Pension Drawdown While Living Overseas: Tax Implications by Country

The Core Challenge

Many UK nationals who retire abroad assume that leaving the UK means leaving UK tax behind. For pensions, the reality is more nuanced — and the answer depends almost entirely on the double taxation agreement (DTA, also called a tax treaty) between the UK and your country of residence.

Under UK domestic law, UK-source pension income — whether from a personal pension, SIPP, or drawdown arrangement — is subject to UK income tax. HMRC does not automatically release overseas residents from UK tax on pension income simply because they have left the country.

The DTA overrides domestic law where it applies, potentially allocating the taxing right to your country of residence instead. But the outcome varies significantly by treaty. Some DTAs give the country of residence exclusive taxing rights; others allow both countries to tax (with a credit mechanism); and some have no pension article at all.

Understanding your specific DTA position before committing to a drawdown strategy is essential — mistakes are costly and often difficult to unwind.

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The NT Tax Code

One practical mechanism worth understanding upfront: if a DTA allocates taxing rights exclusively to your country of residence, you can apply to HMRC for an NT (non-taxable) tax code. The NT code instructs your pension provider not to deduct UK income tax at source.

Without an NT code, UK income tax is deducted at source by the pension provider or scheme, and you would need to reclaim it via a UK self-assessment return — which is administrative burden you can avoid with proper advance planning.

Applying for an NT code requires submitting form DT-Individual (or the relevant country-specific form) to HMRC, along with evidence of residence in the treaty country. The code typically applies for one tax year and must be renewed annually.

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United Arab Emirates

The UAE has a DTA with the UK. However, the pension article in the UK–UAE DTA is limited in scope, and the practical position requires careful analysis.

The UK–UAE DTA was concluded in 2016 and covers government pensions and private pensions differently. Government pensions (local authority, NHS, civil service, armed forces) are typically taxable only in the UK. Private pensions and personal pensions are taxable in the state of residence — but the UAE has no personal income tax, meaning a UAE-resident individual receiving private UK pension income may face neither UK nor UAE tax on that income, provided the NT code is obtained.

This is one reason the UAE is so popular with UK expats in retirement: effective zero-rate pension income is possible in the right circumstances. However, the DTA must be relied upon carefully — HMRC must be satisfied that genuine UAE residence exists. Spending insufficient time in the UAE, maintaining a UK home, or other ties could result in HMRC challenging residence status.

Compliance caveat: UAE residence and UK non-residence must be properly established under the UK Statutory Residence Test (SRT). Simply holding a UAE visa or having a UAE address is not sufficient. Seek legal and tax advice.

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Spain

The UK–Spain DTA has a clear pension article for private pensions: income from pensions (other than government service pensions) is taxable only in the state of residence. This means a UK pension drawdown received by a Spanish resident is taxable in Spain — not the UK.

Spanish income tax (IRPF — Impuesto sobre la Renta de las Personas Físicas) applies at progressive rates. For 2026, the rates range from around 19% at the lower end to 47% at the top (with autonomous community surcharges potentially pushing rates higher in some regions).

The UK pension provider should not deduct UK tax at source once an NT code is in place. The full gross amount is reported in Spain under self-assessment (Declaración de la Renta).

An important planning point: Spain operates the Beckham Law (régimen de impatriados) for certain incoming workers, not retirees. Most UK retirees in Spain will be standard Spanish tax residents and subject to IRPF in the ordinary way.

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Thailand

Thailand became significantly more relevant to UK pension planning following a change to Thai tax law effective from 1 January 2024. Previously, Thailand only taxed foreign-source income if it was remitted to Thailand in the same tax year it was earned. Planning accordingly — remitting in a subsequent year — was commonly used to avoid Thai tax entirely.

From 2024, Thailand taxes foreign-source income remitted to Thailand in the year of remittance, regardless of the year in which it was earned (income earned before 1 January 2024 remains outside this rule). Earlier guidance suggested a further change to worldwide income taxation may follow, though this had not been definitively enacted at the time of writing. The position is evolving and requires professional advice based on current Thai law.

Importantly, the UK–Thailand DTA does not contain a pensions article. This means the UK retains its domestic right to tax UK-source private pension income, and an NT code is generally not available on the basis of the treaty. At the same time, a Thai tax resident who remits that pension income to Thailand may also have it taxed in Thailand. Relief from double taxation is then achieved by Thailand giving a credit for UK tax paid, rather than by either country surrendering its taxing right.

The practical result: UK pension drawdown is typically taxable in the UK, and when remitted to Thailand by a Thai resident may also be assessable in Thailand at Thai income tax rates (with credit for UK tax). Thailand's personal income tax rates are progressive, ranging from 0% to 35%. A personal allowance and various deductions apply. Because there is no treaty pensions article, the position is more complex than for countries whose DTA assigns exclusive residence-state taxing rights, and specialist advice is essential.

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Cyprus

Cyprus is one of the most attractive jurisdictions for UK pensioners from a tax perspective and has long been recognised as such.

Under the UK–Cyprus DTA, private pension income is taxable in Cyprus. Cyprus offers pensioners a choice of tax regime:

1. Standard progressive rates — but only on Cyprus-source income (territorial basis). UK pension income is foreign-source and, under standard rules, is taxable if remitted.
2. Special election for overseas pensions: Cyprus offers a flat 5% rate on overseas pension income received in Cyprus (with the first €5,000 exempt, raised from €3,420 under the 2026 Cyprus tax reform). This is available to those who qualify as Cyprus tax residents and elect for this treatment.

The 5% flat rate on overseas pension income is a significant benefit and is why Cyprus attracts large numbers of UK expats in retirement. The effective rate on, say, £50,000 of annual pension drawdown could be as low as 5% — far below both UK higher rate (40%) and Spain's IRPF.

Cyprus also does not impose inheritance tax, capital gains tax on most disposals (other than Cyprus-situated property), and has a reasonably favourable tax treaty network.

Compliance caveat: Cyprus tax law and DTA interpretations may change. The 5% regime and its conditions should be confirmed with a Cyprus-qualified tax adviser before relying on it.

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Greece

Greece has in recent years introduced a special tax regime for foreign retirees — modelled loosely on the Portuguese NHR (Non-Habitual Resident) regime, which has itself been reformed.

Under Greece's Retirement Transfer Tax Programme (introduced 2020), qualifying retirees who transfer their tax residence to Greece can pay a flat 7% tax on foreign-source income, including UK pension income, for up to 15 years. Minimum requirements include spending at least 183 days per year in Greece and not having been a Greek tax resident in 5 of the previous 6 years.

Under the UK–Greece DTA, private pensions are taxable in the state of residence. Combined with the 7% flat rate regime, this makes Greece potentially very efficient for UK pension drawdown.

However, the flat rate regime requires an annual application fee and is not automatically renewable — the Greek tax authority retains discretion. Administrative requirements should not be underestimated.

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France

The UK–France DTA, updated in 2008, generally gives taxing rights on private pensions to France (the state of residence). French income tax is applied at progressive rates — up to 45% at the top. However, France offers various deductions and allowances for pension income, and the effective rate on modest pension income can be lower than the headline rates suggest.

France is not typically regarded as a tax-efficient destination for UK pension drawdown, but it is relevant for UK nationals who have retired there for lifestyle reasons.

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Portugal

Portugal's Non-Habitual Resident (NHR) regime was available for many years and provided a 10% flat rate on foreign pension income for qualifying residents. However, the NHR regime was substantially reformed from 1 January 2024. The standard NHR as previously structured is no longer available to new applicants.

A replacement scheme — the IFICI (Incentivo Fiscal à Investigação Científica e Inovação) — targets a narrower group of qualifying workers and does not carry the same pension benefits as the old NHR.

UK nationals retiring to Portugal from 2024 onwards should not assume the old NHR pension rules apply. Standard Portuguese income tax — at progressive rates up to 48% — may apply to foreign pension income. Specialist Portuguese tax advice is essential before making any plans based on historical information about the NHR regime.

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General Planning Principles

Several principles apply across all jurisdictions:

• Establish genuine residence first — tax residency in the target country must be properly established under both local law and the UK Statutory Residence Test before treaty benefits apply.
• Apply for the NT code before drawdown begins — not retrospectively.
• Review the treaty pension article specifically — general DTA guidance is not enough; the pension article wording matters.
• Government pensions are different — NHS, civil service, military, and local authority pensions are typically taxable in the UK regardless of treaty, not in the state of residence.
• The 25% tax-free lump sum — pension commencement lump sum (PCLS) is not subject to UK income tax regardless of residence. DTAs typically follow UK domestic law in treating it as non-income. This can be a significant planning consideration.

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Compliance and Risk Warnings

This guide provides an overview only. Tax law in every jurisdiction covered is complex and subject to change — sometimes at short notice. The DTA position for pensions is not always clear-cut and may depend on the type of pension, whether it has been crystallised, the residency of the beneficiary, and the specific treaty wording.

Rules change. What applies in 2026 may not apply in 2028. Professional cross-border tax advice must be sought before committing to any drawdown strategy overseas. Pension values can fall as well as rise. Past performance of pension investments is not a guide to future results.

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How Global Investments Can Help

Global Investments has extensive experience working with UK nationals who have retired to or are considering retiring to the UAE, Cyprus, Spain, Thailand, Greece, and other markets. We understand the interaction between UK pension structures, DTA rules, and local tax planning.

We can help you understand the implications of your specific situation — pension type, residency plans, other income — and connect you with specialist cross-border tax advisers who can provide current, jurisdiction-specific advice.

Contact us to discuss your retirement income plans across borders. All formal tax advice will be provided by qualified tax professionals operating within the relevant jurisdiction; Global Investments provides strategic wealth management context and facilitates the right professional relationships.