Non-residents may be able to reclaim tax on UK pensions
27th March 2026
Posted in Articles by Andrew Marr
We are coming across more and more cases where non-UK residents are leaving tax on the table when it comes to their UK pensions. If a non-UK resident withdraws funds from their pension, then PAYE will be applied (and this will sometimes be excessive due to the use of an emergency tax code). However, the UK may not have taxing rights to this pension income and so the scheme member should seek to recover it from HMRC. Better still, they could ask HMRC for what is known as an NT code before a pension scheme makes a payment as this will allow any payment to be made gross.
If the tax is left with HMRC then that is not an end to the matter because the jurisdiction in which the individual is resident will still want its tax if it is entitled to it under the terms of a tax treaty. The individual may therefore find the authorities of their country of residence knocking at their door for payment of tax (and possibly interest and penalties). Any claim that the tax has already been paid in the UK would be likely to receive the unsympathetic response that the taxpayer should reclaim the tax from the UK – which will usually be the correct technical position.
The decision process before a non-resident receives a UK pension
If pension scheme members were to consider the following steps before taking pension income, then their tax-lives would be easier:
1. What country am I resident in?
2. Does UK have a tax treaty with that country?
3. What does the ‘pensions clause’ of the tax treaty say?
4. Often this will say that only the country of residence should have taxing rights.
5. Don’t stop there! Check for any ‘funny stuff’ in the treaty. For example, there can be other clauses that say the treaty will only apply to amounts that are actually taxed in the country of residence. This means that if (say) the pension will not be taxed because it is not going to be remitted to the country of residence (because the remittance basis of tax applies there) that the UK will still have taxing rights.
6. If UK does not have taxing rights, then you should seek an NT code in respect of the pension scheme income, but this can be an irritating bureaucratic process.
7. First step is to send off a double tax treaty form to your country of residence, the main point of which is to get them to give you a stamp confirming that you are actually treaty resident in that country.
8. The next step is to send off the stamped form to HMRC which you hope they will use as a basis to give you an NT code.
9. Be prepared for some resistance here as they do not seem to want to give these codes away lightly.
10. Even if you have a code, you still need to make sure that you are actually resident in the overseas country when the payment is made, otherwise the UK could still have a claim to tax, notwithstanding the fact that no tax had been withheld.
Forbes Dawson view
This is a complicated area, and each country has complicated nuances based on its tax treaty and how HMRC treats claims from its residents. Although getting an NT code is the preferred ‘gold standard’ option, tax reclaims can be made where tax has been paid incorrectly. In some ways this process is easier because HMRC is then considering a specific pension payment rather than being asked to give a blessing to tax-free future payments, however, if the repayment is refused for any reason, it can be a real kick in the teeth for the taxpayer. On the other hand, it will usually be possible to secure an NT code with perseverance. Any non-UK residents who have received pension payments net of PAYE should urgently be considering whether a repayment claim will be appropriate. For lucky residents of a tax-free jurisdiction like Dubai (if they escape the bombs) such a repayment may represent a cash windfall. Others may need to use the repayment to fund the tax that was properly due to their country of residence. Any action in this area should always involve both UK advice and advice from the place of residence.
