s death;
(b)
where the taxpayer is the deceased’s personal representatives, to any person’s entitlement to benefits under the scheme on the deceased’s death.
(7)
Any repayment under section 241 (overpayments) of tax paid by the scheme administrator under this section may, regardless of who the taxpayer is, be paid to—
(a)
the deceased’s personal representatives, or
(b)
any of the beneficiaries to whom an officer of Revenue and Customs considers the overpayment of tax to relate
(but may not be paid to the scheme administrator).
(8)
The rules of a registered pension scheme are void so far as they purport to prohibit or restrict—
(a)
the payment of tax by the scheme administrator as required under this section, or
(b)
the making of a consequential adjustment under subsection (6) to a person’s entitlement to benefits under the scheme.
(9)
In this section—
“beneficiary”, in relation to a deceased member of a pension scheme, means a person who receives or has a right to receive benefits under the scheme on the member’s death;
“tax” includes interest on tax.
(10)
(11)
A statutory instrument containing regulations under subsection (10) is subject to annulment in pursuance of a resolution of the House of Commons.
(12)