Inheritance tax on a Scottish estate: who pays and how much?
The allowances, gifts and the seven-year rule, pensions from April 2027, and paying the tax before Confirmation.
Read the guideThe short answer
State Pension and benefits stop at the date of death; anything owed is paid to the estate, and anything overpaid is recovered from the estate, not from the family. Workplace and private pension lump sums are usually paid to the people the person nominated and do not form part of the estate, although from 6 April 2027 most will count for inheritance tax. A surviving spouse or partner may get a widow's or dependant's pension and Bereavement Support Payment. Tell the executor about everything, so the estate is not paid out too early.
When someone dies, their income usually comes from several places at once: the State Pension, a workplace or personal pension, perhaps benefits from the Department for Work and Pensions (DWP) or Social Security Scotland. Each follows its own rules. The executor needs to know about all of them, because some affect what is left to distribute, and some affect whether inheritance tax is due.
Telling everyone about the death
When you register the death, the registrar offers the Tell Us Once service, which lets you notify most government departments in one go, including the DWP, HM Revenue and Customs and the council. Our guide on registering a death explains how it works in our local council areas. You still need to contact private pension schemes, insurers and banks yourself.
What happens to each type of income
| Income | What happens after the death | Part of the estate |
|---|---|---|
| State Pension | Paid up to the date of death. Payments after the death are an overpayment. A surviving spouse or civil partner may inherit some extra State Pension, depending on the dates involved | Arrears, yes |
| DWP benefits, such as Pension Credit or Universal Credit | Stop at the death. Arrears are paid to the estate; overpayments are recovered from it | Arrears, yes |
| Social Security Scotland payments, such as Adult Disability Payment or Pension Age Disability Payment | Stop after the death. Social Security Scotland may recover any overpayment from the estate | Arrears, yes |
| Workplace or personal pension lump sum | Usually paid at the scheme's discretion to the people the member nominated | Usually not |
| Spouse's, partner's or dependant's pension | Paid by the scheme directly to the survivor, for their lifetime or a set period | No |
| Annuity | Stops, unless it had a guarantee period or a joint life option | Guarantee payments, sometimes |
State Pension and DWP benefits
- Payments stop at the date of death. Because State Pension is paid in arrears, there is often a final payment owed to the estate.
- Overpayments are recovered from the estate. If payments continued after the death, the DWP will ask for them back. It can also recover older overpayments, for example where the person had more savings than they declared, or had gone into hospital or a care home without telling the DWP.
- The DWP writes to the executor. It usually does this once Confirmation has been granted, asking for bank statements or other information.
- Do not pay out the estate too early. The government's guidance warns that if you distribute the estate before you know what must be repaid, you may have to pay it back yourself.
Family members are not personally responsible for a benefit overpayment, unless they were part of the same claim. Our guide on who pays a parent's debts explains how estate debts work.
Social Security Scotland payments
Social Security Scotland now pays several benefits that were previously paid by the DWP in Scotland, including Adult Disability Payment and Pension Age Disability Payment. These stop after the person dies. Social Security Scotland acknowledges that it is not always told about a death straight away, and that this can cause an overpayment, which it may recover from the estate. Tell Us Once should notify it, but if in doubt, call Social Security Scotland on 0800 182 2222.
If you are on a low income and paying for the funeral, Social Security Scotland may also help with a Funeral Support Payment. Our guide to funeral costs and who pays explains the 2026/27 amounts.
Workplace and private pensions
Most pension schemes pay death benefits at the scheme's discretion, so that they fall outside the estate. The member usually fills in an expression of wish or nomination form, saying who they would like the money to go to. The scheme normally follows it, but it does not have to.
- Defined contribution pensions, such as personal pensions and most modern workplace schemes, can usually pay the remaining fund as a lump sum or as a pension or drawdown fund for the beneficiaries.
- Final salary (defined benefit) schemes usually pay a spouse's or dependant's pension, and sometimes a lump sum if the member died soon after retiring.
- Death in service benefits from an employer are usually a lump sum of several times salary, paid to the nominated beneficiaries.
- Income tax. If the member died before age 75, most payments to beneficiaries are free of income tax. If they died at 75 or over, the beneficiary usually pays income tax on what they take.
Contact each scheme as soon as you can, with a copy of the death certificate. Look through the person's papers for annual pension statements, and ask their former employers if you are unsure what schemes they belonged to.
The April 2027 inheritance tax change
At the moment, most unused pension funds and pension death benefits are outside the estate for inheritance tax. That changes for deaths on or after 6 April 2027, when most unused pension funds and death benefits will be included in the value of the estate for inheritance tax. The main points:
- Death in service benefits from current employment, and some dependants' pensions, are excluded.
- Pensions left to a spouse or civil partner are still covered by the spouse exemption.
- The executor is responsible for reporting and paying any inheritance tax due on the pension, even though the pension money is paid by the scheme, not through the estate.
This means executors will need details of every pension, not just the assets that pass under the will. Our guide to inheritance tax in Scotland explains the thresholds, and our guide on valuing an estate for Confirmation explains how pensions are listed.
Help for a surviving spouse or partner
| Who you are | Bereavement Support Payment | Most you can get |
|---|---|---|
| Married or civil partner, with children, getting Child Benefit or pregnant | Higher rate | £3,500 plus 18 monthly payments of £350 |
| Married or civil partner, without children | Lower rate | £2,500 plus 18 monthly payments of £100 |
| Living together as if married, with children, getting Child Benefit or pregnant | Higher rate | £3,500 plus 18 monthly payments of £350 |
Bereavement Support Payment is not means tested, but you must have been under State Pension age when your partner died, and your partner must have paid enough National Insurance, or died because of an accident at work or a work related disease. You usually need to claim within 3 months of the death to get the full amount, and within 21 months at the latest. Our guide on what an unmarried partner can claim covers the rest of a cohabitant's position.
A surviving partner should also check their own benefits, such as Pension Credit, Universal Credit or Council Tax Reduction, as their circumstances have changed. The 25% single person council tax discount may now apply.
A checklist for executors
- Use Tell Us Once when the death is registered.
- List every pension and benefit the person received, using bank statements and letters.
- Contact each private pension scheme with the death certificate and ask what benefits are payable, and to whom.
- Claim any arrears owed to the estate.
- Keep money back for any DWP or Social Security Scotland overpayment until it has been confirmed.
- For deaths from 6 April 2027, gather pension values for the inheritance tax calculation.
How we can help
We contact the pension schemes, the DWP and Social Security Scotland, deal with any overpayments, and make sure the estate is not paid out until everything is settled. Talk to our executry solicitors in Glasgow, Paisley, Renfrew, Barrhead, Hamilton, East Kilbride, Motherwell or Dumfries. Your first appointment is free.
Frequently asked questions
Is a pension part of the estate in Scotland?
Usually not. Most workplace and private pension lump sums are paid at the discretion of the pension scheme to the people the member nominated, and they do not form part of the estate that the will governs. Any State Pension or pension income owed up to the date of death is paid to the estate. From 6 April 2027, most unused pension funds and death benefits will count towards the estate for inheritance tax, even though they pass outside the will.
Does State Pension have to be paid back after a death?
State Pension is paid up to the date of death. If payments continued after the death because the Department for Work and Pensions had not yet been told, the extra is an overpayment and is recovered from the estate. If any State Pension was owed at the date of death, it is paid to the estate.
Who pays back benefit overpayments when someone dies?
The estate does, not the family. The Department for Work and Pensions can recover overpayments from the estate, and it usually writes to the executor once Confirmation has been granted. The executor should not distribute the estate until they know what, if anything, must be repaid, or they may have to pay it themselves.
How much is Bereavement Support Payment?
If you were married, in a civil partnership, or living together with children, and you get or are entitled to Child Benefit or were pregnant, the higher rate is a one-off £3,500 plus 18 monthly payments of £350. Otherwise, married couples and civil partners get the lower rate of £2,500 plus 18 monthly payments of £100. You usually need to claim within 3 months of the death to get the full amount.
What happens to Adult Disability Payment or Pension Age Disability Payment when someone dies?
These Social Security Scotland payments stop after the death. If Social Security Scotland is not told straight away, an overpayment can build up, which it can recover from the estate. Registering the death and using Tell Us Once normally notifies it, or you can call 0800 182 2222.
Need help with an estate?
Our executry solicitors can take the whole process off your hands, or answer a single question. Your first appointment is free.
This guide is general information about Scots law, correct at the date shown. It is not legal advice for your circumstances.
