UK Budget Changes - Autumn 2024

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What Happens to My HSA When I Retire Overseas?

|Financial guidance, Retirement|9/24/2026

What happens to your HSA when you retire abroad? A practical guide to HSA withdrawals, overseas medical expenses, contributions, age 65, Medicare, tax and estate planning.

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Key takeaways

From 6 April 2025 the UK abolishes domicile-based taxation and the remittance basis. A new residence-based regime applies, including a 4-year foreign income and gains relief for new or returning residents who were non-UK resident for the prior 10 consecutive tax years.
A Temporary Repatriation Facility lets former remittance-basis users bring pre-6 April 2025 foreign income and gains to the UK at reduced tax rates. The rate is 12 percent in 2025-26 and 2026-27, then 15 percent in 2027-28.
Inheritance Tax moves to a residence-based test from 6 April 2025. Long-term UK resident status for IHT generally means resident in at least 10 of the previous 20 tax years. If you leave the UK you can remain within IHT scope for up to 10 tax years, with the tail shortened for shorter residence histories. If you have 10 consecutive years of non-residence and then return, the 10-of-20 test resets.
Trusts and excluded property require review. From 6 April 2025 the status of foreign trust assets depends on the settlor’s long-term UK residence, and some existing structures can face IHT exposure under the new rules. Do not assume prior excluded-property treatment continues unchanged.
Unused pension funds and many death benefits will fall into the IHT estate from 6 April 2027. The policy has been confirmed and draft legislation is being consulted on.
Overseas pension transfers become more expensive in many cases. From 30 October 2024 the exemption from the 25 percent Overseas Transfer Charge for QROPS in the EEA and Gibraltar was removed. Many transfers to QROPS now face a 25 percent charge unless another exclusion applies.
Practical actions now. Map your UK residence history, review any trusts and estate plans, stress-test pension transfer plans versus a UK SIPP, and consider whether the 12 percent or 15 percent TRF makes sense for bringing legacy offshore funds onshore.

From April 2025, the UK is making some of the most significant tax reforms in decades, moving from a domicile-based system to a residence-based tax regime.

For UK expatriates, these changes could have far-reaching implications on inheritance tax (IHT), foreign income and gains (FIG), and pension transfers. Many expats assume they’ve left the UK tax net for good, but under these new rules, that may no longer be the case.

If you have UK connections - whether through property, pensions, or future plans to return - now is the time to review your financial strategy.

Abolishing the Non-Domicile (Non-Dom) Regime: The End of an Era

Key Change: From Domicile-Based to Residency-Based Taxation

For years, non-domiciled (non-dom) status allowed UK residents with overseas ties to avoid UK tax on foreign income and gains (FIG) unless they were remitted to the UK. That remittance basis is now being scrapped.

New Residency Test for Taxation: From April 2025, UK taxation will be based on residency alone.

Resident for 10 out of 20 years? You will now be considered UK tax resident for inheritance tax purposes.

Leaving the UK? You may remain in the UK tax net for up to 10 years under an "exit tail" rule.

This means UK expatriates who were historically non-doms may suddenly find themselves exposed to UK tax on worldwide assets, even if they left years ago.

Implications for Expats:

If you’ve been relying on a non-dom status to mitigate tax exposure, this is a wake-up call.

Assets held in offshore structures will require urgent review to ensure they remain tax-efficient under the new rules.

Inheritance Tax (IHT) Exposure for Long-Term UK Residents and Expats Returning to the UK

The biggest unspoken impact of these reforms is inheritance tax (IHT). The UK’s 40% IHT rate is one of the harshest in the developed world, and now many more people will fall under its scope.

What’s Changing?

Historically, IHT liability was determined by domicile, meaning non-doms only paid IHT on UK assets.

From April 2025, IHT will be residency-based, meaning:

10-Year Exit Tail: If you were UK resident for 10 of the last 20 years, your worldwide estate will be subject to IHT - even if you have since moved abroad.

Trusts will NOT be grandfathered: This means previously "excluded property" trusts (often used for IHT planning) will no longer protect foreign assets from IHT.

What Expats Need to Do Now

If you are a long-term UK resident or plan to return, you may face a 40% tax hit on your worldwide estate.

Consider restructuring assets and trusts before April 2025 to ensure they remain tax-efficient.

Foreign Income & Gains (FIG): Transitional Tax Rules for Expatriates

To soften the blow, the UK is introducing a four-year Foreign Income & Gains (FIG) regime for new UK residents.

Who Benefits?

Expats returning to the UK after *10+ years of non-residence can claim FIG relief.

For four years, they won’t pay UK tax on foreign income & gains, making it an attractive re-entry window.

However, for existing non-doms who lose their status in April 2025:

The UK is offering a one-off ‘temporary repatriation facility’, allowing previously untaxed FIG to be remitted to the UK at a reduced tax rate of 12% (2025-26) or 15% (2026-27).

This is a one-time opportunity for those with offshore wealth to bring it into the UK at a lower tax cost.

Strategic Considerations

If you are a UK expat considering a return, the FIG regime creates a four-year window for tax planning.

Non-doms should assess whether repatriating funds under the reduced 12%/15% tax rate is beneficial before it closes.

Pension Transfers & UK Tax Changes: QROPS, SIPPs, IHT, and the Overseas Transfer Charge (OTC)

For UK expatriates, pension transfers have always been a key tax-planning tool. The 2025 reforms introduce new risks for overseas pensions, particularly Qualifying Recognised Overseas Pension Schemes (QROPS).

Key Changes:

1. Inheritance Tax (IHT) on Pensions:

Previously, unused UK pensions fell outside of the estate for IHT purposes.

From April 2027, unused UK pensions - including QROPS - will be subject to IHT.

This significantly reduces the tax efficiency of leaving pensions untouched as an estate-planning tool.

2. Overseas Transfer Charge (OTC):

Transfers to QROPS within the EU/EEA previously avoided the 25% overseas transfer charge (OTC).

This exemption is now being removed - meaning even EU-based QROPS will face a 25% exit tax.

This is a game-changer for those considering moving UK pensions abroad. However, SIPPs are still attractive.

What Should Expats Do?

If you are considering a pension transfer, discuss with a qualified professional before doing anything!

What Should You Be Doing Now?

If you are a UK expatriate - or plan to return to the UK - these reforms require action now, not later.

1. Estate & Tax Planning:

Review your IHT exposure - especially if you have trusts or foreign assets.

If you are within the 10-year exit tail rule, consider tax mitigation strategies.

2. Pension & Retirement Planning:

Reassess QROPS suitability and explore alternative pension structures before the OTC rules tighten.

If you plan to leave your UK pension untouched for inheritance, reconsider your approach before IHT applies.

3. Expatriate Tax Strategy:

If you have offshore assets, review whether the 12%/15% repatriation option is worth utilising.

If you are considering returning to the UK, the four-year FIG regime creates a tax-efficient window - plan accordingly.

Final Thoughts: The 2025 UK Tax Reforms Require Proactive Planning

The UK’s 2025 tax reforms eliminate many traditional expat advantages and create significant tax risks for those with UK connections. If you own assets, pensions, or plan to return to the UK, this is not something to ignore.