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HMRC internal manual

PAYE Manual

From
HM Revenue & Customs
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PAYE operation: double taxation claims submitted by non resident individuals: government pensions

The treatment of a pension under a double taxation (DT) treaty can depend on the payer of the pension. While relief for occupational pensions is widespread, certain public pensions commonly remain taxable in the UK.

These are often referred to as government pensions and generally include those paid by

  • A local authority or other public body in the UK, for example Police pensions, London Borough pensions and County / City Council pensions
  • The UK government, for example the Civil Service

More information regarding government pensions can be found at INTM343030 and INTM343040.

The state pension is not classed as a government pension. Specific guidance on the treatment of the state pension is given in the DT Digest (PDF 184KB) (HMRC website) (external users can find the guidance at http://www.hmrc.gov.uk/taxtreaties/dtdigest.pdf).

For a full list of government pensions, see INTM343040. You will see that note 3 on this list explains that under the terms of the DTA with certain countries, some of these pensions are treated as non-government pensions.

If an individual claims relief from UK income tax on a government pension where no relief is available, you need to inform them. For instructions on how to do this, see Action guide tax40170 and tax40181 Double Taxation Claims.

Please be aware that for double taxation purposes, the National Health Service (NHS) pension is not classed as a government pension if it is paid by CAPITA or the Paymaster Generals office. If the NHS pension is paid by a local authority, it is classed as a government pension.

However, under the DTA’s of Germany and many states of the former Yugoslavia, the NHS pension is always classed as a government pension, irrespective of who pays the pension.