Is a UK pension taxable in Canada? Yes: the UK-Canada treaty leaves regular UK pension payments, State Pension included, to Canada if you live there.

What sets the Canadian treaty apart is its reach: workplace, personal and public service pensions, Armed Forces retirement pay and the State Pension all come under one paragraph, while annuities and lump sums are handled differently. Until HMRC accepts a claim, UK tax can still come off a workplace or personal pension. Holding several UK pensions from Canada? An FCA-authorised adviser untangles how those pensions fit together, free, by phone, once a Canadian resident completes the form on this page.

Is a UK pension taxable in Canada under the tax treaty?

Usually yes, in Canada, and not in the UK once the treaty is claimed. GOV.UK says the country where you live may tax your UK income, and the 1978 UK-Canada convention, as amended, settles who gets first call. Article 17(1) reads:

"Periodic pension payments arising in a Contracting State and paid to a resident of the other Contracting State who is the beneficial owner thereof shall be taxable only in that other State."

For a UK pension paid to someone resident in Canada, "that other State" is Canada. HMRC publishes the convention on GOV.UK and notes that it has been modified by the Multilateral Instrument.

The treaty only helps if you are a Canadian resident within its meaning, which HMRC's claim form has the Canada Revenue Agency (CRA) confirm. Treaties also differ: HMRC's PAYE manual says "Whilst many of the UK’s DTAs will exempt the pension income, not all do so", so this answer does not carry over to other countries.

Workplace, State and public service pensions under Article 17

Article 17 does most of the work. Its third paragraph defines "pension" widely: payments under a superannuation, pension or retirement plan, Armed Forces retirement pay, sickness, accident or disability plan payments, and payments under social security legislation.

Private and workplace pensions

Regular income from a workplace or personal pension falls under that definition, so under Article 17(1). HMRC's notes to its Canada form say "Certain types of pension and most annuities from the UK, paid to you as a resident of Canada, can be exempted from UK Income Tax." The word "can" matters, because HMRC's manual says a claim must not be allowed automatically.

The UK State Pension

The State Pension is paid under social security legislation, so it sits in the same definition. HMRC's notes say it "is normally liable to UK Income Tax. As a resident of Canada you can apply to have this income exempted from UK Income Tax." It is usually paid without tax deducted. For the UK rules on it, see is the State Pension taxable.

Government service pensions

Article 18 covers government pay for services and begins "Remuneration, other than a pension", so a pension is left to Article 17. HMRC's manual agrees that Article 17 covers "all pensions (including governmental and local authority pensions)". Armed Forces retirement pay is named in Article 17(3) itself, and armed forces pensions have their own page.

Annuities and the 10 per cent limit

Annuities are treated differently. Article 17(2) allows Canada to tax them but also lets the UK tax annuities that arise there, with a limit: the tax "shall not exceed 10 per cent of the portion thereof that is subject to tax in that State." The treaty's definition of an annuity excludes payments under a pension plan, so whether a payment counts as a pension or an annuity is for the payer and HMRC to confirm.

The frozen State Pension in Canada

If you live in Canada, your UK State Pension does not rise each year. GOV.UK says "The UK has social security agreements with Canada and New Zealand, but you cannot get a yearly increase in your UK State Pension if you live in either of those countries." HMRC's PAYE manual describes the effect: unless the person lives in a country whose agreement allows increases, the pension "will remain at the level it was on leaving the UK". This is what people mean by a frozen State Pension.

The freeze does not apply for ever: "Your pension will go up to the current rate if you return to live in the UK." Questions on your own award go to the Department for Work and Pensions; the State Pension guide covers the basics.

Lump sums: why the word 'periodic' matters

Article 17(1) covers "periodic" payments, and a one-off lump sum is not periodic, so do not assume the treaty answer above applies to it. HMRC's notes give one example: a trivial commutation payment, paid instead of a small pension, is taxed in the UK under PAYE, and if you were resident in Canada when it was paid you "remain liable to UK taxation and cannot claim relief in the UK."

For the usual tax-free lump sum when a pension starts, the UK rules are on the tax-free lump sum page. Whether Canada taxes that amount is a question about Canadian law. The CRA's guide to pension income puts lump-sum payments from pensions received after leaving a plan under other income (line 13000), apart from foreign pensions on line 11500, so ask a Canadian accountant how a UK tax-free lump sum should be reported. An FCA-authorised adviser can explore the UK side of a lump sum when you ask for a ring-back in the enquiry form; it carries no charge.

Getting form Canada DT certified by the CRA

You apply to HMRC for relief at source on form Canada/Individual, which HMRC's notes call Canada DT. It covers pensions and purchased annuities from UK sources and also lets you claim back UK tax already deducted. The steps:

  • Complete the form and send it to the CRA Tax Services Office for the area where you live. That office certifies you as resident in Canada under the convention and returns the form to you.
  • Send the certified form to HMRC with a photocopy of the latest P60 from your pension payer.
  • HMRC's notes list no UK tax being withheld from pension and annuity payments among the convention's benefits, but relief at source needs HMRC to agree to issue a notice. Its PAYE manual lists double taxation agreements among the cases for tax code NT, so once a claim is agreed, ask your payer which code it holds for you.
  • If relief at source cannot be arranged, you can claim repayment of part or all of the UK tax taken off.

HMRC decides each claim individually, so relief is not automatic. A PAYE refund runs back only as far as your Canadian residence date, the first payment or the oldest UK tax year still open, whichever is latest. Tell HMRC without delay if the details on your form change. Once relief is claimed, GOV.UK says "You do not need to report your income to HMRC if you’ve already claimed tax relief under a ‘double-taxation agreement’."

Reporting UK pension income on a Canadian return

The CRA lists "pension from a foreign country" under line 11500 of the Canadian return, alongside other pension and superannuation income, so expect to report it there. How the return is built is for the CRA and an accountant who knows both countries' pensions.

Moving a pension or drawing from it are different questions. For those, see moving abroad with a UK pension, transferring a UK pension to another country and pension drawdown for non-UK residents.

War pensions, benefits and short stays in Canada

Is a war veterans' pension covered too?

Yes. Article 17(3) names war veterans' pensions and allowances in its definition of a pension, alongside Armed Forces retirement pay, so they fall under the same article as other UK pensions.

Does the treaty help if I am only visiting Canada?

It turns on being a resident of Canada within the convention, which defines a resident by liability to tax there on grounds such as domicile or residence. A tax professional should confirm your position.

What about Incapacity Benefit or a State Pension deferral lump sum?

HMRC's Canada notes say Incapacity Benefit, like the State Pension, is taxable but paid without tax taken off, and you claim exemption for it in Part C.1 of form Canada DT. If UK tax came off a State Pension deferral lump sum, it goes in Part D, with the State Pension itself claimed in Part C.1.

Who answers which part: an accountant or an adviser

The treaty and HMRC's notes give the general position; yours depends on which pensions you hold, when you became resident in Canada and what the payers deduct. Filing questions belong with an accountant who handles Canadian returns. As for the pension choices behind your return, such as which pot to draw from first, an FCA-authorised adviser can discuss those with you on the free ring-back from the form here. The wider UK rules are covered in pension tax.