The UK probate and estate planning landscape is undergoing one of its most significant changes in decades. While many people are aware of the upcoming inheritance tax on pensions changes due to take effect from 6 April 2027, fewer realise that another major reform is already reshaping how estates are assessed for Inheritance Tax (IHT).
The move from a domicile-based system to a residence-based approach has fundamentally changed how HM Revenue & Customs (HMRC) determines an individual’s exposure to UK Inheritance Tax. Combined with the upcoming changes to pension inheritance tax, these reforms could affect more families, more estates and more executors than ever before.
At Lyons Bowe, we are already seeing how these changes are influencing estate planning, probate administration and cross-border estates. Whether you have lived abroad, hold overseas assets or have built up a substantial pension pot, now is the time to understand how these reforms could affect you and your family.
Understanding the New Inheritance Tax Rules
Inheritance Tax has traditionally been an area of estate planning that many families only consider after a loved one has passed away. However, the latest reforms highlight the importance of planning ahead.
Two significant changes are now shaping the future of probate and estate administration:
- The introduction of a residence-based Inheritance Tax system, replacing the long-standing domicile rules.
- The inheritance tax on pensions changes being introduced from 6 April 2027, which could bring unused pension funds into a person’s taxable estate.
While these reforms address different areas of Inheritance Tax, together they represent one of the most significant shifts in UK probate for many years.
The Move from Domicile to Residence
Historically, UK Inheritance Tax was based on an individual’s domicile. Although commonly misunderstood as where someone lived, domicile is actually a complex legal concept that often depends on where a person considers their permanent home to be.
From April 2025, the UK moved to a residence-based system.
In simple terms, your exposure to UK Inheritance Tax is now determined by how long you have been resident in the UK, rather than your domicile status.
Generally speaking:
- If you have been UK resident for 10 out of the previous 15 tax years, you may be fully within the UK Inheritance Tax regime.
- Even after leaving the UK, your estate may remain within the UK Inheritance Tax system for a tail period of up to 10 years, depending on how long you were previously resident.
This provides greater clarity in some respects, but it also means that more people may now fall within the scope of UK Inheritance Tax than under the previous rules.
Inheritance Tax on Pensions from 2027
Alongside the residence-based reforms, another significant change is approaching.
From 6 April 2027, unused pension funds and certain death benefits are expected to become part of a person’s estate for Inheritance Tax purposes.
Previously, pension pots were often viewed as an effective estate planning tool because they could, in many circumstances, sit outside an individual’s estate for Inheritance Tax purposes. The upcoming pension inheritance tax changes could alter this position significantly.
For many individuals, this means their pension may no longer simply provide retirement income. It could also become an important consideration when reviewing the overall value of their estate.
These UK pension inheritance tax changes may particularly affect:
- Individuals with substantial pension savings.
- Families with multiple pension arrangements.
- Business owners.
- Those already carrying out estate planning.
- Clients with overseas assets or international connections.
Although every estate is different, these changes highlight the importance of reviewing your existing arrangements rather than assuming previous estate planning strategies will continue to achieve the same outcome.
Why These Changes Matter for Probate
These reforms are not simply technical tax changes. They have practical consequences for families, executors and probate professionals alike.
As more estates fall within the scope of UK Inheritance Tax, executors may find themselves dealing with additional reporting requirements, more complex estate valuations and increased consideration of both UK and overseas assets.
The introduction of inheritance tax on pensions also means executors may need to consider pension arrangements as part of the wider administration of an estate, something that has not always been necessary in the past.
For many families, this could lead to more detailed estate administration and a greater need for professional advice before distributing assets.
More Estates Could Fall Within UK Inheritance Tax
One of the biggest practical consequences of the new residence-based rules is that more estates may now become liable for UK Inheritance Tax.
Individuals who may previously have relied on their non-UK domicile status could now fall within the UK Inheritance Tax regime through the residence test instead. At the same time, the inheritance tax on pensions 2027 reforms may increase the overall taxable value of an estate where unused pension funds are included.
For executors, this could result in:
- More estates requiring detailed Inheritance Tax reporting.
- Greater consideration of worldwide assets.
- Additional valuations and financial information.
- Increased interaction with HMRC during the probate process.
These changes reinforce the importance of understanding your estate well before probate becomes necessary.
Cross-Border Estates and International Families
For families with international connections, the new rules introduce an additional layer of complexity.
Many people divide their time between different countries, own overseas property or have family members living abroad. Under the previous domicile-based system, much of the discussion centred on where an individual considered their permanent home to be. Now, the focus shifts to a much more measurable question:
How many years have you been UK resident?
Although this may appear simpler, it can have far-reaching consequences for estate planning. Residence history over a 15-year period may now determine whether worldwide assets fall within the scope of UK Inheritance Tax, making accurate records and early planning more important than ever.
Where pension savings also form part of an individual’s overall wealth, the upcoming inheritance tax on pensions UK changes could further increase the value of an estate that is subject to Inheritance Tax.
For families with international assets, this creates an even greater need to understand how different parts of an estate interact.
The “Tail Period” After Leaving the UK
One of the most significant aspects of the residence-based reforms is what is commonly referred to as the tail period.
Many people assume that once they leave the UK, they immediately leave the UK tax system behind. Under the new rules, this may no longer be the case.
Depending on how long you have been resident in the UK, you could remain within the UK Inheritance Tax regime for up to 10 years after leaving.
This means your worldwide estate may still be considered when calculating any potential Inheritance Tax liability, despite no longer living in the UK.
This change is particularly relevant for:
- Individuals retiring overseas.
- Families relocating abroad.
- International professionals.
- Those with property or investments outside the UK.
Understanding how long this period applies to your circumstances can form an important part of effective estate planning.
A Practical Example
Imagine an individual who lives in the UK for 12 years before deciding to retire to Spain.
Three years after moving, they pass away while still living overseas.
Under the previous domicile-based system, determining their exposure to UK Inheritance Tax may have involved complex legal arguments around where they intended to live permanently.
Under the new residence-based rules, the position is much clearer.
Because they had been UK resident for more than 10 out of the previous 15 tax years, their worldwide estate could still fall within the UK Inheritance Tax regime.
If that estate also includes a substantial unused pension, the inheritance tax on pensions introduced in the UK from 2027 may also need to be considered when calculating the overall value of the estate.
For many families, this represents a significant change from previous expectations and highlights why reviewing estate planning arrangements before moving overseas is increasingly important.
What This Means for Executors
The responsibilities of executors and administrators are also changing.
Alongside gathering information about assets and liabilities, executors may now need to investigate an individual’s residence history over the previous 15 years rather than relying solely on domicile assumptions.
They may also need to consider:
- Whether worldwide assets fall within the UK Inheritance Tax regime.
- Whether unused pension funds form part of the taxable estate.
- Whether any overseas taxes apply.
- Whether double taxation relief is available.
As estates become more complex, the administration process may require greater due diligence, particularly where international assets or pension arrangements are involved.
Seeking professional advice at an early stage can help ensure the estate is administered accurately and efficiently.
Financial Planning Considerations
Although these reforms may affect more people than before, they also provide an opportunity to review your estate planning while there is still time to act.
Every estate is different, but now may be the right time to consider:
- Reviewing your Will to ensure it still reflects your wishes.
- Assessing the value of your pension pots alongside the rest of your estate.
- Reviewing beneficiary nominations on your pension arrangements.
- Considering how overseas assets are owned and structured.
- Discussing lifetime gifting opportunities where appropriate.
- Reviewing any trusts already in place.
For individuals approaching retirement, living overseas or planning to relocate, these conversations may become even more important as both the residence-based rules and the pension inheritance tax changes come into effect.
Rather than viewing these reforms in isolation, they should be considered as part of your wider estate planning strategy.
Our View at Lyons Bowe
The introduction of residence-based Inheritance Tax and the upcoming inheritance tax pensions reforms represent one of the biggest shifts in UK probate and estate planning for many years.
In some respects, the residence test provides greater certainty than the previous domicile rules. However, it is also likely to bring more estates within the scope of UK Inheritance Tax while increasing the importance of careful estate planning.
Combined with the changes affecting unused pension funds from April 2027, families may need to think differently about how they structure their estates and protect future generations.
We expect these reforms to result in increased HMRC scrutiny, more complex probate matters and a growing need for specialist advice, particularly where international assets, pensions and cross-border estates are involved.
Final Thoughts
If you have lived in the UK for a number of years, have pension savings, own overseas assets or are planning to move abroad, now is the ideal time to review your estate planning.
The new rules mean that where you have lived, how long you have been resident in the UK and how your pension forms part of your estate could all influence the amount of Inheritance Tax payable in the future.
Understanding these changes today could help you make informed decisions that protect both your estate and the people you leave behind.
How Lyons Bowe Can Help
The changes to residence-based Inheritance Tax and pensions highlight the importance of planning ahead rather than waiting until probate becomes necessary. Whether you are reviewing your Will, considering your pension arrangements, planning for international assets or simply want to understand how these reforms may affect your family, our Wills & Probate team is here to help. We can provide clear, practical advice tailored to your circumstances, helping you plan with confidence and ensure your wishes are protected for the future.
Written by Veronica Boboc,
Edited by Denmin Moore
Last updated 5 August 2026
Â
