This page discusses certain tax considerations for pensioners retiring abroad. For general guidance on going to live abroad, see Leaving the UK.
Content on this page:
The DWP does not deduct tax under pay as you earn (PAYE) when making payments of the state pension. If HMRC believe that there is tax payable then they should issue you with a self assessment tax return or, if your tax affairs are straightforward they may issue a simple assessment of your tax bill.
If there is a double taxation agreement in force between the UK and your country of residence it is likely that this agreement will provide for the country of residence to have primary taxing rights over the pension. However, there are some exceptions for pensions of a certain type. There is a list of the UK's double taxation agreements on GOV.UK.
You may also find our guidance helpful for determining how to interpret a double tax agreement in the context of a cross-border pension.
For government information on your state pension if you retire abroad, go to GOV.UK.
State pension increases
A frequent concern for pensioners who retire abroad is whether they can get increases to their UK state pension.
In particular, note that if you are a UK national who was already living in an EEA country or Switzerland by 31 December 2020, then under the UK’s withdrawal agreement with the EU you will continue to get your UK state pension uprated for every year you continue to live there. We understand this is also the case where an individual is in scope of the new UK-EU protocol on social security coordination (see paragraph 113 of the UK-EU Trade and Cooperation Agreement Summary).
For individuals not within scope of either the withdrawal agreement or the new protocol on social security coordination, please check GOV.UK.
We publish more information about how the UK state pension works for individuals who have worked in the UK. You can also find detailed information in the House of Commons briefing paper on Brexit and state pensions.
If you are retiring to a country outside the EEA or Switzerland then the position depends on whether or not that country has a social security agreement with the UK:
- If you retire abroad to a country that has a social security agreement with the UK you will generally get annual increases in your state pension, just as you would if you continued to live in the UK. You can find a list of relevant countries on GOV.UK
- If you retire abroad to any other country, you will not get any annual increases in your state pension. However, there is an exception – if you retire abroad ‘part-time’ but live in the UK for six months or more each year. In this instance, you will get annual increases in your state pension.
If you retire abroad to a country where you do not get annual increases in your state pension and cease to be ordinarily resident in the UK, the rate of your pension will remain at the level it is:
- on the day you leave the UK, or
- when you first qualify for the pension if you are already abroad.
If you return to or visit the UK for any reason you will get a higher rate of pension, but this will be reduced again once you return abroad if your stay in the UK is only temporary.
Occupational pensions from the UK are divided into two categories:
- UK government and most local authority pensions, and
- other occupational pensions.
Under some double taxation agreements, UK government pensions and local authority pensions are only taxable in the country of payment. This means it is not possible to have them paid without deduction of tax under PAYE if they exceed your personal allowances. Your new country of residence might not tax such pensions. If they do, they should allow a foreign tax credit for any tax due in the UK. You may find our guidance helpful for determining how to interpret a double tax agreement in the context of a cross-border pension.
Other occupational pensions are usually taxed in the country of residence, so you can make a claim to HMRC to have them paid without deduction of UK tax. There is more information on GOV.UK and, for those in self assessment, in HMRC’s helpsheet HS304.
Contact HMRC Residency if you have need further assistance. There is information on how to contact HMRC on GOV.UK.
Trivial commutation and flexible pension withdrawals
Trivial commutation occurs when you convert an entitlement to a small amount of certain types of pension into a taxable lump sum. At the present time, it is not possible to take advantage of double taxation provisions in advance. The pension payer will deduct UK tax and you will have to reclaim the tax.
The same occurs when you take a lump sum pension payment under pension flexibility rules.
If you want to reclaim this tax once you have left the UK and become non resident, you can start the repayment process by downloading, completing and sending in a repayment claim on form R43. You might also be able to claim relief under a double taxation agreement. You should check the tax position of such payments in your destination country. See UK tax for non-UK residents on UK income and gains.