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HMRC internal manual

Employment Income Manual

HM Revenue & Customs
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Pensions: double taxation agreements

A pension may be liable to income tax in the United Kingdom under domestic law. However, if the pensioner lives abroad a charge may also arise in the country of residence. In these circumstances you should look at the relevant double taxation agreement (DTA) to establish which state has primary taxing rights.

The following guidance is sketched in the broadest possible terms and is no substitute for:

  • reading DT223 to DT224 and DT1925 to DT1926 and
  • looking at the appropriate articles of the relevant DTA.

Pensions paid in respect of government service

The government service article applies both to civil servants and local authority employees. Pensions payable for government service are usually taxed in the paying state and are exempt from tax in the state where the pensioner is resident.

Other pensions

Other pensions are usually taxed only in the country in which the pensioner is resident. The United Kingdom gives up its taxing rights under the terms of the relevant DTA.

Social security pensions

The state retirement pension is covered under articles dealing with “other income” in most DTAs. Taxing rights usually go to the state in which the pensioner is resident.