The Basics of Pension Taxes if You are a UK Expat Abroad


There are different pension schemes you can avail of if you are a UK citizen, even if you are living abroad. For instance, you will get the state pension if you have contributed to National Insurance (NI), provided you have been doing it for ten years or more, and you can also get a workplace pension if you so choose. This is where your employer will contribute to a pension fund on your behalf as well. Another option for you would be to take advantage of a personal or private pension, where you can choose the pension scheme that best fits your needs. In this kind of pension, you can make investments, and you can also have a higher pension amount if your investments pay off. But there’s another thing on many peoples’ minds when it comes to pensions, whatever type they may be; taxes. What should you expect in regard to UK taxes when it comes to your UK pension(s)? The following are the basics of pension taxes if you are a UK expat abroad.

  • The essentials on taxes

If you are getting both the state pension as well as a private or personal pension, your provider will be in charge of taking off any taxes you owe prior to paying you. They will also be responsible for taking off any taxes you owe in regard to your state pension.

However, if you receive pension payments from more than a single provider – from, for example, a personal pension and a workplace pension – then HMRC (HM Revenue and Customs) will request one of the providers you have to take the taxes off your own state pension. At the end of the year, you can expect to receive a P60 from the provider of your pension, which will show much you have paid in taxes. If you only have the state pension and no other pension scheme such as tailor made pensions from a particular provider, you will be responsible for paying whatever taxes you owe.

There’s also a difference if you choose to continue working – your employer will be the one to take off any tax due from your income or earnings as well as your state pension. This is referred to as PAYE or Pay as You Earn. On the other hand, if you have more than one income, you will also be responsible for paying whatever taxes you owe on the additional or extra income you receive.

  • Pension taxes if you reside abroad

If you are living in another country but you are still classified as a UK resident (which is based on how many days you are living in the UK throughout the tax year), you may have to settle taxes in the United Kingdom on your pension. The amount you will settle will also be based on your earnings or income.

But if you aren’t classified as a UK resident, you will not usually have to settle taxes on your pension from the UK. You may, however, have to settle taxes in the country where you live, although there are some exceptions to the rule, such as a civil service pension, which will be taxed in the United Kingdom.

Here’s an important note, however: if you reside in a country which has no agreement on double taxation with the UK, you may have to settle taxes in both of the countries. Countries such as Australia, Canada, France, Sweden, Germany, Switzerland, the USA, Japan, New Zealand, and South Africa have agreements with the UK; make sure to double check if the country where you reside has an agreement with the UK as well.

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