The Pension Blind Spot: 25 Checks for British Expats Ahead of April 2027

A Change Already in Law, and a Date Already Set

The change was legislated in the Finance Act 2026, which received Royal Assent on 18 March 2026, and the Budget of 28 October 2026 left the start date unchanged. Four figures frame what it means:

• ‍6 April 2027: the rules apply to deaths on or after this date.‍
• 40%: the standard inheritance tax rate on value above the nil-rate bands. The basic band is £325,000, with up to £175,000 more where a home passes to children or grandchildren (conditions apply, and it is reduced for estates above £2 million). Both bands are frozen until April 2031.‍
• 10,500 estates: the government's modelling estimate of estates that will have an inheritance tax bill in 2027-28 where previously they would not, with around 38,500 estates paying more.‍
• £34,000: the expected average rise in the inheritance tax liability where pensions are included. These are national estimates, not a forecast for any one family. HMRC says they are static, do not take into account potential behavioural changes, such as tax planning or drawing down pension funds faster, and should be viewed as a maximum.

Why Living Abroad Does Not Settle It

Since April 2025, UK inheritance tax has turned on residence rather than domicile. You are a long-term UK resident if you were UK resident for at least 10 of the previous 20 tax years, and the status can last for up to 10 tax years after you leave.

If you are a long-term UK resident, your worldwide assets are in scope. If you are not, most of your non-UK assets are outside UK inheritance tax, but a pension held in a UK-established scheme can remain in scope.

One of the checklist's hypothetical worked examples shows what that means. David has lived in Dubai since 2012 and is no longer a long-term UK resident. His UK estate, a £300,000 rental flat and £40,000 in savings, would pay £6,000 in inheritance tax under today's rules. From 6 April 2027, with his untouched £500,000 UK pension included, the bill for his estate rises to £206,000. On these assumptions, David's UAE assets are outside UK inheritance tax because he is no longer a long-term UK resident. His UK pension remains in scope. Every assumption is set out in the checklist.

Couples can be caught out too. Where the spouse who dies is a long-term UK resident and the survivor is not, the spouse exemption is capped at £325,000, cumulative over a lifetime across all spouses and civil partners, so leaving everything to a spouse may not be tax-free. An election can lift the cap, but it cannot be revoked and can bring the survivor's worldwide assets within UK inheritance tax.

Two Views From Our Experts

Carla Smart, Group Head of Pensions:

“Your pension needs to support your retirement first. Before making changes because of the inheritance tax rules, check how they affect your family, what income you need and whether any action could create other tax or costs.”

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Shil Shah, Group Head of Tax Planning:

“Many expats assume that living somewhere with no income tax or inheritance tax puts their UK pension beyond HMRC’s reach. From April 2027, that will not hold for most pensions in UK schemes. It is your residence over the past 20 years, not your passport, that decides what else is in scope. And for couples where only one partner has a long UK history, leaving everything to a spouse may not be the tax-free option they assume.”

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Inside the Checklist

The checklist sets out 25 checks in three areas, with guidance from our pensions and tax experts in every section. Each check is a plain statement about you: tick it if it is true, or if you are not sure. Your ticks identify the questions to review; they do not measure your tax exposure.

• ‍What you have and what may be affected: every pension you hold, where each scheme is established, and your residence status.‍
• What your family could receive: a spouse versus children, why age 75 matters, and how the tax would be paid.‍
• What to review before making changes: nominations, wills, withdrawals, gifts and transfers.

It also includes a step-by-step guide to what happens to a pension on death under the new rules, an action pack of questions to ask each pension provider, and a technical appendix with three worked examples, every assumption stated, and a clear list of what is settled and what HMRC has still to confirm.

Review, Not Rush

The months before April 2027 are time to review, not a deadline to move money. Withdrawing more than you need, giving money away too early or transferring a pension overseas can each create costs of their own, from income tax to a 25% overseas transfer charge on some transfers.

Some of the detail is still to come. HMRC has still to publish its guidance on international issues, and final guidance is due in spring 2027. We will update the checklist as each is published. For the full picture, including the exclusions, how income tax applies and every assumption behind the worked examples, download the checklist.

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The checklist is free to download. It sets out all 25 checks, the worked examples and guidance from our experts, and we will update it as HMRC publishes further guidance.