How are foreign pensions taxed in the UK?
Answered 17 March 2026
Here is a comprehensive answer on how foreign pensions are taxed in the UK.
How Foreign Pensions Are Taxed in the UK
What the law says
Charge to tax Foreign pensions are charged to income tax as pension income under Part 9 of ITEPA 2003. The taxable amount is the full amount of pension income arising in the tax year.
Treatment as relevant foreign income The full amount of a foreign pension is treated as relevant foreign income for the purposes of Chapters 2 and 3 of Part 8 of ITTOIA 2005, which govern the remittance basis and deductions/reliefs.
Split years Where the tax year is a split year for the individual, only the pension income arising in the UK part of the year is taxable.
Backdated pensions – relief Where a foreign pension is paid in respect of an earlier tax year, the individual may claim relief under ITTOIA 2005 s.840 so that the income is treated as arising in that earlier year.
HMRC guidance / practice
Arising basis taxpayers (UK residents) A UK resident taxed on the arising basis is taxed on 100% of any foreign pension received. The former 10% deduction (under ITEPA 2003 s.575) was abolished from 6 April 2017; prior to that date, only 90% of the pension was chargeable.
Remittance basis taxpayers If an individual claims the remittance basis, their foreign pension is only taxed to the extent it is remitted to the UK (ITTOIA 2005 s.832). Importantly, the 10% deduction never applied to remittance basis users — they were always taxable on the full amount remitted.
Non-UK residents A non-UK resident individual will not pay UK tax on pensions from sources outside the UK.
Double Taxation Agreements (DTAs) The terms of a relevant DTA must always be considered when determining whether a foreign pension is chargeable to UK tax. A DTA may exempt the pension from UK tax or provide credit relief for foreign tax paid.
Special case – Overseas Pensions Act 1973 Certain Commonwealth government pensions taken over by the UK government under the Overseas Pensions Act 1973 are taxed as if they were foreign pensions under ITEPA 2003 s.629. However, any pension increases under the Pensions (Increase) Act 1971 are taxed as UK-source pension income under ITEPA 2003 s.569, not as foreign pension income.
Summary Table
| Taxpayer status | Basis | Tax treatment |
|---|---|---|
| UK resident – arising basis | Arising | 100% of foreign pension taxable (from 6 April 2017) |
| UK resident – remittance basis | Remittance | Only amounts remitted to the UK are taxable |
| Non-UK resident | N/A | No UK tax on foreign-source pensions |
Note: Always check the relevant DTA, as it may override the domestic position.
Citation sources
Part 9 Pension income Chapter 4 Foreign pensions: general rules Taxable pension income 575 1 If section 573 applies, the taxable pension income for a tax year is the full amount of the pension income arising in the tax year, but subject to subsections (1A) ... and (3) and section 576A . 1A If the person liable for the tax under this Part is an individual and the tax year is a split year as respects that individual, the taxable pension income for the tax year is the full amount of the pension inc
Where a taxpayer elects to pay tax on the remittance basis, the taxable amount of their ‘relevant foreign income’ RDRM31140 is the amount remitted in that tax year ITTOIA05/s832. This means that it is not possible for a taxpayer to deduct expenses (such as the cost of collection or legal costs) from, for example: foreign dividends, interest or royalty payments. However, taxpayers who carry on a trade, profession or vocation wholly outside of the UK are able to claim the same deductions as are al
Resident: When an individual is liable to UK tax on the arising basis (AB) they are taxed in the UK on most pensions whether they are from the UK or abroad. If they receive pension payments from outside the UK (an overseas pension) they might be entitled to a 10% deduction from the amount chargeable. From 6 April 2017 the 10% reduction has been abolished, the individual will pay tax on 100% of any foreign pension. If the individual is liable to UK tax on the remittance basis (RB), they will pay
illed in the case of an individual who returns to the UK on final leave pending retirement, with the intention of taking up residence here and so becomes resident and ordinarily resident here. In these particular agreements the fact that the individual becomes ordinarily resident in the UK does not prevent his exemption from UK tax on his pension. In practice, his final leave pay may be treated for this purpose as if it were pension. If such a pensioner was exempt from UK tax on his earnings bef
ITEPA03/s575 provides that the taxable amount of a foreign pension is 90% of the actual amount arising in the tax year. This treatment is not available to Remittance Basis taxpayers. Where a taxpayer made a claim to be taxed on the remittance basis then under ITTOIA05/s832 the chargeable amount of their foreign pension is the amount remitted. Refer to the Employment income Manual for more information on the treatment of foreign pensions. You may need to take into account the terms of a Double Ta
Part 8 Foreign income: special rules Chapter 3 Relevant foreign income charged on arising basis: deductions and reliefs Relief for backdated pensions charged on the arising basis 840 1 This section applies if— a as a result of section 575(3), 613(4) or 635(4) of ITEPA 2003 a pension or annuity or an increase in a pension or annuity is treated as relevant foreign income, b the pension, annuity or increase is paid in respect of a tax year (“ the earlier year ”) before the tax year in which the pen
Section 629 ITEPA 2003 Under the Overseas Pensions Act 1973 the UK government took responsibility for paying certain Commonwealth government pensions. The effect of section 629 is to tax these pensions as if they were foreign pensions. Section 629 applies to a pension payable under section 1 of the Overseas Pensions Act 1973 that immediately before 6 April 1973 was payable to a UK resident who was either: an individual who had retired from service before 6 April 1973 and the pension was in respe