What The New UK Tax Year Means For British Expats In 2026/27

TL;DR

The new 2026/27 UK tax year still matters for many British expats, even if you live overseas. You may still be able to contribute to a UK pension for a limited period, voluntary State Pension top-ups have become more expensive, capital gains allowances remain tight, and inheritance tax planning continues to be relevant — especially with pension IHT changes due from April 2027. Leaving the UK does not automatically remove you from its tax system, so a regular review of pensions, investments, and estate plans is essential to avoid quiet but costly mistakes.

Last reviewed: May 2026

For many British expats, the UK tax year passes by with little attention.

After all, if you live overseas, UK tax rules no longer really matter… right?

Not quite.

Many expats still have UK pensions, investments, property, or plans to return home in the future.

That means UK tax changes can continue to affect your financial planning long after you leave Britain.

And in my experience, this is where people often get caught out.

Not because they have done something reckless.

But because nobody ever explained how the rules still connect together once life becomes international.

Quick Summary

Some British expats can still contribute to UK pensions and receive tax relief
The UK capital gains tax allowance is now only £3,000
UK inheritance tax planning still matters for many expats
Pension inheritance tax rules are changing from April 2027

The Problem

One of the most common misunderstandings in cross-border financial planning is the belief that leaving the UK means leaving the UK tax system behind completely.

Sometimes that is true.

Often, it is only partly true.

Many British expats still have ongoing UK financial ties through pensions, rental property, investments, or future inheritance planning.

That means UK tax rules can continue to apply in ways you do not expect.

Where people often go wrong is assuming:

UK inheritance tax no longer applies
Existing ISAs remain tax-efficient overseas
Old pensions do not need reviewing
HMRC is no longer relevant once they become non-resident

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New UK Tax Year, What You Need To Know

1. You might still be able to contribute to a UK pension

If you have been non-UK resident for less than five complete UK tax years, you can usually still contribute up to £2,880 per year into an existing UK pension and receive UK tax relief.

That means £2,880 becomes £3,600 inside the pension automatically.

This is a useful opportunity many expats overlook entirely.

However, it works on a “use it or lose it” basis. You can no longer use your 2025/2026 allowance, but you can use your allowance for the current tax year.

You can read more about making UK pension contributions while you live overseas here.

2. There has been a shake-up in voluntary UK State Pension contributions

The option to top up your UK State Pension entitlement by making Class 2 National Insurance Contributions has been scrapped.

This is a shame, as Class 2 contributions are £3.50 a week and using them to build State Pension entitlement while living overseas was a no-brainer.

Going forward, we will only be able to use Class 3 contributions.

At £18.40 a week, these are considerably more expensive.

However, for many, they are still a good option.

3. The inheritance tax gifting exemption still matters

Simple inheritance tax planning opportunities still exist.

The annual gifting exemption remains £3,000 per person.

A married couple could therefore potentially gift:

£3,000 each this tax year
Plus unused exemption carried forward from last year

That means up to £12,000 could potentially move outside the estate immediately.

Small decisions like this can make a meaningful difference over time.

Especially as the UK inheritance tax threshold hasn’t been raised since 2009.

Case Study: A Simple Pension Review Abroad

The Situation

A couple living in Portugal recently approached me after realising they had not reviewed their UK pensions in more than 15 years.

They assumed their arrangements remained suitable overseas because “nothing had changed”.

In reality:

several pensions still held outdated beneficiary nominations
their options for drawing down their pension funds were severely restricted now that they are living outside the UK
their investment strategy is no longer appropriate

The Reality

Nothing catastrophic had happened.

But several avoidable issues had quietly built up over time.

That is very common in expat financial planning.

What Is Coming Down The Line

One of the biggest upcoming changes is the planned inclusion of unused pension funds within the UK inheritance tax regime from 6 April 2027.

Historically, pensions have often been viewed as highly efficient estate planning vehicles.

That is set to change significantly.

If you are planning to leave pension assets untouched for children or grandchildren, this is likely to create future inheritance tax exposure that previously did not exist.

The rules are still evolving.

But the direction of travel is becoming clearer.

Pensions will no longer sit outside estate planning conversations in the way they once did.

You can read more in my article on the new pension inheritance tax rules here.

What To Think About In Tax Year 2026/2027

Key Questions to Review

Have your pensions actually been reviewed since leaving the UK?
If you are planning to leave the UK soon, have you considered the tax implications before becoming non-resident?
If you may return to the UK later, how will your investments and tax position work on re-entry?
Do you know how the new UK pension IHT rules will affect you?

❓FAQ

Do I still have to pay UK taxes if I live abroad?

Sometimes. It depends on the type of asset or income involved. UK pensions, rental property, and certain investments can still fall within the UK tax system even after you move overseas.

Can British expats still contribute to UK pensions?

Yes, in many cases. Expats who have been overseas for less than five complete UK tax years can often still contribute to UK pensions and receive tax relief.

Do ISAs remain tax-free overseas?

Not necessarily. While ISAs remain tax-free in the UK, your country of residence may tax ISA income and gains locally. This is something many British expats overlook after moving abroad.

Will UK inheritance tax still apply if I live abroad?

Potentially, yes. UK inheritance tax can still apply depending on your assets, residency status, and long-term connections to the UK. This is particularly relevant for affluent expats with UK pensions, property, or family ties.

Closing Thoughts

A new tax year presents new opportunities and threats, even if you have been living outside the UK for years.

However, for many British expats, the challenge is a lack of clarity on what these threats and opportunities are.

The people who usually navigate them best are not necessarily those using complicated strategies.

They are the ones who periodically review things, understand how different countries interact, and make thoughtful decisions before problems appear.

Talk to an Expert

For many British expats, pensions become significantly more complicated the moment they move overseas. What appears straightforward in the UK can behave very differently once cross-border tax rules, local pension treatment and overseas residency are involved.

I’m Ross Naylor, a UK-qualified Chartered Financial Planner with nearly 30 years’ experience helping British expats understand how their pensions, investments and retirement plans work once they leave the UK. I regularly help clients avoid unnecessary tax, poor withdrawal decisions and pension structures that no longer suit their international lifestyle.

I firmly believe your location in the world should never be a barrier to expert, impartial and transparent financial advice you can trust.

If you live abroad and are unsure how your UK pension should be structured, taxed or accessed, taking professional advice before making major decisions can often preserve flexibility and improve long-term financial outcomes.

Book a confidential consultation