UK pensions when you retire abroad

Q: What does this look like for one retiree?

Illustration only, using 2026 to 2027 UK rates. Alan, a British citizen, retires to a treaty country whose pensions article follows the OECD model and is not limited to past employment. He receives an NHS pension of £18,000, a local authority pension of £9,000 and a State Pension of £12,000. The NHS pension is non government, so he claims treaty exemption and the payer moves to code NT. It is taxed only in his new country. The local authority pension is a government pension and stays taxable in the UK, because he is not a national of his new country. The State Pension falls under the pensions article, so the UK exempts it once he claims. His only UK taxable income is £9,000, below the £12,570 allowance, so he owes no UK tax. Had the treaty restricted the pensions article to past employment with no other income article, his UK income would be £21,000 and the bill £1,686 (£8,430 at 20%), which is less than the £1,800 the section 811 limit would give.

A UK pension stays within UK income tax after you move abroad, and the provider keeps deducting tax through PAYE until HMRC tells it otherwise. A double tax treaty usually gives a private or workplace pension to your new country, which you claim so that HMRC issues code NT, but pensions for service to the UK government or a local authority normally stay taxable in the UK. The State Pension depends on the wording of the treaty.

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Does moving abroad stop UK tax on your pension?

No. HMRC’s PAYE Manual (PAYE81750) says the Income Tax (Earnings and Pensions) Act 2003 charges all pensions paid from the UK to income tax, and a pension paid by an employer to a former employee is taxable whether or not the pensioner is UK resident. GOV.UK puts it simply: you pay UK tax on your pension if you receive it from a UK provider or you are UK resident.

There is one narrow PAYE exception. Regulation 57 of the PAYE Regulations only requires PAYE on a non resident’s pension that does not arise wholly from employment carried out abroad. HMRC treats that test as met where the last ten years of service were abroad, or where service abroad was at least half of the total and covered ten of the last twenty years, counting only service with the same employer or group and ignoring any year with more than incidental UK duties. Even then the pension is still taxable in the UK unless a treaty exempts it, so it may need reporting through Self Assessment.

Which part of a treaty decides where the pension is taxed?

HMRC’s Employment Income Manual (EIM75070) explains that pension income can fall under three articles:

Government service: pensions paid by a state, or a political subdivision or local authority, for services to it.
Pensions: the general rule is that pensions paid in consideration of past employment are taxable only in the country where the recipient lives. Some treaties let the source country tax as well, or only exempt the pension if it is taxed in the country of residence.
Other income: sometimes used for the State Pension where the pensions article does not cover it.

The wording is important for lump sums. EIM75070 notes that a treaty referring to “pensions and similar remuneration” covers lump sums as well as pensions, while one referring only to “pensions” covers pensions only. Always read the treaty itself rather than a summary; how double tax treaties work sets out the structure.

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How are government service pensions treated?

HMRC’s International Manual (INTM343020) says a pension paid by the government of a country to a former employee will normally continue to be taxed by that government, and the OECD model wording extends that to local authorities. Many treaties transfer the taxing right to the country of residence where the pensioner is both a national and a resident of that country. Some older treaties only mention central government, so local authority pensions fall under the general pensions article instead (INTM343030).

HMRC takes a restrictive view of what counts. Its classification table (INTM343040) treats these as government pensions:

civil service and armed forces pensions;
local authority pensions (other than for trading activities);
police and fire service pensions;
teachers’ pensions in general, but not pensions for service at a private or independent school.

By contrast, an NHS pension paid by the NHS Business Services Authority is treated as non government, because NHS staff are employed by health trusts rather than by the state (INTM343030). The same applies to the Bank of England, the Post Office and the Universities Superannuation Scheme. Where a pension mixes government and non government service, HMRC refers the case to specialists.

What happens to the State Pension?

The State Pension is not a government pension for treaty purposes (INTM343190). HMRC considers exemption under the pensions article unless that article is limited to pensions paid for past employment, in which case it looks at the other income article. GOV.UK says non residents do not usually pay UK tax on the State Pension. One reason is that it is “disregarded income” under section 811 of the Income Tax Act 2007, so where the non resident limit produces the lower bill it drops out of the UK calculation; disregarded income for non residents shows when that happens.

How do you get an NT code?

Claims are made to HMRC, which authorises the payer not to deduct UK tax if the claim is accepted (DT1926). Most people use form DT Individual or their country’s own form, certified by the tax authority where they now live. You can only apply once the pension has started, and the adjustment goes back to the latest of the date you became resident abroad, the date payments began and the earliest tax year still open for a repayment claim.

Until the claim is accepted, PAYE81750 tells HMRC how to code. In the year you leave, the existing code continues, reduced by untaxed income such as the State Pension. In later years HMRC checks whether you are entitled to allowances; if not, it issues code 0T. HMRC staff are told not to allow a treaty claim automatically. Once relief is given, PAYE11010 says HMRC should hold notes explaining the NT code and may write to check it is still due. How tax on pension income is collected explains codes more generally.

Can you still use the personal allowance?

If a pension stays taxable in the UK, the personal allowance can shelter it. GOV.UK says non residents get the allowance if they are British citizens, EEA citizens or have worked for the UK government during the tax year, and some treaties also give it. Non residents claim it at the end of each tax year on form R43, or through the residence pages of a tax return. Details are in personal allowance for non residents.

What does this look like for one retiree?

Illustration only, using 2026 to 2027 UK rates. Alan, a British citizen, retires to a treaty country whose pensions article follows the OECD model and is not limited to past employment. He receives an NHS pension of £18,000, a local authority pension of £9,000 and a State Pension of £12,000.

The NHS pension is non government, so he claims treaty exemption and the payer moves to code NT. It is taxed only in his new country.
The local authority pension is a government pension and stays taxable in the UK, because he is not a national of his new country.
The State Pension falls under the pensions article, so the UK exempts it once he claims.

His only UK taxable income is £9,000, below the £12,570 allowance, so he owes no UK tax. Had the treaty restricted the pensions article to past employment with no other income article, his UK income would be £21,000 and the bill £1,686 (£8,430 at 20%), which is less than the £1,800 the section 811 limit would give.

What catches people out?

Assuming every public sector pension is a government pension, or that none is. NHS and teachers’ pensions are treated differently.
Waiting for the provider to stop deducting tax. Nothing changes until HMRC accepts a claim.
Drawing large flexible pension withdrawals during a short spell abroad. Under section 579CA of ITEPA 2003, flexi access drawdown that escapes UK tax during a period of temporary non residence is taxed in the year you return if the total exceeds £100,000.
Forgetting that lump sums may not be covered if the treaty says only “pensions”.
Not telling HMRC you have left; see leaving the UK and form P85.

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Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 24 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.