By Simon Huften, QROPS Specialist

UK Pension Inheritance Tax 2027 - What British Expats in Canada Need to Know Before the April Deadline

In the UK Autumn Budget of October 2024, the UK government confirmed that from April 2027, UK pension death benefits will be included in the deceased’s estate for Inheritance Tax purposes for the first time. Previously, UK pensions sat outside the estate – a valuable protection that allowed pension assets to pass to beneficiaries free of the 40% IHT charge.

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That protection ends in April 2027.

For British expats living permanently in Canada with a UK employer pension, this change is directly relevant – and more urgent than many people realise. UK pensions are UK-situs assets. They remain subject to UK Inheritance Tax on death regardless of your Canadian residency status and regardless of how long you have lived in Canada.

A QROPS transfer to a Canadian RRSP removes your pension from the UK IHT regime entirely. Once your pension lands in a Canadian RRSP under paragraph 60(j) of Canada’s Income Tax Act, it is no longer a UK pension. It is a Canadian registered retirement account governed by Canadian estate law – not UK pension legislation. No UK IHT applies.

This page explains what is changing, why it matters to you as a British expat in Canada, how a QROPS transfer removes the exposure, and how much time you have left. Simon Huften has managed QROPS transfers for British expats in Canada for over 10 years – this is the conversation he is having with every client right now.

What Is Changing in April 2027? The UK Pension IHT Reform Explained

For decades, UK pension funds have been treated as outside the deceased’s estate for UK Inheritance Tax purposes. This was deliberate government policy – pensions were designed as retirement income vehicles, and the IHT exemption reflected that intent.

From April 2027, that exemption ends. UK pension death benefits – both Defined Benefit scheme death benefits and Defined Contribution pension pots – will be included in your estate for UK Inheritance Tax. The change was confirmed by the UK government in the Autumn Budget of October 2024 and applies to deaths on or after 6 April 2027. UK Autumn Budget 2024 – GOV.UK

What this means in practical terms:

If you die before April 2027

Your UK pension death benefits remain outside your estate for IHT purposes if you die before 6 April 2027. Existing rules apply, and your pension’s value is generally excluded when calculating your estate’s Inheritance Tax liability under the current UK pension legislation.

If you die after April 2027 with a UK pension still in a UK pension scheme

Your pension’s value is added to your estate. IHT applies at 40% on the portion of your total estate above the nil-rate band threshold (currently £325,000 for individuals, higher with the residence nil-rate band).

If you die after April 2027 with your UK pension transferred to a Canadian RRSP

Your RRSP is a Canadian registered account, governed by Canadian estate law. UK pension legislation – including the April 2027 IHT change – does not follow the funds to Canada. Your RRSP passes to your named beneficiaries under Canadian rules.

The change does not affect pension income you receive during your lifetime – it affects what your beneficiaries receive on your death. The pension pot or death benefit that currently passes free of IHT will, from April 2027, be subject to the same 40% charge as other estate assets above the nil-rate band.

Read the detailed explainer:

How This Affects British Expats Living in Canada

Many British expats in Canada assume that living permanently in Canada – or having lived here for many years – means UK Inheritance Tax no longer applies to them. This assumption requires careful examination under the rules that now apply.

Why UK Pensions Are Still Exposed - Regardless of Your LTR Status

Here is the critical point that many British expats miss: UK pensions are UK-situs assets. They remain within the scope of UK IHT regardless of whether you are a long-term UK resident or not.

Even if you have lived in Canada for more than 10 years and are no longer a long-term UK resident – so your Canadian RRSP, Canadian home, and other non-UK assets are outside the IHT net – your UK pension remains a UK-situs asset and will be included in your estate from April 2027.

The only way to move a UK pension out of UK-situs is to transfer it out of the UK pension system entirely – into a Canadian RRSP. Once in a Canadian RRSP, the funds are a Canadian domestic asset, not a UK pension asset.

The New Framework: Long-Term UK Residence (April 2025)

From 6 April 2025, the UK replaced the domicile-based IHT system with a long-term UK residence (LTR) test. A person is a long-term UK resident for IHT purposes if they have been UK-resident for 10 of the last 20 tax years. Under the new framework:

Long-term UK residents (10 of last 20 years in the UK): subject to UK IHT on their worldwide estate – including UK and non-UK assets.
Non-long-term UK residents (fewer than 10 of the last 20 years in the UK): generally subject to UK IHT only on UK-situs assets.

This is a legal determination that depends on your specific residence history and requires a qualified UK tax advisor to confirm your position.

What is not in doubt: if you hold a UK pension and die after April 2027 while that pension remains in the UK system, your beneficiaries face a potential 40% IHT charge on the pension’s value – regardless of how long you have lived in Canada.

Pension Pot Size - Illustrative IHT Exposure

Pension Pot Size	Potential IHT Exposure (at 40%, if above nil-rate band)	Amount Your Family Does NOT Receive
£200,000	~£80,000	~£80,000 diverted to HMRC on death
£300,000	~£120,000	~£120,000 diverted to HMRC on death
£400,000	~£160,000	~£160,000 diverted to HMRC on death
£600,000	~£240,000	~£240,000 diverted to HMRC on death
£800,000	~£320,000	~£320,000 diverted to HMRC on death

Note: The figures above are illustrative examples only. Your actual IHT position depends on your total estate size, available nil-rate bands, long-term UK residence status, and individual circumstances. Consult a qualified UK tax advisor for your specific situation.

How a QROPS Transfer Removes Your UK Pension from IHT Exposure

Some advisers and legal commentators have noted that QROPS transfers are not effective for IHT mitigation – and in certain contexts, they are correct. Pensions transferred to QROPS wrappers in jurisdictions such as Malta, Gibraltar, or the Isle of Man remain pension structures and remain within the scope of UK IHT under the April 2027 rules.

The Strata QROPS model is different – and that difference is the critical point.

In Canada, the QROPS process results in the pension landing in a Canadian RRSP under paragraph 60(j) of Canada’s Income Tax Act. Once in a Canadian RRSP, the funds cease to be a UK pension. They are a Canadian registered retirement account – a non-UK domestic account governed by Canadian tax and estate law. UK pension legislation, including the April 2027 IHT change, does not apply to Canadian RRSPs.

Here is exactly why the Canadian RRSP removes UK IHT exposure:

A Canadian RRSP is not a UK pension

Once your UK pension transfers to a Canadian RRSP via QROPS, it ceases to be a UK pension asset. It is not a QROPS wrapper sitting offshore – it is a Canadian registered retirement account. UK pension legislation does not follow the funds to Canada.

Named beneficiary designations replace UK trustee discretion

In a Canadian RRSP, you name your beneficiaries directly. On your death, your RRSP passes to your named beneficiaries – not through your UK estate and not subject to UK IHT. Your spouse can assume the full RRSP via a spousal rollover with no immediate Canadian tax event.

Structurally superior to a UK survivor benefit

A UK DB scheme typically provides a spouse’s pension of 50% of the member’s pension income – paid as income, taxed in the UK, subject to scheme rules. A Canadian RRSP passes 100% of the fund to your named spouse, continues to grow tax-deferred, and is drawn down on their own retirement timeline. No IHT. No UK pension rules.

The transfer must happen before you die - not after

A QROPS transfer is a lifetime event. It must be initiated and completed while you are alive and eligible (aged 55–70, permanently resident in Canada). Leaving the decision until it is too late is the only way this strategy fails.

This is not a grey area or a loophole. It is the fundamental effect of moving your pension from the UK tax and legal regime to the Canadian one. The mechanism is paragraph 60(j) of Canada’s Income Tax Act – a qualifying pension rollover provision that has enabled UK-to-Canada pension transfers for decades. See the full tax treatment of QROPS transfers.

How a QROPS transfer protects your pension from UK IHT – the full explanation →

The April 2027 Deadline - How Much Time Do You Have?

The answer depends entirely on your pension type. Here is the honest position as of August 2026:

Your Pension Type	Typical Transfer Timeline	Position (August 2026)	What to Do
Defined Contribution (DC) – Money purchase, workplace, auto-enrolment	6–8 weeks	Comfortable. DC holders have significant time remaining even with delays.	Book a consultation. No immediate pressure – but no reason to wait.
Defined Benefit (DB) – Final salary, career average (CETV under £30,000)	8–12 weeks	Achievable. Begin now to build buffer for scheme delays.	Start immediately – scheme delays are common. Do not assume best-case timeline.
Defined Benefit (DB) – Final salary, career average (CETV over £30,000)	12–16 weeks + potential delays	Window is narrowing. Starting now gives a realistic chance. Delaying further increases risk.	Book your consultation today. Every week of delay reduces your buffer against April 2027.

Every week that passes without beginning the transfer process is a week of buffer lost against the April 2027 deadline – particularly for DB pension holders whose transfer involves a CETV request (3–4 weeks) and FCA independent advice stage (4–6 weeks) before the transfer instruction can even be submitted.

If you hold a DB pension and have not started, start now.

Should you transfer your UK pension to Canada before April 2027? – Decision guide →

What to Read Next - Three Pages That Cover This in Full

1. What the Changes Actually Mean - The Full Explainer

A detailed breakdown of exactly what changes in April 2027 – the legislative history, how the IHT calculation works, what the nil-rate band and LTR test mean for your estate, and the specific impact on DB vs DC pension holders.

What the April 2027 UK pension IHT changes mean for your retirement →

2. How QROPS Protects You - The Solution Explained

Precisely how a QROPS transfer to a Canadian RRSP removes your IHT exposure – the paragraph 60(j) mechanism, why the RRSP is outside UK IHT, what happens to your estate after transfer, and how your beneficiaries are protected under Canadian rules.

How a QROPS transfer protects your pension from UK IHT →

3. Should You Transfer Before April 2027? - Decision Framework

If you are eligible and trying to decide whether to transfer and whether you still have time – this decision page gives you the framework by pension type, with honest assessment of the timing against the April 2027 deadline.

Should you transfer your UK pension to Canada before April 2027? →

Frequently Asked Questions

Does the April 2027 UK IHT change apply to me if I live permanently in Canada?

In most cases, yes. UK pensions are UK-situs assets – they remain within the scope of UK Inheritance Tax regardless of your Canadian residency status or how long you have lived in Canada. From 6 April 2025, UK IHT is determined by a long-term UK residence test rather than domicile. Non-long-term UK residents are generally subject to UK IHT only on UK-situs assets – and UK pensions are UK-situs assets. Whether you are a long-term UK resident or not, your UK pension enters the IHT net from April 2027 if it remains in the UK system. The only certain way to remove that exposure is to transfer the pension out of the UK system into a Canadian RRSP. Your specific LTR status and wider estate position should be confirmed with a qualified UK tax advisor.

What replaced UK domicile for IHT purposes - and does it affect my pension exposure?

From 6 April 2025, the UK replaced the domicile-based IHT system with a long-term UK residence (LTR) test. A person is a long-term UK resident for IHT if they have been UK-resident for 10 of the last 20 tax years. This changes the scope of your worldwide estate exposure – but it does not remove UK pension exposure. UK pensions are UK-situs assets regardless of LTR status. Whether you left the UK 5 years ago or 20 years ago, your UK pension remains a UK asset and will enter the IHT net from April 2027 unless transferred. The LTR test is a legal determination that requires a qualified UK tax advisor to confirm for your specific situation.

Will a QROPS transfer actually remove my pension from UK IHT - completely?

Yes – but the mechanism is specific. The IHT protection in the Strata QROPS model comes from the pension landing in a Canadian RRSP under paragraph 60(j) of Canada’s Income Tax Act – not from the QROPS wrapper itself. Some advisers have correctly noted that QROPS structures in Malta, Gibraltar, or the Isle of Man remain within the scope of UK IHT as pension structures. The Canadian model is different: the pension exits the QROPS framework and lands in a Canadian RRSP – a non-UK domestic account. It is no longer a pension. UK pension legislation does not apply to Canadian RRSPs. The transfer must be completed while you are alive and eligible (aged 55–70, permanently resident in Canada).

What if I cannot complete the transfer before April 2027?

If your transfer does not complete before April 2027, your UK pension will be subject to the new IHT rules from that date. This does not mean transfer is no longer worth doing – the specific urgency of removing pre-April 2027 IHT exposure no longer applies, but all other benefits of transfer remain: currency consolidation, RRSP tax treatment, Canadian estate planning, and removal of ongoing IHT exposure for deaths from the point of transfer forward. Transfer after April 2027 removes IHT exposure going forward – it does not retroactively undo exposure for deaths that occurred before transfer. Simon Huften advises on the specific position when delays occur.

Can my spouse inherit my RRSP without paying tax when I die?

Yes. If you name your spouse or common-law partner as the beneficiary of your Canadian RRSP, they can assume the full account on your death through a spousal RRSP rollover – with no immediate Canadian income tax event. The full RRSP balance transfers to your spouse’s name and continues to grow tax-deferred, drawn down on their own retirement timeline. This is structurally superior to a UK DB scheme survivor benefit (typically capped at 50% of the member’s pension income, paid as taxable income in the UK) and to a UK DC pension pot that, from April 2027, is subject to IHT before reaching your spouse. The spousal RRSP rollover gives your spouse 100% of the fund you built, governed by Canadian rules, with no UK IHT exposure.

Your UK Pension and April 2027 - Get a Clear Assessment From Simon Huften

The April 2027 deadline is confirmed legislation. Whether it affects your specific pension – and what your realistic options are – depends on your pension type, its value, your residence history, and your age. Simon Huften addresses this question in every consultation he takes right now.

No commitment. No fees. Just a clear picture of where you stand against the April 2027 deadline.