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The April 2027 pension inheritance tax change has been public knowledge since the Autumn 2024 Budget, and yet the majority of UK expats with pension assets have not reviewed how it affects their estate. That is not surprising: cross-border financial planning rarely reaches the top of the priority list, and the deadline can feel abstract until it does not.
With around eleven months remaining before unused pension funds fall inside the UK IHT estate for the first time, the window for meaningful planning is open but not indefinitely. Some of the most commonly used strategies, including gifts and trust arrangements, require time to work properly. A review started now has significantly more options available than one started in January 2027.
This guide sets out the areas a specialist typically works through with expats in the lead-up to the April 2027 deadline, and the questions worth asking before the rules change.
From April 2027, unspent pension funds held in defined contribution schemes and SIPPs will be included in the estate for UK inheritance tax purposes. The standard IHT charge is 40% on the value of the estate above the nil-rate band, currently £325,000 for individuals.
Until now, pension funds have sat entirely outside the IHT estate. A well-funded SIPP could pass to nominated beneficiaries without any IHT applying, regardless of its value. From April 2027, that exemption ends for most defined contribution arrangements. For expats who have spent years building UK pension assets during their UK working years, this is a material shift.
A more detailed explanation of the change and who it affects is covered in UK Inheritance Tax for Expats: What Changes in April 2027.
The following are not actions to take without specialist advice. They are the questions that tend to surface in a thorough pre-deadline review, and the starting point for any conversation with a regulated specialist.
The starting point for any review is a clear picture of what the exposure actually is. Many expats have multiple pension pots from different periods of UK employment, some of which may have been forgotten or neglected. Before any planning can take place, a specialist needs to know:
Only with these inputs can the projected IHT liability under the new rules be calculated. For some expats, the number will be modest. For others, it will be significant.
Pension death benefits are directed according to beneficiary nominations held by the pension scheme, not by the terms of a will. Many expats made their original nominations years or even decades ago, when circumstances were different.
A nomination review is worth completing before April 2027 for two reasons. First, the IHT treatment of pension death benefits is changing, and how funds are structured between different nominees may affect the overall tax position. Second, nominations that are outdated or inconsistent with the estate plan as a whole can create practical complications at a difficult time.
A specialist can review whether existing nominations remain appropriate given the new IHT rules and the overall estate position.
For expats who are already in retirement or approaching it, the order in which different assets are drawn down can affect the eventual IHT position. If pension assets are now going to be included in the estate at death, drawing pension funds first (rather than depleting other assets first) reduces the IHT-exposed pension value over time.
This is not a straightforward calculation. It intersects with income tax treatment in the country of residence, currency considerations for sterling-denominated pensions, and individual cashflow needs. But it is a factor that a specialist will model as part of any holistic retirement income review.
Wills that were drafted before the pension IHT announcement may no longer reflect the estate as it will actually be taxed. A pension pot that was previously IHT-exempt and therefore excluded from estate planning calculations is now part of the taxable estate.
This does not necessarily mean a complete rewrite. But it does mean that any estate planning documents should be reviewed by a specialist, and ideally by a solicitor with cross-border estate experience, to ensure they remain appropriate given the new landscape.
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Gifts made to individuals more than seven years before death are generally exempt from UK IHT. Gifts made within seven years are subject to taper relief but may still carry some charge. This means the earlier a gifting strategy is put in place, the more effective it is.
Trust arrangements are another area that some expats explore in the context of estate planning, though the rules are complex and the appropriateness depends heavily on individual circumstances, jurisdiction, and the size of assets involved.
These are areas where the input of a regulated specialist is particularly important. There are common misconceptions about what gifts and trusts can and cannot achieve for IHT purposes, and poorly structured arrangements can create complications. IHT planning for expats: gifts, trusts, and the 7-year rule covers this in detail.
Not every expat with a UK pension will have a significant IHT problem under the new rules. The exposure is most material for:
Those with large, untouched pension pots. An expat who left the UK fifteen years ago with a substantial SIPP that has continued to compound without drawdown is precisely the profile the April 2027 change most affects. The pension value may now represent the largest single IHT liability in the estate.
Those who remain UK-domiciled or deemed UK-domiciled. Domicile determines the scope of IHT exposure. Individuals who are UK-domiciled face IHT on worldwide assets. Those who have spent significant time abroad but have not formally broken UK domicile may still be in scope. An expat financial adviser with estate planning experience can help assess the domicile position.
Those with no current adviser relationship. Without a specialist reviewing the position proactively, the April 2027 deadline may arrive without any of the preparation that would otherwise be possible.
Those with assets in multiple jurisdictions. Cross-border estates require coordination across different legal systems. Adding a material UK IHT liability to an already complex estate makes specialist advice more important, not less.
Some areas of IHT planning require time to be effective. A gift made in February 2027 begins a seven-year clock that does not complete until February 2034. A gift made in May 2026 completes in May 2033. The planning benefit is the same, but acting now gives more flexibility in terms of how the strategy is structured and phased.
Beyond gifting, a thorough review of pension valuations, beneficiary nominations, estate documents, and drawdown strategy takes time to complete properly. A specialist working through multiple strands in a complex estate needs time to model the options and present them clearly. Starting that process now, rather than in late 2026, is the difference between having genuine choices and having fewer of them.
Drawing down pension assets means the funds leave the pension wrapper and may be spent, gifted, or held as other assets. What remains in the pension at death will be the amount subject to the new IHT rules. Whether accelerating drawdown makes sense depends on the income tax implications in your country of residence, your overall cashflow needs, and how any drawn funds are then structured. This is a decision that requires individual modelling by a regulated specialist, not a general rule.
The change applies to UK-registered pension schemes, including SIPPs and most UK workplace defined contribution schemes. Pension arrangements held in other countries are subject to the rules of that jurisdiction and are generally outside the scope of UK IHT unless held by a UK-domiciled individual in circumstances where they form part of the UK estate. A specialist can review the position for any overseas pension arrangements alongside UK schemes.
From April 2027, pension scheme administrators will take on new responsibilities for calculating and reporting IHT on pension death benefits. In many cases they will be required to pay the IHT due before releasing funds to beneficiaries. However, the interaction between the pension administrator's obligations and the broader estate is complex, and executors and beneficiaries will still need to understand the overall position. A specialist can help ensure the estate planning is structured so that the pension IHT liability does not create avoidable complications.
Existing estate planning was typically done without pension assets in the IHT calculation. Wills, trusts, gifts, and beneficiary nominations may all have been structured on the assumption that the pension sits outside the estate. A review is worth completing to ensure the existing arrangements still achieve the intended outcome given the new rules. In some cases, adjustments will be needed; in others, the existing plan may remain appropriate. A specialist can help assess this.
Domicile is a legal concept that does not automatically change when you move abroad. Many expats who have lived overseas for years remain UK-domiciled in the eyes of HMRC. The deemed domicile rule applies to individuals who have been UK resident for 15 of the last 20 tax years. A formal domicile review by a specialist with cross-border estate planning experience is the only way to establish the position with confidence.
Pharos Introductions connects qualifying expats with regulated specialists in UK pension planning, IHT, and cross-border estate structuring. We do not provide financial, tax, or legal advice. We make a personal, vetted introduction to the right specialist for your situation, at no cost to you.
If the April 2027 deadline has prompted you to start reviewing your position, we can connect you with a specialist who works with expats in your jurisdiction and has direct experience of the pension IHT changes.
Request an introduction or explore how to find an expat financial adviser.
This article is for informational purposes only and does not constitute financial, tax, or legal advice. Please seek specialist regulated advice for your individual circumstances.
From April 2027, unused UK pension funds will fall inside the IHT estate for the first time. For expats with UK pensions, this is one of the most significant changes in a generation.
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