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UK Tax on Overseas Pensions
Tax on Overseas Pensions
Our specialists manage UK tax on overseas pensions, working to minimise liabilities while ensuring full compliance. We deliver personalised advice so you can understand complex rules, stay protected, and reduce stress.
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UK Tax on Overseas Pensions
If you receive a pension from abroad, understanding how it’s taxed in the UK is essential for compliance with tax obligations. HM Revenue and Customs (HMRC) requires UK residents to declare overseas pension income on their Self-Assessment tax return, regardless of whether it’s held in a foreign bank account. Tax treatment varies based on the pension’s country of origin, any double taxation agreement (DTA) in place, and your residency status. For example, a UK resident receiving a state pension from US would pay UK tax on it as UK have the primary right to tax pensions. You must seek professional advice to navigate these regulations and maximize tax relief.
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The rules around foreign retirement income can be complex, especially for those who are non-domiciled, recently retired abroad, or considering a QROPS transfer. Without the right advice, you could pay more tax than necessary—or worse, face penalties for incomplete disclosure. Our specialists help you calculate liabilities, claim treaty reliefs, and file correctly so you can keep more of your pension income. Whether you’re already drawing an overseas pension or planning to move funds internationally, expert guidance ensures peace of mind and keeps you on the right side of HMRC.
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We are here to help you with any questions you may have
Do I have to pay UK tax on my overseas pension?
If you live in the UK and receive a pension from abroad, it is normally taxable here. HMRC generally requires UK residents to declare overseas pension income on their Self-Assessment tax return. The amount is added to your other income, such as wages, savings interest, or rental profits, and taxed at your usual income tax rate.
In some cases, a double tax treaty may change where the pension is taxed. These agreements are designed to avoid double taxation and determine which country has taxing rights. Without a treaty, both the UK and the source country could tax the same income, although you can usually claim Foreign Tax Credit Relief to offset one against the other.
The key factor is residency. If you are classed as a UK resident, your worldwide income, including pensions from abroad, will typically be within the UK tax net. Careful reporting is important to stay compliant and avoid penalties.
I’m a UK resident but domiciled abroad—how am I taxed on overseas pensions?
From 6 April 2025, the old “remittance basis” rules will be abolished. Instead, the UK has moved to a residence-based system, meaning your tax position is determined purely by where you are resident, not by your domicile. A new Foreign Income and Gains (FIG) regime has been introduced for individuals who become UK residents after being non-resident for at least ten consecutive years. Under this regime, qualifying individuals receive full tax relief on foreign income and gains, including overseas pensions, for their first four UK tax years. Importantly, it does not matter whether those funds are brought into the UK during that period.
For those who do not qualify, all overseas pension income and other foreign earnings arising from 6 April 2025 will be taxed in the UK on an arising basis. That means they will be taxed as they are earned, regardless of whether the funds are remitted. To ease the transition, for the 2025–26 tax year only, non-qualifying individuals will pay UK tax on just 50% of their foreign income (though this reduction does not apply to gains).
There is also a Temporary Repatriation Facility, which allows people who previously used the remittance basis to bring older foreign income and gains into the UK at a reduced tax rate for a limited time. This transitional measure provides an opportunity to clean up offshore structures and regularise historic income at a lower cost.
I’m non-resident but receive a UK pension—do I still pay UK tax?
If you are a non-resident for UK tax purposes, most pensions arising in the UK remain taxable here. This includes private, workplace, and state pensions. Non-residents are generally subject to UK income tax on UK-sourced pensions, regardless of where they live. There may be relief available under a double tax treaty if one exists between the UK and your country of residence. In some cases, the treaty will assign taxing rights to one country only. Where that applies, you can claim exemption or a refund of tax withheld in the UK.
Even if you are a non-resident, you may still be required to file a UK tax return if you receive pension income here. Understanding your obligations ensures you remain compliant with HMRC while avoiding unnecessary double taxation.
Do I need to declare my overseas pension on a UK tax return?
Yes, if you are a UK resident, you generally must declare any overseas pension income on your Self-Assessment tax return. This applies even if tax has already been deducted abroad before payment reaches you. The income should be reported in the foreign income section of the return, showing the full amount before any foreign tax. If applicable, you can then claim credit for overseas tax already paid. This prevents the same income from being taxed twice.
Failure to declare overseas pension income can lead to penalties, interest charges, and additional scrutiny from HMRC. With automatic data-sharing agreements in place between tax authorities, undeclared pensions are more likely to be discovered. Clear reporting provides protection and peace of mind.
How does the UK tax lump sums from overseas pensions?
Lump sums from overseas pensions are not always treated the same way as those from UK pensions. While UK schemes often allow a portion to be withdrawn tax-free, overseas pension withdrawals may be fully taxable in the UK. The treatment depends on both the nature of the pension and the relevant tax agreements.
If the lump sum is considered income under UK law, it will usually be subject to income tax at your marginal rate. The possibility of relief or different treatment arises where a double tax treaty applies. Each treaty has its own rules, so the exact outcome depends on the specific agreement in place.
It’s important to understand how the UK will classify and tax lump sums before withdrawing money from an overseas pension. This ensures unexpected liabilities do not catch you out.
What if I pay tax on my pension in both the UK and abroad?
If both the UK and the source country attempt to tax your pension, relief is normally available. Double tax treaties are designed to allocate taxing rights and prevent the same income from being taxed twice.
Where the treaty gives taxing rights to the UK, you must declare the pension here, but you may be able to offset foreign tax already paid through Foreign Tax Credit Relief. If the treaty gives taxing rights to the other country, you can claim an exemption in the UK or reclaim UK tax withheld. Accurate record-keeping is essential. Proof of any foreign tax deducted is required to claim relief. Without this, HMRC may not allow the offset, leaving you exposed to double taxation.
How do government service pensions from abroad get taxed?
Government service pensions, such as those paid for employment with a foreign government or public body, often follow special rules. In many cases, they are taxable only in the country that pays them, regardless of where the pensioner now lives.
UK residents receiving such pensions may still need to report them to HMRC, even if the income is exempt from UK tax under a treaty. This ensures transparency and avoids misunderstandings. The rules vary depending on the wording of the relevant tax agreement, so it’s always important to check carefully.
Government pensions can be treated differently from private or occupational schemes, which means the reporting and tax implications may not be the same.
Can I transfer my overseas pension to the UK?
Transfers of overseas pensions to the UK are possible, but strict rules apply. To avoid heavy tax charges, the transfer generally needs to be made into a Qualifying Recognised Overseas Pension Scheme (QROPS) or another approved arrangement.
If the transfer does not meet HMRC’s conditions, a significant overseas transfer charge can apply. Additional reporting obligations also exist for both the transferring and receiving schemes. These rules are designed to prevent tax avoidance and ensure pension funds are only moved in approved ways.
Anyone considering a transfer should seek advice in advance. The rules are complex, and the tax consequences of making the wrong move can be severe.
What if I move abroad with my UK pension?
If you leave the UK but continue to receive a UK pension, it usually remains taxable in the UK. The impact of your move depends on your residency status and whether there is a double tax treaty between the UK and your new country of residence.
In some cases, treaties may allow the country of residence to tax the pension instead. In other cases, both countries may have rights, but relief is available to avoid double taxation. You may also need to complete a UK Self-Assessment return even after moving abroad. Understanding the interaction between residency, treaty provisions, and pension type is crucial to avoiding unexpected liabilities after leaving the UK.
How can I reduce UK tax on my overseas pension legally?
There are several legitimate ways to manage the UK tax due on overseas pensions. First, review your residency status, as non-residents are taxed differently. Next, examine whether a double tax treaty provides relief or assigns taxing rights exclusively to one country. For those who are non-domiciled, the remittance basis may allow overseas pensions to remain untaxed in the UK if not brought here. Timing of withdrawals can also make a difference, particularly if income falls in a year when your overall taxable income is lower.
Transfers into approved pension schemes may also help align your retirement income with more favourable tax treatment. Professional advice ensures you remain compliant while keeping your liabilities as low as possible.