UK pension tax if you live in Spain or Portugal

UK pension tax in Spain: for a Spanish tax resident the UK-Spain treaty leaves most pensions to Spain, but UK government pensions stay with the UK.

Which country taxes you depends on which pension pays you and where you count as resident. Own a pot you have not yet decided about? Use the form on this page. Call-backs from an FCA-authorised adviser cost nothing. Spanish tax filing is a job for a Spanish tax adviser, so this guide sets out the UK side and says where each question goes next.

When does Spain treat you as a tax resident?

Spain's Tax Agency, Agencia Tributaria, sets out the tests. You are resident if "they remain in Spain for more than 183 days during the calendar year", or if "the main centre or base of its activities or economic interests is situated in Spain". Unless you show otherwise, the Agency also presumes you are resident where your spouse (not legally separated) and dependent minor children habitually live in Spain. Residence applies to the whole calendar year, so a mid-year move does not split it. A residence permit is a separate matter: the Agency says holding one does not of itself mean tax residence.

If both countries claim you, the treaty has a tie-break in Article 4. It puts you where you have a permanent home and, if that is both, where your "personal and economic relations are closer (centre of vital interests)". The wider checklist before a move is in what happens to a pension when you move abroad.

Is a UK pension taxed in Spain or the UK?

Usually the country you live in. The 2013 UK-Spain Double Taxation Convention, published by HMRC, says in Article 17 that pensions and similar payments to a resident of one country "shall be taxable only in that State", subject to the government-service rule in Article 18 below. For a Spanish resident, that State is Spain. GOV.UK records that the convention entered into force on 12 June 2014 and has applied to UK income tax from 6 April 2015.

The treaty does not switch UK tax off by itself. GOV.UK says that you usually pay UK tax on UK income even when not UK resident, and HMRC's notes to its Spain claim form say certain types of pension and most annuities from the UK can be exempted from UK Income Tax once you are resident in Spain. Whether your own payments qualify is settled when you make the claim, described below. What Spain does with the payments is for Spain to say, so take that to a Spanish adviser.

Is the UK State Pension taxed in Spain?

It follows the same route. HMRC's notes call it taxable but usually paid without tax deducted, and say a Spanish resident can claim exemption from UK income tax on it under the convention, using a box on the same form. Spanish tax on it is again Spain's affair. For the UK rules, see whether the State Pension is taxable.

On yearly rises, GOV.UK says your State Pension will only increase each year if you live in a listed place, and the list begins with the European Economic Area. Spain is in the EEA, so increases continue. The State Pension guide covers how the starting amount is built.

Which pensions stay taxed in the UK?

Article 18 carves out pensions paid "by, or out of funds created by" the UK State or a local authority for service to it: these are taxable only in the UK. HMRC's notes say it plainly: "Pensions paid by the UK for service to the UK government or local authority are taxable in the UK." Anyone drawing a civil service, teachers', NHS, armed forces or police pension should look at this article first, because the general rule above may not apply to them. Your scheme or HMRC can confirm which side you are on.

Nationality matters here. The pension is taxable only in the other country if the person is both resident and a national there, and HMRC's notes describe the UK case as someone who is, "exceptionally, … a national (and resident) of Spain without also being a UK national". A dual UK and Spanish national is therefore not in that group. For pensions that stay taxable in the UK, you may be able to claim UK personal allowances if you meet certain conditions. For one scheme in detail, see whether an armed forces pension is taxable.

How do you stop UK tax being taken from your pension?

You apply to HMRC on form Spain-Individual (headed DT-Spain Individual on HMRC's notes), which GOV.UK says is for residents of Spain receiving pensions, purchased annuities, interest or royalties from the UK. HMRC's notes ask you to get a Residencia en España Convenio certificate from Agencia Tributaria and attach it. The form can ask for no tax to be deducted from future payments and can claim back tax already taken. HMRC treats every application on its own merits, and its manual tells staff "you must not automatically allow the claim", so do not treat the exemption as granted until HMRC confirms it.

For a pension taxed under PAYE the notes ask for a copy of your latest P60 from the payer. You may hear this described as getting an NT code, which GOV.UK defines as "You’re not paying any tax on this income". A payer stops deducting tax only once HMRC has agreed the claim.

Is a UK pension lump sum taxed differently?

Article 17 covers "pensions and other similar remuneration", so whether a particular lump sum falls within it is worth settling before you take it. HMRC covers one case directly: if you took a trivial pension commutation payment while resident in Spain, "you can claim repayment of the tax that has been taken off". How Spain treats the UK tax-free part of a lump sum is a question for a Spanish tax adviser before you take it. Whether to take that cash at all is a pension decision, and the call-back form here sets it before an FCA-authorised adviser who can walk you through it, free. The UK rules are in the tax-free lump sum.

Taking income from abroad raises its own points; see drawdown as a non-UK resident and transferring a UK pension to another country. Be wary of any offer to move your money abroad tax-free, and compare it with the FCA's pension scams page.

Common queries from UK pensioners in Spain

Do I still send a UK tax return?

GOV.UK says you do not need to report income to HMRC if you have already claimed relief under a double-taxation agreement. If your claim has not been made or decided, ask HMRC or a tax adviser. Declaring pensions on a return is covered in whether to declare pensions on a tax return.

Can I be taxed twice on the same pension?

GOV.UK warns that overseas residents "may be taxed on your State Pension by the UK and the country where you live". The treaty exists to stop that, but you may need to claim and the claim takes time. A Spanish adviser can say how relief is given in Spain.

How long does a Spanish residence certificate last?

Agencia Tributaria says tax residence is proven by a certificate from the tax authority and that "these certificates are valid for one year". HMRC asks for the Residencia en España Convenio certificate with the claim, so request a current one before you send the form.

Who helps with pension choices while I live in Spain?

Spanish tax filing needs a Spanish tax adviser. Pension choices made from Spain can start when you request a call-back that an FCA-authorised adviser answers by phone for nothing. Government-backed guidance is described in what Pension Wise is.