From April 2027, measures first proposed by Chancellor Rachel Reeves will come into effect. Under the new rules, any unspent pension funds will be treated as part of an estate and subject to IHT upon death.

Currently, families inheriting pension pots pay no inheritance tax—only income tax if the deceased was over 75. But under the revised legislation, death duties of up to 40% could be applied, followed by income tax on the remaining balance.

The reform is expected to raise £1 billion a year by the end of the decade. However, it may also push more Britons to seek more favourable tax environments abroad.

Portugal Pathways, which supports affluent expats with investment, Golden Visa residency, cross-border tax, and researching luxury new homes in Portugal, believes this will lead to increased interest in moving overseas.

Paul Stannard, chairman and founder of Portugal Pathways, said:
“Making pension pots subject to IHT means everyone should review how they are currently using their pension.”

The UK’s HM Revenue & Customs (HMRC) has also confirmed that the responsibility for managing and paying IHT on pensions will fall on the estate’s personal representative or executor—adding further pressure on grieving families.

Stannard continued:
“Exploring international residency, particularly in jurisdictions like Portugal, can be a crucial part of a comprehensive wealth management strategy. This strategy ensures expats can fully capitalise on the latest tax rules while avoiding unnecessary liabilities.”

In addition to the pension reforms, broader IHT changes are coming into force in April 2025. The new framework will be residence-based, meaning global assets will be subject to UK IHT if an individual has been a UK tax resident for at least 10 of the previous 20 tax years.

Yet this also opens up opportunities for expats. Individuals who have been non-resident for at least 10 of the last 20 years may be exempt from UK IHT on their overseas assets—including property, savings, and investments—if specific criteria are met.

David Vacani, founder of Beacon Global Wealth Management, noted:
“This is a significant relief for expats who plan their financial and property portfolios wisely.

Credits: Supplied Image; Author: Client; Seek expert advice on cross-border taxation and wealth strategies


“By keeping your assets outside the UK, you can ensure they remain free from the heavy burden of UK IHT. When combined with the benefits of Portuguese residency, this offers significant planning opportunities.”

Portugal’s favourable tax conditions continue to play a major role in its appeal. For years, the country’s Non-Habitual Residency (NHR) tax regime offered reduced taxation—just 10% on pensions and 0% on passive income like dividends.

Although the original NHR tax regime has now closed to new applicants, Portugal introduced a successor programme in 2025—officially named the “Tax Incentive for Scientific Research and Innovation,” but often referred to as NHR 2.0.

The revised scheme targets entrepreneurs, value creators, and highly skilled professionals. It offers a flat 20% tax rate on Portuguese-sourced income and 0% tax on passive income from abroad, such as dividends, royalties, and capital gains.

When structuring long-term financial plans, it is vital to seek expert advice on cross-border taxation and wealth strategies.

Credits: Supplied Image; Author: Client; Upcoming changes to UK IHT could impact pensions

Paul Stannard added:

“Portugal has consistently attracted high-net-worth individuals (HNWIs) who seek to benefit from its economic and political environment, as well as its climate and culture. Portugal’s reputation as a safe, stable country with a lower cost of living than the UK has led to a continuously growing demand from people wanting to relocate.


“There are some excellent opportunities for investment and tax using the old NHR tax regime or the new NHR 2.0, but also Portugal’s Golden Visa alternative investment funds, which have no tax on any upside for foreign investors.”

For expert guidance on managing IHT as a British expat and making the most of opportunities in Portugal, contact Portugal Pathways.

About Portugal Pathways

Portugal Pathways has supported hundreds of Golden Visa residency-by-investment applications and provides expert guidance through its professional supply chain network on luxury property, wealth management, and tax optimisation, including post-NHR tax regime planning, as well as private healthcare, IFICI tax incentive applications, money transfers and bespoke relocation solutions to enhance life and investments in Portugal.