New Zealand Inheritance Tax Rules for UK Expats

From 6 April 2025, former UK residents who meet the long-term resident (LTR) rules can remain within the scope of UK IHT on their worldwide assets for up to 10 tax years after leaving the UK. For expatriates with UK property, pensions, investments and internationally held assets, understanding when this exposure ends is an important part of cross-border estate planning.

This article explains the IHT considerations for UK expats in the absence of a New Zealand inheritance tax, including how the LTR rules apply, which assets may remain exposed to UK IHT after LTR status ends, and what to consider when planning an estate across both jurisdictions.

Does New Zealand Have Inheritance Tax?

New Zealand imposes no estate tax, gift tax, or inheritance tax (IHT) on assets passed to beneficiaries on death. Estate duty was abolished for deaths occurring on or after 17 December 1992, and gift duty was subsequently abolished for gifts made from 1 October 2011.

This can make New Zealand attractive from a wealth transfer perspective, especially for expatriates who are no longer within the scope of UK IHT on their worldwide assets. However, the absence of inheritance tax in New Zealand does not mean that inherited assets are always tax-free. Income generated from those assets or certain transactions involving them after receiving an inheritance can still be taxable under New Zealand’s income tax rules.

Do You Have To Pay Tax on Inheritance Money in NZ?

The Inland Revenue Department (IRD) of New Zealand does not regard inheritance as taxable income. However, income subsequently generated from inherited assets may be taxable.

The tax treatment depends on what you inherit and whether you use or dispose of it:

• Cash: Interest earned when you deposit or invest the inherited money is generally taxable.
• Shares or investments: Dividends, interest, or other taxable investment income generated by inherited assets may be subject to New Zealand income tax.
• Overseas assets: NZ tax residents are generally subject to tax on income from worldwide assets. Depending on the beneficiary’s residence status, income generated by inherited overseas assets may be taxable. This can include certain distributions from foreign trusts.

An important exception can apply to people moving to New Zealand. Eligible new or returning residents can qualify as transitional residents and receive a temporary exemption from most types of foreign-sourced income for up to 48 months. This can affect the New Zealand tax treatment of overseas investments and other foreign assets during the exemption period.

What Happens When You Inherit Property in NZ?

You do not pay tax simply because you inherit property in NZ, regardless of whether it is residential or commercial.

Inherited residential property is generally exempt from New Zealand’s bright-line test, including when it is subsequently sold by the beneficiary. However, a sale can still be taxable under other New Zealand land-sale rules.

Under New Zealand law, you can inherit the previous owner’s tax position for certain property sales along with the property.

For instance, if the person who died would have been liable for income tax on a sale because they acquired the property with the intention of reselling it, that tax treatment can continue to apply when the beneficiary sells the inherited property.

If you purchase another beneficiary’s share of inherited property, different rules can apply to the interest you purchased because that part of the property was acquired through purchase rather than inheritance.

A property sale can also generate taxable income in certain circumstances, including where:

• The property was acquired with the intention or purpose of resale.
• You have a pattern of buying and selling property.
• You are or are associated with a property dealer, developer, or builder.
• Another provision of New Zealand’s income tax rules applies to the sale.

Does UK IHT Apply After Moving to NZ?

Moving to New Zealand does not automatically remove UK IHT exposure. Since 6 April 2025, the UK’s IHT rules for overseas assets have been based primarily on long-term UK residence (LTR) rather than domicile status. This means that if you are a UK LTR, your overseas assets can remain subject to UK IHT even after leaving the UK.

The date you leave the UK is therefore only part of the position. Your previous UK residence history can determine how long your worldwide estate remains exposed to UK IHT after departure.

Before and after relocating to New Zealand, it is important to establish:

1. Whether you are considered a UK LTR
2. How long your LTR status can continue after leaving the UK
3. Which UK-situs assets may remain within the IHT regime once LTR status ends

Who Is a Long-Term UK Resident for Inheritance Tax?

For IHT purposes, you are generally a UK LTR if you have been UK tax resident under the Statutory Residence Test for at least 10 of the previous 20 tax years immediately preceding the tax year in which the relevant chargeable event occurs. These years do not have to run consecutively.

If you are an LTR, UK IHT can apply to your worldwide assets, including assets transferred at death and certain lifetime transfers.

You can become a New Zealand resident for local tax purposes and still be treated as an LTR for UK IHT because your LTR status does not necessarily end immediately after you leave.

How Long Can UK Inheritance Tax Apply After Moving to New Zealand?

A former long-term UK resident can remain within the worldwide IHT regime for three to 10 tax years after leaving the UK. The length of this “tail” period depends on how many of the previous 20 years you were a UK resident:

Someone who was a UK resident for 15 years of the relevant 20 tax years before moving to NZ can remain within the UK IHT regime for five tax years after leaving the UK. During that period, their overseas assets, including New Zealand property, can remain within the scope of UK IHT.

IHT is generally charged at 40% on the taxable value of an estate above the available exemptions and allowances. The standard nil-rate band (NRB) is £325,000. An additional residence nil-rate band (RNRB) of up to £175,000 may be available where the relevant conditions are met, including requirements relating to a qualifying residence passing to direct descendants.

After 10 consecutive tax years of non-residence, an individual will no longer satisfy the LTR test based on their earlier UK residence history.

Transitional rules can affect people who left the UK around the introduction of the residence-based regime, so the standard three-to-10-year calculation should not be applied without considering an individual’s residence history and circumstances.

When Should UK Expats Start IHT Planning Before Moving to New Zealand?

The LTR rules make residence history relevant well before the end of the post-departure tail period. Leaving the UK does not start the same fixed IHT countdown for every expatriate; the period during which worldwide assets remain exposed depends on the individual’s previous UK residence.

For HNW individuals with property, pensions, investment portfolios, trusts or other internationally held assets, establishing the likely end of LTR status before or around relocation can provide a clearer timetable for estate planning. It can also identify assets that may need separate consideration because they could remain within the UK IHT regime after worldwide exposure has ended.

For internationally mobile families looking to take advantage of New Zealand’s favourable wealth transfer environment, the expected end of the LTR tail period should therefore form part of the relocation and estate planning process.

If you need support with assessing your LTR status and planning for the IHT tail period, Titan Wealth International can help you review your cross-border estate strategy.

What Happens to UK-Situs Assets After the LTR Tail Period Ends?

New Zealand can offer a favourable environment for wealth transfers once worldwide UK IHT exposure has ended, but certain UK-situs assets can remain within the UK IHT net.

This distinction can be especially important for expatriates who have spent many years restructuring their financial affairs around an international move. Ceasing to be an LTR does not necessarily mean that every remaining connection with the UK falls outside IHT.

Common examples include UK real estate, bank accounts and certain UK-situated securities. However, the IHT position depends on the type and situs of the particular asset. Some UK investments can qualify as excluded property for a person who is not an LTR, so an investment should not be assumed to fall within UK IHT simply because it is UK-based.

The treatment of UK-situs property can also be affected by specific statutory rules. For instance, some interests in overseas companies that derive their value from UK residential property are subject to IHT. Holding an asset through a non-UK entity does not therefore necessarily remove IHT exposure.

Pensions require separate consideration. From 6 April 2027, most unused pension funds and pension death benefits will be brought within the value of a person’s estate for IHT purposes. For someone who is no longer an LTR, the location of the pension scheme can then become relevant: broadly, pension property in a scheme established in the UK can remain within the UK IHT regime, while pension property in a scheme established outside the UK will generally fall outside it for a non-LTR.

For expatriates who are no longer LTRs and hold no assets that remain within the UK IHT regime, New Zealand’s lack of inheritance tax, estate duty and gift tax can create a considerably different environment for longer-term wealth transfer planning. Reaching that position, however, requires an assessment of the assets retained rather than relying on relocation alone.

Cross-Border Estate Planning Considerations for UK Expats in NZ

UK expats with substantial wealth need to consider both the UK and NZ rules when structuring their estates. A coordinated estate plan should therefore consider where you live, where your assets are located, how they are owned, and how they are intended to pass to beneficiaries.

For people relocating to New Zealand, timing can also matter. The transitional-residence regime may temporarily change the New Zealand tax treatment of foreign income, investments and some trust arrangements, while UK IHT exposure may continue under the LTR rules at the same time.

As part of your estate strategy, it is important to:

1. Review UK pensions
2. Structure investment portfolios
3. Review property ownership
4. Assess trusts
5. Coordinate wills

Review UK Pensions

Pensions have historically been an important part of inheritance planning, but their role will change from 6 April 2027, when the Finance Act 2026 brings most unused pension funds and pension death benefits within the value of a person’s estate for IHT purposes.

For UK expats in New Zealand, the estate-planning implications will depend on factors including your LTR status, the nature of the pension benefits and where the pension scheme is established. These points become especially relevant as you approach the end of the LTR tail period, when the treatment of UK and overseas pension arrangements may diverge.

For some expatriates, transferring a UK pension to a New Zealand-based Qualifying Recognised Overseas Pension Scheme (QROPS) may be worth considering as part of a wider retirement and estate strategy. However, a transfer can have significant tax and financial consequences, including potential exposure to the Overseas Transfer Charge and Overseas Transfer Allowance.

Moving a UK pension overseas does not, by itself, remove it from UK IHT. Any transfer to a QROPS in New Zealand should therefore be considered alongside your LTR status, the location of the receiving scheme, retirement objectives and wider estate structure.

Death-in-service benefits payable from a registered pension scheme will remain outside the value of the estate for IHT purposes under the rules taking effect from 6 April 2027.

Structure Investment Portfolios

Investment portfolios should be reviewed as LTR status changes because an asset’s UK IHT treatment and its New Zealand tax treatment are separate considerations.

Certain UK-situs investments can remain within the scope of UK IHT after an individual ceases to be an LTR, although the position depends on the type and situs of the investment. Some holdings, including certain authorised unit trusts and open-ended investment companies, can qualify as excluded property for a person who is not an LTR.

In New Zealand, the foreign investment fund (FIF) rules can apply to overseas investments, generally where the cost of an individual’s relevant interests exceeds the applicable NZ$50,000 threshold. The regime can tax a deemed return rather than relying solely on the actual income or gains realised.

Eligible transitional residents are generally exempt from the FIF rules during their temporary foreign-income exemption period. For people moving from the UK with substantial international portfolios, the timing of any restructuring can therefore be important.

A structure that is tax-efficient under UK rules, such as an offshore bond, may produce a different outcome under NZ rules. For HNW expatriates with assets held across several jurisdictions, portfolios established before relocation should therefore be reviewed against both the changing UK IHT position and their longer-term New Zealand tax treatment.

Review Property Ownership

UK property requires separate consideration even after the LTR tail period ends. UK real estate generally remains subject to UK IHT regardless of your LTR status, so retaining property in the UK can leave part of your estate within the UK IHT regime after your worldwide exposure has ceased.

The purpose, use and ownership of that property can also affect its tax treatment.

For instance, the RNRB can reduce IHT when a qualifying residence passes to direct descendants. The RNRB is subject to conditions and tapers for larger estates, so it should not be assumed to apply simply because the property was a family home.

An investment or rental property does not qualify for the RNRB. Additionally, rental income from UK property remains taxable in the UK, and a non-resident landlord may need to account for tax under the non-resident landlord scheme.

Ownership structure also determines tax treatment. Property can be:

• Personally owned
• Jointly owned with a spouse or civil partner
• Owned through a company
• Owned through a trust

For instance, UK residential property held through offshore structures can remain subject to UK IHT under rules that look through certain non-UK entities.

Assess Trusts

Trusts should be reviewed before or soon after relocation because moving to New Zealand can change their local tax treatment while the settlor may still remain within the UK’s LTR regime. For HNW families using trusts to hold international or intergenerational wealth, the two regimes need to be considered together.

New Zealand tax treatment of a trust depends in part on the settlor’s residence status. When the settlor of a foreign trust becomes a New Zealand tax resident, special transitional rules apply. Broadly, an election can be made for the trust to become a complying trust. If no election is made within the relevant period, the trust can subsequently become non-complying.

For a settlor who is not a transitional resident, the election generally needs to be made within 12 months of becoming New Zealand resident. Where the settlor qualifies as a transitional resident, the 12-month election period generally starts when transitional-resident status ends.

The classification of trusts is important because New Zealand taxes trust income and distributions differently depending on the type of trust:

The UK IHT position must be considered alongside these New Zealand rules. From 6 April 2025, the settlor’s LTR status can determine whether non-UK assets held in a trust remain within the UK IHT regime. Changes in LTR status can also have consequences for the trust itself, so existing offshore trusts should be reviewed as part of the relocation process rather than considered only after the move.

Coordinate Wills

Like England and Wales, New Zealand allows considerable testamentary freedom. This can make coordinating an NZ will with a UK will more straightforward than in a jurisdiction with strict forced-heirship rules, but the position is not unrestricted.

Separate wills for UK and NZ assets, drafted to work together rather than conflict with or unintentionally revoke one another, can help ensure each estate is administered under the appropriate local procedures.

Certain family members can bring claims against an estate under New Zealand’s Family Protection Act 1955, so a will should be considered alongside, not instead of, a wider understanding of who might have a claim on the estate.

For UK expats with substantial, internationally held assets, coordinating UK IHT planning with NZ tax and succession rules may require specialist advice. Titan Wealth International can help you review how your financial arrangements fit within your wider cross-border estate strategy.