Your UK Pension and the 2027 Inheritance Tax Change: What Expats Need to Know Now

Last updated: 4 June 2026 · Reviewed by the Paratus Wealth editorial team

For years a UK pension sat outside inheritance tax, the one part of your estate that passed on cleanly. From 6 April 2027 that protection ends. If you have moved abroad and assumed distance settled the matter, the detail below is worth ten minutes now, while your options are still open.

What changes on 6 April 2027?

From 6 April 2027, most unused pension funds and pension death benefits are added to the value of your estate for UK inheritance tax. Above the nil-rate band, frozen at 325,000 pounds, the excess can be taxed at 40 percent. You can read the headline changes in our 2027 explainer; this article focuses on what it means once a border is involved.

The direction of travel is clear. UK inheritance tax receipts reached 7.7bn pounds in 2025/26, and the Office for Budget Responsibility forecasts 14.5bn pounds by 2030/31. Pensions entering the net is a large part of why.

Does this apply if I live abroad?

Yes. This is the point most expats miss. Becoming non-UK resident can take your worldwide assets outside UK inheritance tax, but it does not move an asset that is situated in the UK. A UK-registered pension, a SIPP or a personal pension, is treated as a UK asset, so from April 2027 it stays within UK inheritance tax regardless of where you live or how long you have been away.

There is a second layer. Under the residence rules introduced in April 2025, if you were a long-term UK resident before leaving, your estate can stay exposed to UK inheritance tax on worldwide assets for between 3 and 10 years after departure, depending on how long you lived in the UK.

How your UK pension is treated	Before 6 April 2027	From 6 April 2027
Unused pension in your estate	Generally outside IHT	Within IHT, 40% above the nil-rate band
You live abroad (non-resident)	Pension is UK-situated	Still within UK IHT; residence does not remove it
Death after age 75	Income tax on beneficiary withdrawals	IHT first, then income tax on withdrawals

The double-tax trap after age 75

If you die after age 75, the same pension can be taxed twice. Inheritance tax of up to 40 percent applies to the pension as part of your estate, then your beneficiaries pay income tax at their own marginal rate when they draw what is left. As Graham Nicoll of NCL Wealth Partners put it, “in essence the same pound is being taxed twice.”

HMRC has said it will let beneficiaries reclaim the income tax that overlaps with the inheritance tax already paid. In principle that prevents true double taxation. In practice, advisers are warning of friction. Greg Moss of Eleven.2 Financial Planning cautions that if families settle the tax themselves, “that creates a risk of delays, complexity, and beneficiaries being temporarily out of pocket.” Several advisers expect “painful teething challenges” in the early years.

For balance, this will not touch everyone. HMRC states that “more than 90% of estates each year will continue to pay no inheritance tax” after the changes. The question is whether yours is one of them, and a UK pension on top of property can move you across the line quickly.

Why it is harder across a border

Now run that reclaim process across two countries. Your beneficiaries may live elsewhere. Your executor may be handling a UK pension scheme from another time zone and currency, while also navigating the inheritance rules of your country of residence, some of which tax inherited pensions or foreign income in their own right. The administrative tangle that is awkward in Surrey becomes a long, costly one when the people involved are spread across the Algarve, Dubai and Sydney. None of this is cause for alarm. It is cause to map it out in advance.

What is the cost of waiting?

For expats, time does more work than almost any single strategy. Independent modelling for Octopus Investments (carried out by the Centre for Economics and Business Research, 2026) suggested families who begin estate planning at 50 rather than 70 can pass on around 397,000 pounds more on average. The figures are UK-specific, but the principle travels: the largest cost is rarely the tax itself, it is the planning that never quite happened because it always felt like next year’s job.

What expats with a UK pension can do now

You do not need decisions today. You need a clear picture. A sensible order:

1. Confirm your status. Were you a long-term UK resident, and are you still inside the 3 to 10 year tail?

2. Locate every UK pot. Old workplace pensions, personal pensions and SIPPs all count.

3. Estimate the exposure. Our inheritance tax calculator gives a starting figure for the estate as a whole.

4. Check your nominations. Out-of-date beneficiary forms are one of the most common and most avoidable problems.

5. Review it as one cross-border plan. Look at the UK position and your country of residence together, through cross-border retirement planning and UK inheritance tax planning. Where relevant, options such as transferring a UK pension overseas can be explored.
   

Frequently asked questions

1. Does the 2027 change apply if I am not a UK resident?

Yes. A UK-registered pension is a UK-situated asset, so it remains within UK inheritance tax from 6 April 2027 regardless of your residence.

2. Will my UK pension really be taxed twice?

For deaths after age 75, inheritance tax and then income tax can both apply. HMRC intends to allow a reclaim of the overlapping income tax, though advisers expect the process to be slow in the early years.

Is there anything I can do before April 2027?

Often yes. Reviewing nominations, confirming your residence position and understanding how your pension is held are all best done early, while options remain open.

4. Who is affected most?

British expats with a UK pension and an estate likely to exceed the 325,000 pound nil-rate band, especially those who also own property.

5. What is the nil-rate band, and is it frozen?

The nil-rate band is the amount of an estate that passes free of UK inheritance tax, currently 325,000 pounds. It is frozen at this level, which means more estates are expected to cross it over time as asset values rise.

6. Does this apply to a SIPP or a personal pension?

Yes. UK-registered pensions, including SIPPs, personal pensions and most workplace schemes, are UK-situated assets and fall within the 2027 changes regardless of where you live.

7. I have already transferred my pension overseas. Am I still affected?

It depends on the type of transfer. A pension moved into a qualifying recognised overseas pension scheme can sit outside a UK-registered scheme, but the position varies by scheme, by timing and by your residence history. This is an area worth checking for your specific arrangement rather than assuming.

8. What about money I leave to my spouse or civil partner?

Transfers between spouses and civil partners are generally exempt from UK inheritance tax. Current guidance indicates this exemption is intended to continue to apply to pensions, with any charge more likely to arise when funds later pass to other beneficiaries. The detail matters, so it is worth confirming for your own circumstances.

9. Will my country of residence tax the pension as well?

Possibly. Some countries tax inherited pensions or foreign income under their own rules, and double-tax treaties do not always remove every overlap. Looking at the UK position and your country of residence together is the only way to see the full picture.

10. Do I have to make any decisions before 6 April 2027?

No. The useful early steps are about clarity rather than commitment: confirming your residence position, locating your pots and checking your beneficiary nominations. These keep your options open without locking anything in.

British expats with a UK pension and an estate likely to exceed the 325,000 pound nil-rate band, especially those who also own property.

If you live outside the UK and hold a UK pension, see where you stand before the rules change. Get a cross-border pension review.

Book a cross-border pension review.

Disclaimer: This article is for general information and does not constitute financial, tax or legal advice. UK inheritance tax and pension rules are complex, subject to change, and interact with the rules of your country of residence. Seek guidance tailored to your circumstances before acting. Paratus Wealth connects globally mobile clients with independent specialists and does not offer services to UK residents.