UK Inheritance Tax Changes (6 April 2027)

What Does This Mean for UK Pensions Transferred to New Zealand?

Significant changes to the UK’s Inheritance Tax treatment of pensions are due to take effect from 6 April 2027. For people who have moved to New Zealand, particularly those who have already transferred UK pension benefits to a New Zealand Qualifying Recognised Overseas Pension Scheme (QROPS), the changes raise an important question: could their pension still be exposed to UK Inheritance Tax?

What are the UK Inheritance Tax Rates?

UK Inheritance Tax does not necessarily mean tax will be payable simply because an estate exceeds £325,000. Depending on the circumstances, additional allowances can increase the tax-free amount to £500,000 for an individual, or potentially £1 million for qualifying married couples and civil partners.

What is changing from 6 April 2027?

Historically, pension funds have often sat outside a person’s estate for UK Inheritance Tax purposes. However, the UK Government has changed the rules.

From 6 April 2027, most unused pension funds and pension death benefits will be brought into the value of a deceased person’s estate for UK Inheritance Tax purposes. The new rules apply where the pension scheme member dies on or after 6 April 2027.  [gov.uk]

The reforms were enacted through the Finance Act 2026, which received Royal Assent on 18 March 2026. [gov.uk]

Importantly, this does not automatically mean that every pension will suffer Inheritance Tax. Whether tax is ultimately payable depends on the deceased person’s circumstances, the nature of the pension benefits and the available exemptions and allowances.

What about a UK pension already transferred to a New Zealand QROPS?

This is particularly important for New Zealand residents who transferred UK pension benefits offshore.

UK legislation has long contained specific provisions dealing with qualifying non-UK pension schemes. The Inheritance Tax (Qualifying Non-UK Pension Schemes) Regulations 2010 apply to pension schemes established outside the United Kingdom and contain the requirements for a scheme to qualify for the relevant UK treatment. [legislation.gov.uk]

The new rules therefore should not be interpreted as simply saying that every UK pension, including every pension previously transferred to a New Zealand QROPS, automatically becomes subject to UK Inheritance Tax from April 2027.

The position of an overseas pension will need to be considered according to the applicable UK legislation, the status of the overseas scheme, the source and history of the pension funds and, importantly, the member’s UK residence history.

HMRC has specifically indicated that further material dealing with international issues is part of its programme of guidance ahead of implementation. Accordingly, anyone with substantial UK-derived pension benefits in a New Zealand QROPS should obtain individual tax advice rather than assume that either the old or new IHT treatment automatically applies. [gov.uk]

UK domicile has also been replaced by a residence-based test

There has been another major change that is highly relevant to British expatriates.

From 6 April 2025, the UK’s previous domicile-based approach to determining exposure of overseas assets to Inheritance Tax was replaced by a long-term UK residence test. Under the legislation, an individual will generally be a long-term UK resident if they have been UK resident for at least 10 of the previous 20 tax years.  [legislation.gov.uk]

This means someone who has recently moved from the UK to New Zealand should not assume that moving overseas immediately removes all potential exposure of their worldwide assets to UK Inheritance Tax.

The length of time a person has been outside the UK can therefore be extremely important.

Why this matters for New Zealand QROPS members

For somebody who transferred their UK pension to a New Zealand QROPS several years ago, the important questions may now include:

• When did you leave the UK?
• How many of the preceding 20 tax years were you UK resident?
• Are you still treated as a long-term UK resident for Inheritance Tax purposes?
• Does your New Zealand pension arrangement meet the relevant UK requirements?
• What portion of the arrangement represents benefits originating from a UK pension?
• How will benefits remaining at death be treated under the post-April 2027 rules?

These questions can produce different outcomes for two people who both live permanently in New Zealand and both transferred their pensions into QROPS.

Becoming a New Zealand permanent resident does not necessarily end a person’s exposure to UK Inheritance Tax. A person who has left the UK permanently may continue to be treated as a long-term UK resident for UK Inheritance Tax purposes for a period after departure. Under the current rules, that period can range from three to ten tax years, depending on the individual’s previous UK residence history.

Are the new rules a reason to transfer a UK pension to New Zealand?

A QROPS transfer should never be undertaken solely on the assumption that it will avoid UK Inheritance Tax. The suitability of a transfer depends on a much wider range of factors, including the type of UK pension, transfer value, investment options, charges, currency exposure, access to benefits, UK and New Zealand tax consequences and the member’s long-term retirement plans.

Similarly, someone who has already transferred should not assume that the 2027 changes mean their New Zealand QROPS will suddenly suffer a 40% UK tax charge.

Whether UK Inheritance Tax applies will depend upon the individual’s circumstances and the detailed rules applying at the date of death.

What should existing QROPS members do?

For most people there is no reason for immediate action. However, UK pension transfers should now form part of a wider estate-planning review, particularly for people who have recently moved from the UK, retain significant UK assets, or have substantial pension balances.

HMRC has confirmed that the new pension rules apply to deaths occurring on or after 6 April 2027. If a scheme member dies before that date, the existing rules apply even where the pension death benefits are subsequently paid after 6 April 2027. [gov.uk]

Further HMRC guidance and secondary legislation are being developed ahead of implementation. [gov.uk]

The key message

For New Zealand residents with UK pension benefits, the forthcoming changes make it more important to understand both your pension arrangements and your UK residence history.

Moving a pension to a New Zealand QROPS does not, by itself, provide a simple answer to the UK Inheritance Tax question. Equally, the new rules should not be read as meaning that every New Zealand QROPS containing former UK pension benefits will automatically be caught.

If you have transferred a UK pension to New Zealand, or are considering doing so, this is a good time to review how the changing UK pension and Inheritance Tax rules may apply to your particular circumstances.

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