People who leave Britain usually plan the move around income tax. Inheritance tax runs on a different clock. For someone who has lived in the UK for most of their adult life, it can follow their worldwide estate for up to ten years after departure.
Two changes now shape that clock. Since 6 April 2025 the UK decides inheritance tax exposure by long-term residence, not by domicile. And from 6 April 2027 most unused pension funds and pension death benefits will count as part of the estate. The second has a twist many leavers have not noticed: a pension held in a UK scheme stays within reach of inheritance tax even after the residence tail has run out.
The test: 10 out of the previous 20 years
The rule sits in section 6A of the Inheritance Tax Act 1984, inserted by section 44 of the Finance Act 2025. An individual is a "long-term UK resident" at all times in a tax year if they were UK resident for at least 10 of the previous 20 tax years. Residence means residence for income tax purposes, under the statutory residence test from 2013-14. Domicile no longer decides the question.
Being a long-term UK resident matters because it decides what the UK can tax. HMRC's guidance for long-term UK residents puts it plainly: if you are one, your overseas assets may be subject to inheritance tax when you make a transfer or die. If you are not, inheritance tax generally reaches only your UK assets. The standard rate is 40% on the part of the estate above the £325,000 threshold, which can rise to £500,000 where a home passes to children or grandchildren. Section 72 of the Finance Act 2026 extends the freeze on those bands to cover the 2030-31 tax year.
Young people follow a modified test. Under IHTM47024, someone under 20 qualifies if they have been UK resident for at least half of the tax years since birth, rounded up, and the same three-year minimum tail applies when they leave.
The tail: 3 to 10 years after you leave
The part of section 6A that leavers need is subsection (3). When you stop being UK resident, you do not drop out of the long-term group straight away. You stay in it until you have been non-resident for a "required number" of consecutive tax years, and that number depends on how many of the 20 tax years ending with your last UK-resident year you spent as a UK resident. The statute sets it out in a table, which HMRC repeats in IHTM47020:
| UK-resident years in the last 20 | Tail after leaving (consecutive non-resident years) |
|---|---|
| 13 or fewer | 3 |
| 14 | 4 |
| 15 | 5 |
| 16 | 6 |
| 17 | 7 |
| 18 | 8 |
| 19 | 9 |
| 20 | 10 |
The count looks back only 20 years, so a 30-year resident gets the same 10-year maximum as a 20-year resident; HMRC's own example says so. The years need not be consecutive: 10 years in your twenties and five more after a spell abroad can add up to 15 of the last 20, and a five-year tail.
A worked illustration. Someone has been UK resident for 12 of the 20 tax years up to and including 2025-26, and is non-resident from 2026-27 onwards. Their required number is 3. They remain a long-term UK resident through 2026-27, 2027-28 and 2028-29, and drop out from 6 April 2029, provided they do not come back. If they die, or give away overseas assets, while still inside the tail, the UK treats their worldwide estate as within the charge. Someone with 20 of 20 years who leaves on the same timetable stays inside through 2035-36 and drops out from 6 April 2036.
There is also a reset. HMRC's manual says a person is not a long-term UK resident in the year following 10 consecutive years of non-residence, even if they return. HMRC's guidance says that after a return following 10 consecutive years away, "only the year you return and future years of residence count".
Former non-doms and the transitional rules
The move from domicile to residence came with transitional rules for people who left around the changeover. IHTM47021 and the gov.uk guidance set out two outcomes, both depending on status on 30 October 2024, the date of the Budget that announced the reform:
- Not domiciled and not deemed domiciled on 30 October 2024, and non-resident in 2025-26: you did not become a long-term UK resident at all, as long as you do not return.
- Deemed UK domiciled on 30 October 2024, and non-resident in 2025-26: you remain a long-term UK resident only until the start of your fourth year of non-residence, so the tail is capped at three years regardless of the table.
People who were UK domiciled under common law on that date get no transitional treatment. The ordinary 10-of-20 test and the full table apply to them. That is the group most likely to be surprised: British-born people who have spent decades in the UK and move abroad in 2026 will usually face the full 10-year tail.
The Brief looked at how the end of the non-dom regime has played out in the capital in London after the non-dom era, and at why a change of government does not change these exit rules in a new prime minister is not a relocation plan.
Trusts: what still counts as excluded property
Offshore trusts used to be the classic answer for non-doms, because overseas assets settled by a non-UK domiciled settlor were excluded property and outside inheritance tax for good. That link to domicile has gone. HMRC's guidance now says that inheritance tax "will be charged on any overseas assets in a trust you have set-up or added to (even when you were not a long-term UK resident)", with the settlor's current long-term residence status deciding the outcome.
There is a protection for older trusts. According to the guidance, there is no inheritance tax on your death on trust assets that were:
- placed in the trust while you were non-UK domiciled,
- overseas on 30 October 2024, and
- overseas on the date of your death or when your rights in the trust ended.
The guidance also tells settlors to inform their trustees when their long-term residence status changes, because "there may be separate trusts charges to pay".
From 6 April 2027: the pension joins the estate
Until now, unused defined contribution pension pots and most lump sum death benefits have sat outside the estate. The Finance Act 2026, which received Royal Assent on 18 March 2026, changes that. Section 71 makes the new rules apply to deaths on or after 6 April 2027.
The core is a new section 150A of the 1984 Act, inserted by section 66. A member of a registered pension scheme, a qualifying non-UK pension scheme or a section 615(3) scheme is treated as beneficially entitled, immediately before death, to "notional pension property". Broadly, that is the money purchase value available for death benefits plus defined benefit lump sums that must or can reasonably be expected to be paid.
Some benefits are carved out as excluded benefits and do not count:
- dependants' scheme pensions, such as a spouse's or child's pension from a final salary scheme;
- joint life and similar annuities bought together with the member's own lifetime annuity;
- death in service benefits paid because the member was in employment or other work immediately before death. HMRC's technical note makes clear that only the benefit from the current job qualifies; a deferred pension from an earlier employer does not.
The usual exemptions also carry through. Section 69 amends the spouse exemption in section 18 so that pension benefits passing to a surviving spouse or civil partner are exempt, and makes equivalent changes for charities and other exempt recipients. The old cap still matters for mixed couples: where the person who dies is a long-term UK resident and the spouse is not, the spouse exemption is limited to the £325,000 exemption limit. A spouse who is not a long-term UK resident can lift that cap by electing to be treated as a long-term UK resident under section 267ZC, but the election brings the spouse's own worldwide estate into scope, so it is a trade-off rather than a free fix.
HMRC's policy paper estimates that, of around 213,000 estates with inheritable pension wealth in 2027-28, 10,500 will have an inheritance tax liability for the first time and 38,500 will pay more, by an average of about £34,000.
Who reports and pays
The burden sits with the personal representatives, not the pension scheme. Section 67 makes them liable for tax attributable to the pension, alongside beneficiaries who receive the money. The technical note sets out the working process:
- Personal representatives contact each scheme. Under the Registered Pension Schemes (Provision of Information) (Miscellaneous Amendments) Regulations 2026, laid on 15 July 2026 and due to apply from 6 April 2027, the scheme must provide the value of the notional pension property within 28 days of the request, with the split between exempt and non-exempt beneficiaries following once beneficiaries are known.
- The tax is due, as normal, at the end of the sixth month after the date of death. Late payment interest runs after that.
- Under section 68, personal representatives can serve a withholding notice on a registered scheme. While it has effect, no beneficiary can receive more than 50% of their share, for up to 15 months after the end of the month of death.
- They or a beneficiary can also serve a payment notice requiring a registered scheme to pay the tax directly to HMRC. The notice must be for at least £1,000, and the scheme has 35 days to pay.
- Where a beneficiary later pays income tax on the inherited pension, the technical note says the part used to pay inheritance tax does not count toward their taxable income.
The detail leavers miss: UK pensions stay in scope
For anyone who has left or is leaving, the decisive provision is section 150A(5). It says that notional pension property is situated where the scheme is established. That decides how the residence rules interact with the pension rules, and the technical note spells out the result:
- For long-term UK residents, inheritance tax applies to notional pension property in registered schemes, qualifying non-UK schemes and section 615(3) schemes "regardless of where the scheme is situated or established".
- For people who are not long-term UK residents, inheritance tax applies to notional pension property in any such scheme established in the UK. Schemes established outside the UK are not charged.
Put simply: the residence tail ends, but a UK pension remains a UK asset. A retiree who left Britain in 2015, has long since dropped out of the long-term group and dies in 2028 with a UK self-invested personal pension will, on the plain reading of the rules, have that pension counted in a UK inheritance tax estate, subject to the threshold and the exemptions. A local pension in the new country of residence would not be.
That does not make moving a pension offshore automatically wise; transfers raise their own tax questions. But the familiar assumption that leaving the tail means leaving UK inheritance tax no longer holds for anyone with a sizeable UK pension pot. The Brief's piece on the UK State Pension from abroad covers the income side of a UK retirement abroad; the estate side now needs equal attention.
Treaties and the other country's claim
HMRC's double taxation relief page lists conventions covering inheritance tax with the Republic of Ireland, South Africa, the United States, the Netherlands, Sweden and Switzerland. Older treaties with France, Italy, India and Pakistan date from the estate duty era and work on different rules. Since 6 April 2025, HMRC says, a person is treated as having deemed UK domicile for these purposes if they are a long-term UK resident. Where there is no treaty, unilateral relief may give a credit for foreign tax on assets located abroad.
Treaties can shift the outcome substantially, so the destination matters as much as the departure date. The US, for instance, has its own regime for non-residents, covered in the US estate tax for non-residents, and the wider problem of several countries claiming one estate is set out in inheritance across borders.
What may still move
The Chancellor told the Treasury Select Committee on 31 July 2026 that the Budget will be held on 28 October 2026. The residence test, the pension rules and the scheme information regulations are all law already. Check for changes after the Budget, but do not plan on the rules being softened.
A checklist for leaving in 2026
- Count your UK-resident years in the 20 tax years up to your last year of residence, using the statutory residence test year by year. That number sets your tail.
- Mark the date the tail ends. It is the start of the tax year after your required number of consecutive non-resident years. A year back in the UK breaks the run of non-resident years.
- Keep the evidence. Every year of non-residence has to be provable if HMRC asks after a death, which is what the paper trail that saves you is about.
- List your pensions by where each scheme is established. From 6 April 2027 a UK-established scheme stays in the UK estate even after the tail; check nominations and who the beneficiaries are.
- Check a spouse's status. If one partner is a long-term UK resident and the other is not, the £325,000 cap on the spouse exemption applies, and the election under section 267ZC is a decision with consequences both ways.
- Tell trustees when your status changes, and check whether any trust assets meet the conditions for protection.
- Read the treaty, if there is one, between the UK and your new country, and plan for the other country's inheritance or estate tax as well.
Work with Sebastian
If you are leaving the UK with a pension, property or trust that will outlast your residence, and you want to know how long the UK can still reach your estate and what your new country will claim, that is the kind of cross-border setup Sebastian works on with internationally mobile clients. Book a consultation.
