If you live outside the UK or are planning to retire abroad, understanding how your UK pension is taxed as a non-resident is essential. Whether you receive the UK State Pension, a private or workplace pension, the tax rules can be complex and often depend on Double Taxation Agreements (DTAs) in place with your country of residence.
We can help navigate your UK pension tax position with clarity and confidence.
Most UK pensions remain taxable in the UK, even if you are non-resident. However, the exact position depends on the type of pension you receive and whether a Double Taxation Agreement (DTA) allows your new country of residence to tax the income instead. A DTA will ensure that the same tax is not paid twice, but the tax relief is not automatic and must be applied for.
Yes, the State Pension is taxable in the UK by default. Some DTAs shift the taxation rights to your country of residence instead, so whether UK tax actually applies depends on the treaty between the UK and your new country.
Pension providers must follow UK tax rules and will normally withhold UK tax at source unless HMRC confirms you are entitled to treaty relief. You may need to complete specialist UK tax form which is then approved in your country of residency too, and once in place will then provide the consent for your provider to stop withholding UK tax.
Yes, if too much UK tax has been withheld, you can reclaim it from HMRC. This is common when a DTA applies but relief was not granted at source. Claims often require evidence of overseas residency and the correct treaty forms to be filed.
To qualify for the UK State Pension, you need to have built up enough National Insurance (NI) contributions during your working life. Non-residents may be eligible to pay voluntary Class 3 contributions to fill gaps in their record.
Declarations may need to be made to HMRC via the Non-Residency section of the tax return. These SA109 pages are not made available on HMRC’s software as they are very often completed incorrectly and usually require some specialist advice. In addition, you may need to obtain a tax certificate of residence where you are living overseas.
Failure to correctly appraise the UK tax position on your pension can be a costly mistake. If you are UK tax exempt on your pension income under a Double Taxation Agreement, then you will not be entitled to claim a foreign tax credit overseas for the tax already suffered in the UK.
This is because if a source of income happens to be exempt from tax, then you must apply for the exemption and you can not simply chose to just claim an overseas credit instead.
Professional guidance offered by UK Tax Returns gives you clarity, peace of mind, and confidence that your pension income is being managed in the most tax-efficient way possible.