QNUPS, LTR & IHT in 2027: What Expats Can Expect (With Case Studies)
The 2027 UK Inheritance Tax reform marks the most significant shift in decades: domicile disappears, replaced by Long‑Term Residence (LTR), and unused pension funds become Notional Pension Property (NPP) — potentially exposed to a 40% IHT charge. For expatriates, or Asia-based investors, the impact varies dramatically depending on residence history, family structure, and asset mix. Below are four realistic case studies illustrating how the new rules apply in practice. We will also review each profile’s suitability for QNUPS after 2027. This review follows the HMRC’s Technical Note on IHT on Pensions from May 2026, which states that “non-long-term UK residents will not be charged Inheritance Tax on pension schemes… established outside the UK.” This residency rule determines whether a QNUPS is within IHT scope.
1. The Long‑Term Hong Kong Expat (Non‑LTR, UK Assets)
Profile
- British national, age 55, married to a British National
- Living and working in Hong Kong since 2012
- Owns UK investment property within a QNUPS
- Holds a UK SIPP
- No intention to return to the UK
How Does the 2027 Reform Affect the Non-LTRs?
Under the new 10-out-of-20 residence rules, this individual is classified as a non-Long-Term Resident (LTR). They have lived outside the UK for more than 10 years, and do not plan to re‑establish long‑term residence.
Implications:
- Their QNUPS and their assets (including UK property) remain outside the UK IHT net.
- Their UK SIPP becomes Notional Pension Property if left unused at death.
- Beneficiaries may face a combined tax burden of 40% IHT + up to 45% income tax on the SIPP.
- All non‑UK assets remain outside IHT scope.
Planning Insight
This is the ideal post‑2027 QNUPS profile. The QNUPS continues to serve as a long‑term, internationally portable retirement structure that protects non‑UK assets and UK property assets from IHT. The SIPP, however, becomes a liability if left untouched, and its value is over £650,000 following his and his wife’s death.
Recommended actions (conceptually):
- Consider taking a Pension Commencement Lump Sum from your SIPP and transferring it to your QNUPS.
- Continue using QNUPS for the contribution of excess cash and acquisition of any new UK-sited assets.
- Maintain non‑LTR status by avoiding extended UK residence.
This case study demonstrates that QNUPS remains highly relevant to long‑term expatriates with no plans to return to the UK.
2. The Singapore Executive Planning to Return to the UK (LTR Risk)
Profile
- British national, age 45
- Working in Singapore for 7 years, and Japan for 5 years prior to that
- Holds UK property and offshore investments
- Plans to return to the UK in 2028
How the 2027 Reform Affects A UK Returnee (LTR risk)
This individual is currently non‑LTR, but their planned return to the UK will eventually result in LTR after 10 years of residency.
Implications:
- If dies within 10 years of returning, no IHT on UK assets.
- Once LTR is triggered, worldwide assets fall into the IHT scope.
- QNUPS loses its IHT protection once the individual becomes LTR.
- UK property remains fully taxable.
- Offshore investments may be caught under anti‑avoidance rules.
- UK pensions become Notional Pension Property if unspent at death.
Planning Insight
This is the worst possible profile for QNUPS after 2027. The individual’s future UK residence renders QNUPS unsuitable, as the structure loses its IHT advantages once LTR is triggered.
Recommended actions (conceptually):
- Avoid establishing new QNUPS structures.
- Focus on pre‑arrival planning: pension withdrawals, trust restructuring, and asset relocation.
- Consider reducing UK‑situs exposure before returning.
This case study highlights the importance of future residence planning — not just current residence — when assessing QNUPS suitability.
3. The Mixed‑Nationality Couple With UK Property
Profile
- British husband (age 50), Thai wife (age 48)
- Living in Thailand for 15 years
- Jointly own a UK rental property
- Husband holds a UK pension and an offshore bond
How does the 2027 Reform Affect British non-LTR in Thailand?
The husband is currently non‑LTR, but his status could change if he returns to the UK for work, family, or retirement.
Implications:
- UK property remains fully within IHT scope regardless of residence.
- An offshore bond remains outside IHT unless LTR is triggered.
- QNUPS could protect non‑UK assets only while the husband remains non‑LTR.
- The Thai spouse’s non‑UK assets remain entirely outside IHT.
Planning Insight
This couple sits in the grey zone. QNUPS may be beneficial today, but the long‑term suitability depends on whether the husband will ever re‑establish UK residence.
Recommended actions (conceptually):
- Consider QNUPS for the husband only if he is confident he will remain non‑LTR.
- Ensure the Thai spouse holds non‑UK assets where possible.
- Maintain clear documentation of residence history.
This case study shows how mixed‑nationality families require dual‑track planning that accounts for both partners’ tax positions.
Related: What is QNUPS?
4. The Hong Kong Resident With UK Property
Profile
- Hong Kong citizen (or long‑term HK permanent resident), age 55
- Never lived in the UK
- Invests in UK residential property for rental income and diversification
- The majority of wealth is held in Hong Kong (cash, securities, business interests)
- No UK pension, no UK employment history
How the 2027 Reform Affects Hong Kong UK Property Owners
This individual is a Hong Kong resident with international investments. Because they have never lived in the UK, they are not LTR and will not become LTR unless they live there for 10+ years.
Under the 2027 rules:
- UK property remains fully within the IHT net, regardless of residence or nationality.
- All Hong Kong assets remain outside IHT, as they are non‑UK situs.
- No exposure to Notional Pension Property, because they do not hold UK pensions.
- QNUPS may be used for retirement planning, but they cannot shield UK‑situs property.
- Mortgage leverage reduces IHT exposure because IHT applies to net equity rather than gross value.
- Other IHT offsetting options available, such as Life Insurance.
Planning Insight
This profile is extremely common in Hong Kong: a local investor who diversifies into UK property but has no personal or residential ties to the UK. This scenario highlights a critical point often misunderstood in Asia:
You do not need to be British or an expat to be exposed to UK Inheritance Tax — owning UK property alone is enough.
5. Best candidates for QNUPS after 2027
- Long‑term expatriates
- Individuals with no intention to return to the UK
- Non‑LTR individuals under the 10/20 rule
- Expats holding significant non‑UK assets
- High‑net‑worth individuals seeking flexible contribution rules
The 2027 IHT reform fundamentally changes how expatriates must think about wealth planning. QNUPS remains a powerful structure — but only for the right profiles. The key determinant is no longer domicile, but Long‑Term Residence. Understanding where you fall on the LTR spectrum is now the single most important factor in determining whether QNUPS is suitable.
For expatriates in Asia and the Middle East, the next 12–18 months represent a critical window to reassess structures, model exposure, and make informed decisions before the new rules take effect. Contact the team at Soteria Trusts to understand your position and your planning options.
From 6 April 2027, most unused pension funds and pension death benefits will be included in a person’s estate for Inheritance Tax (IHT).
It is the total value of a member’s pension arrangements immediately before death, calculated under section 150A IHTA 1984. HMRC explains that a member is treated as “beneficially entitled” to this value at death.
The rules apply to UK-registered pension schemes, defined benefit and money purchase schemes, collective money purchase schemes, qualifying non‑UK pension schemes, and section 615(3) schemes.
A QNUPS (Qualifying Non‑UK Pension Scheme) is a pension scheme established outside the UK that meets HMRC’s qualifying criteria. While the HMRC technical note does not discuss QNUPS directly, it states that “non-long-term UK residents will not be charged Inheritance Tax on pension schemes… established outside the UK.” This rule determines how QNUPS are treated for IHT purposes.
QNUPS fall under the category of “qualifying non‑UK pension schemes,” which are included in the new framework. However, HMRC clarifies that IHT only applies to non‑UK schemes if the individual was a long‑term UK resident. The technical note states: “For long-term UK residents, Inheritance Tax arises… regardless of where the scheme is situated,” while “non-long-term UK residents will not be charged Inheritance Tax on pension schemes… established outside the UK.” This residency rule determines whether a QNUPS is within IHT scope.