What changes on 6 April 2027?
The UK pension inheritance-tax reform is enacted for deaths on or after 6 April 2027. Most unused pension funds and pension death benefits will be brought into the value of the estate for UK Inheritance Tax purposes. This changes the treatment of many unused defined-contribution pots, but it does not impose a flat 40% charge on every pension.
The Government’s technical note on inheritance tax and pensions explains the framework and the treatment of non-UK schemes.
The calculation is individual
IHT is calculated on the estate after applying the exemptions, reliefs and nil-rate bands available in that person’s circumstances. The pension value cannot simply be multiplied by 40%. Relevant factors can include the total estate, transfers to a spouse or civil partner, charitable exemptions, available nil-rate bands, pension and death-benefit type, and liabilities or reliefs that apply.
Separate income-tax rules may also affect a beneficiary who later draws inherited pension benefits. That possible income-tax treatment does not mean every estate is automatically “double taxed”; the sequence and amounts depend on the facts.
Why residence history matters to NRIs
From 6 April 2025, UK IHT uses a long-term residence framework for overseas assets. A person’s years of UK residence and the period after leaving can affect whether non-UK assets remain within scope. Residence in India at death does not, by itself, settle the UK IHT position.
Qualifying non-UK pension schemes can remain in scope depending on the member’s long-term UK residence position and the rules at death. The receiving scheme’s location is therefore not enough to determine the answer.
A QROPS is not an automatic IHT escape
Moving a pension outside the UK does not guarantee removal from UK IHT. The member’s residence history, scheme status, transfer history and law at death must all be reviewed. List inclusion is not HMRC approval, suitability assurance or a tax guarantee.
Questions for an estate calculation
- Which pension funds and death benefits are expected to remain at death?
- What is the value of the rest of the estate, in the UK and overseas?
- Which exemptions, reliefs and nil-rate bands are available?
- Is the individual a long-term UK resident, and for how long can overseas assets remain in scope after departure?
- How would the exact non-UK pension scheme be treated under the 2027 rules?
Case-specific calculation
Review the estate, not a headline rate
Use current values, residence history, beneficiary arrangements and the exact pension rules to obtain regulated UK tax and estate-planning advice. Do not transfer solely to meet an assumed IHT deadline.
Practical conclusion
The 6 April 2027 reform is real, but the liability is not a universal 40% of the pension and it cannot be solved automatically by transferring to a QROPS. NRIs should model the whole estate and long-term residence position, then coordinate pension, tax and succession advice before acting.
