What Is a Double Taxation Agreement?
A double taxation agreement (DTA), also called a double taxation convention or treaty, is a bilateral agreement between two countries that sets out rules for how different types of income are taxed when a resident of one country earns income from the other. The UK has DTAs with over 130 countries.
For pension purposes, DTAs are critical because they determine whether your UK pension is taxed in the UK, in the country where you live, or potentially in both. Without a DTA, you could face taxation in both countries on the same pension income.
How DTAs Treat Different Types of Pension
DTAs distinguish between different categories of pension income, and the tax treatment varies:
Private Pensions
This includes workplace pensions, SIPPs, personal pensions, and the State Pension. In most UK DTAs, private pension income is taxable only in the country where you are tax-resident. The UK gives up its right to tax this income, and you pay tax only in your new country.
Government Pensions
Pensions from government service (civil service, armed forces, NHS, teaching, local government) are usually taxable only in the UK, even if you live abroad. The exception is if you are a citizen or national of the other country — in that case, the pension may be taxable only in the country of residence.
Social Security Pensions (State Pension)
The UK State Pension is classified differently in different DTAs. In most cases it is treated as a private pension (taxable only in the country of residence), but some DTAs classify it as a social security pension with specific rules. Always check the specific DTA for your country.
| Country | Private Pension | Government Pension | State Pension |
|---|---|---|---|
| Spain | Taxed in Spain only | Taxed in UK only* | Taxed in Spain only |
| France | Taxed in France only | Taxed in UK only* | Taxed in France only |
| Portugal | Taxed in Portugal only | Taxed in UK only* | Taxed in Portugal only |
| Australia | Taxed in Australia only | Taxed in UK only* | Taxed in Australia only |
| USA | Taxed in USA only | Taxed in UK only* | May be taxed in both** |
| Canada | Taxed in Canada only | Taxed in UK only* | Taxed in Canada only |
* Exception: if you are a citizen of the other country. ** The US-UK DTA has specific provisions for social security payments that may allow both countries taxing rights with credit relief.
How to Claim DTA Relief
To stop HMRC deducting UK tax from your pension after you move abroad, you need to apply for relief. The process is:
- Complete the DT-Individual form — this is the standard form for claiming DTA relief on UK income. Some countries have specific forms (such as the US/UK form for US residents)
- Get certification — the tax authority in your country of residence certifies that you are tax-resident there
- Submit to HMRC — send the completed form to HMRC’s International Team
- HMRC issues a notice — HMRC sends a NT (no tax) code to your pension provider, stopping UK tax deductions
The process can take several weeks. In the meantime, you can reclaim any UK tax already deducted after the date you became non-UK resident.
The 25% Tax-Free Lump Sum and DTAs
The 25% pension commencement lump sum (PCLS) is tax-free under UK domestic law, regardless of where you live. However, DTAs do not specifically address lump sums in a uniform way. The question is whether your new country of residence also treats it as tax-free.
- Spain — generally respects the UK tax-free treatment under the DTA
- France — may treat the lump sum as taxable income, though favourable treatment may be available
- Portugal — treatment depends on whether you have NHR status and local interpretation
- Australia — generally does not tax the lump sum if taken before becoming Australian tax-resident
The safest approach is to take advice from a tax specialist in your destination country before taking any lump sum.
Countries Without a DTA
If you move to a country that does not have a DTA with the UK, you may face double taxation on your pension income. The UK may tax it under domestic rules, and the other country may also tax it. In practice, the UK offers unilateral relief in some cases, and many countries offer a foreign tax credit for UK tax paid. But this is not guaranteed and the process is more complex.
Countries without a UK DTA are relatively few among popular retirement destinations, but they include some Caribbean islands, parts of South America, and some African nations. Always check before you move.
DTAs and Pension Transfers
DTAs do not directly govern QROPS transfers. The 25% overseas transfer charge is a UK domestic tax provision, not affected by any DTA. However, once your pension is in a QROPS and you start drawing income, the DTA between the UK and your country of residence (and possibly the QROPS country) determines the tax treatment of that income.
Practical Tips
- Always read the specific DTA articles on pensions for your destination country — they vary significantly
- Apply for DTA relief as soon as you become tax-resident abroad
- Keep evidence of your tax residency status in case HMRC queries your claim
- Consider the interaction between the DTA and domestic tax law in both countries
- Take specialist advice for complex situations (dual nationality, multiple pensions, government pensions)
For country-specific guidance, see our guides on Spain, France, Portugal, and Australia.