Tax Tips for UK Citizens Living Abroad with UK-Based Pension

Tax Tips for UK Citizens Living Abroad

In a nutshell, you have to pay tax on your UK pension, even if you’re not a UK resident, except for the State Pension, where non-residents are not obliged to pay UK tax.

So, for example what happens if you are living in Germany with a UK pension?

UK Citizens Living Abroad

It is possible that you may be taxed twice in the UK and in Germany. UK-based pensions are considered income that originates from the UK, which is why it is tax deductible. All payments made to a UK pension are taxed based on an individual’s UK marginal tax rate.

But the Double Tax Agreement between the two countries are clear – residents of Germany who receive UK-based pension only need to pay tax in Germany, except when the pension contributions are under the 15-Year Condition on Contributions, where tax is relieved for over 15 years, or are tax deductible. Under the circumstances, pension payments are taxable in the UK.

However, the exception doesn’t apply when the tax relief was clawed back, the 15-year tax relieved contributions were fulfilled in Germany, and the UK does not effectively tax the pension.

Double Taxation on Overseas Pension

In the event that you are taxed twice, you can apply for a partial or full relief before you are taxed or a refund after taxes. It is likely that you will get a substantial tax rebate, because the Double Taxation Agreement specifies that the higher tax rate between two countries will apply. So, if Germany has a higher tax rate than the UK, the tax rate in Germany will apply.

You also have an option to transfer your pension to other jurisdictions under the Qualifying Recognised Overseas Pension Scheme (QROPS). But you have to make sure that you get the upper hand by consulting with tax experts.

So if you’re a UK citizen living overseas and need tax advice speak with one of our tax agents at

Photo by Jeremy Beadle on Unsplash

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