Any questions? I’m UK resident and I’m worried my overseas pension is going to be taxed in both countries: what should I do?

Question:

I’m a UK resident but I have worked overseas in the past. I have been receiving an overseas pension which is paid into an overseas bank account and has been taxed in that country. I informed HMRC a few weeks ago that I receive a foreign pension and now they have told me that I need to register online for Self Assessment to declare income from abroad. I’m in a panic that I will get double taxed. They also told me that because I didn’t do this by the end of January then I will get a big fine?

Answer:

The taxation of overseas pensions is complex and depends on a number of different factors including the type of pension, the country it is paid from, and your residence and nationality status.

Under UK domestic law, people who are UK resident are generally taxable in the UK on their worldwide income and gains. Other countries have their own domestic tax rules. This means that, at first glance, it can appear that an overseas pension may be taxable both in the UK and in the country from which it is paid.

  The fact a particular source of income is paid into an overseas bank account and is taxed in that location does not necessarily mean it is only taxable there.

While this may sound concerning, systems are in place that override domestic law, meaning double taxation is usually avoided. 

Double taxation agreements

The UK has double taxation agreements with most — though not all — other countries. These agreements are also sometimes called double tax treaties. The most up-to-date agreement between the UK and the country paying your pension can be found on GOV.UK.

The purpose of a double taxation agreement is to determine which country has taxing rights over particular types of income. Depending on the agreement:

• the income may be taxable in only one country; or
• it may be taxable in both countries, with one country (often the paying country) taxing it first, and the other country giving relief for the tax already paid — usually in the form of a foreign tax credit.

Many of the UK’s double taxation agreements follow the OECD Model Convention, which broadly provides that:

• pensions other than government pensions are taxable only in the country where the recipient is resident; and
• government pensions are taxable only in the paying country, unless the recipient is both a resident and a national of the other country, in which case the pension is taxable only in that other country.

However, there are important exceptions, so it is essential to check the relevant double taxation agreement carefully in each case.

We have detailed guidance on UK tax on overseas pensions, which you may find helpful in understanding your position further. This includes guidance on how to interpret double taxation agreements and practical information on how to report foreign pensions to HMRC where required (more on this below).

  Overseas income, including pensions, may not always be taxed in the UK – limiting the risk of double taxation in practice. For example, certain individuals who have spent a long period living outside the UK and are now returning may be able to claim relief under the foreign income and gains regime, introduced from 6 April 2025. Relief under this regime is only available if you meet certain conditions. It is also important to bear in mind that claiming relief under this regime might not be beneficial in all cases. Further details can be found on our dedicated guidance page.

This is a technically complex area, and professional assistance may be needed to determine whether an overseas pension is reportable or taxable in the UK. If you are on a low income, free help may be available from the charity TaxAid.

What about Self Assessment penalties?

It is important to understand that HMRC often requires individuals with overseas income, including foreign pensions, to register for Self Assessment and submit a tax return. However being asked to complete a tax return does not mean that additional UK tax will necessarily be due.

If you should have notified HMRC that you need to complete a tax return but did not so within the required timeframe, the issue is usually a failure to notify, rather than late filing.

Where HMRC has not issued a notice to file a tax return, there can be no late filing penalty for missing the end-of-January filing deadline, as no return exists to be filed. As set out in our guidance on penalties, penalties for failure to notify, including for including for overseas issues, can only be charged where there has been a loss of tax as a result. In a situation where a tax return would be required purely to report a situation, rather than to pay tax, penalties should not arise.

Again, a professional adviser — including from TaxAid — should be able to help you understand your position and what steps, if any, you need to take.