For many British nationals who have retired abroad, especially in France, understanding how their UK pension is taxed can be confusing. The good news is that under the right circumstances, you can avoid paying UK tax on your UK pension. The key lies in the UK–France double taxation treaty, which determines where your pension income is taxed and how to structure it most efficiently.

It is important to seek professional tax advice to ensure you make the most tax-efficient decisions regarding your UK pension.

Introduction to Pension Tax

Pension tax can seem overwhelming, but understanding the basics is the first step to making your retirement income work harder for you. In the UK, pension income is generally subject to income tax, just like earnings from employment. The amount of tax you pay on your pension depends on your total income, your tax code, and the type of pension you receive. Everyone is entitled to a personal allowance, a set amount of income you can receive each year before you start paying tax. By making the most of your personal allowance and planning your pension withdrawals carefully, you can avoid paying too much tax on your pension. Whether you’re receiving a UK pension or considering your options for retirement income, it’s important to understand the tax implications of each choice. This guide will help you navigate the key rules around pension tax, so you can make informed decisions and keep more of your pension income tax free.

Understanding Where UK Pension Tax Applies

When you live in France, the first question is simple: Do I still pay UK tax on my UK pension?The answer depends on both your residency status and the type of pension you receive.

The United Kingdom typically taxes pension income at source. The tax code applied to your pension income determines how much tax is deducted at source.

However, France and the UK have a double taxation agreement (DTA) to ensure the same income is not taxed twice. Under this treaty, most private and company pensions are taxable only in the country of residence. Therefore, if you are tax resident in France, you can normally receive your pension gross of UK tax, declaring and paying tax in France instead. Understanding the relevant tax rules and tax treatment of different pension types is essential for proper tax planning.

The main exception is UK government pensions (for example, NHS, civil service, military), which remain taxable in the UK but are also declared in France to prevent double counting.

When considering private and company pensions, your total income from all income sources, including pensions and other earnings, will affect your overall tax liability.

State Pension

The State Pension provides a regular income from the government once you reach State Pension age, based on your National Insurance record. While the State Pension is a valuable part of your retirement income, it is not completely tax free. The amount of income tax you pay on your State Pension depends on your total income from all sources, including any personal pension, rental income, or other earnings. If your only income is the State Pension, you may not pay income tax, as the standard personal allowance is usually higher than the State Pension amount. However, if you have other income sources, your State Pension will be added to your total income for the tax year, and you may need to pay income tax on the combined amount. Understanding how much tax you owe and how your State Pension affects your overall tax position is essential to avoid paying too much tax and to ensure you make the most of your retirement income.

Personal Pension Plans

Personal pension plans are a flexible way to save for retirement, offering valuable tax benefits both when you contribute and when you start drawing your pension income. When you pay into a personal pension, you receive tax relief on your contributions, helping your pension pot grow more efficiently. When it’s time to access your pension savings, you can usually take up to 25% of your pension pot as a tax free lump sum, often called tax free cash. The rest of your pension income is subject to income tax, and how much tax you pay depends on your total income for the year. It’s important to consider the tax implications of how and when you withdraw money from your pension plan, as taking large lump sums could push you into a higher tax bracket. Consulting a financial adviser can help you make the most of your pension plan, minimize tax charges, and ensure your retirement income is as tax efficient as possible. Careful planning can help you enjoy the full benefits of your personal pension while keeping more of your money tax free.

How to Ensure You Don’t Pay UK Tax

To avoid paying UK tax on your UK pension, you must prove to HMRC that you are tax resident in France. This involves completing a “France Individual” form (previously Form FD5). Once validated by your French tax office and sent to HMRC, it authorises your pension provider to pay your pension gross (without UK withholding tax).

It is crucial to:

• Register as a French tax resident, typically after spending more than 183 days per year in France.
• Obtain a French tax identification number (numéro fiscal).
• Complete and submit the France Individual form to HMRC.

Once approved, UK pension income should be paid gross into your account, and any overpaid UK tax can often be reclaimed (usually through a tax refund from HMRC). Once HMRC confirms your non-UK residency, ask your pension provider to apply an NT tax code so payments are made gross and you avoid UK withholding, then declare the income in France.

UK–France Double Tax Treaty Explained

The UK–France DTA ensures income is only taxed once. Article 19 covers government service pensions, which are taxed in the UK. Article 18 covers private and occupational pensions, taxable in your country of residence.

This structure means that a retiree living permanently in France can often avoid UK taxation entirely on their private pensions, provided they have the correct residency documentation in place.

For those who maintain links to the UK, such as property ownership or part-time work, ensuring proper tax residency documentation is vital to avoid complications. The application of the double tax treaty may vary depending on individual circumstances.

Taking Your Pension Tax Efficiently

Even once your pension is taxed in France, how you draw it can make a significant difference to the overall amount of tax paid. Many UK expats explore tax-efficient withdrawal strategies such as:

• Taking a lump sum vs. regular income: You can choose to take a pension lump sum, a single lump sum, or regular monthly income from your pension pot or pension pots. Taking a single lump sum or large pension withdrawals in one go can push you into a higher tax bracket or tax band, resulting in more tax or much tax being paid. In contrast, spreading withdrawals over several years as regular monthly income or phased withdrawals may help you pay less tax and avoid paying tax unnecessarily. While a 25% tax-free lump sum (tax free cash) applies in the UK, it is often fully taxable in France, and pension tax free withdrawals are subject to specific rules. The tax treatment may differ, so careful planning is essential.
• Using an International SIPP: Consolidating multiple pensions into an International SIPP (Self-Invested Personal Pension) can provide greater flexibility, investment choice, and tax efficiency for expats living abroad.
• Flexi-access drawdown: Flexi-access drawdown allows you to withdraw money flexibly from your pension pot or pension pots, giving you access to flexible income options. However, using this strategy can trigger the Money Purchase Annual Allowance, which restricts how much you can contribute to your pension savings each year with tax relief. It’s important to understand both the annual allowance and the money purchase annual allowance to avoid an unexpected tax charge.

Careful planning of pension withdrawals, including phased withdrawals and considering your total income, total annual income, yearly income, and other income, can help you pay less tax and avoid paying tax unnecessarily. The amount of income tax you pay on your pension depends on your taxable income, how much income you withdraw, and your overall pension savings.

There are tax benefits and tax relief available on pension contributions, especially for defined contribution pension schemes, and understanding the tax treatment of pension savings is crucial for tax-efficient retirement planning. If you exceed your annual allowance or make large withdrawals, a tax charge may apply.

A qualified cross-border financial adviser can model these options to minimise both UK and French tax exposure and help you navigate the complex tax implications to optimise your pension plan.

Avoiding the 60% Tax Trap

In the UK, pension contributions and withdrawals can trigger complex marginal rates, particularly for high earners losing their personal allowance between £100,000 and £125,140. The standard personal allowance is the amount of income you can earn each tax year before paying income tax; exceeding this threshold can move you from a basic rate taxpayer to a higher rate. The tax year runs from 6 April to 5 April, so planning contributions and withdrawals within each tax year is important for tax efficiency. If you remain UK-connected, structuring contributions carefully and making use of allowances before becoming non-resident can help avoid this 60% effective tax trap.

Once you are non-resident and your pension is taxed in France, UK personal allowances may no longer apply, but the DTA still protects you from double taxation.

The Importance of Cross-Border Advice

Pension taxation across borders requires coordination between two systems. A mistake in reporting or residency can lead to double taxation or penalties. Working with an independent cross-border adviser who understands both UK and French systems ensures your pension income is optimised legally and efficiently.

At Harrison Brook, our advisers specialise in expat financial planning and act as your financial advisor, providing tailored tax advice for your cross-border pension needs, helping British nationals in France manage their pensions, investments, and retirement income under both jurisdictions.

FAQs – How to Avoid Paying UK Tax on Your UK Pension

Do I pay tax on my UK pension if I live in France? If you are a French tax resident, most private and company pensions are taxable in France, not in the UK. Government service pensions remain taxable in the UK.

Can I have my UK pension paid into a French bank account? Yes. Most pension providers can transfer payments directly to a French account once HMRC confirms your gross payment status.

What if my pension has already been taxed in the UK? You may reclaim the overpaid UK tax from HMRC by submitting the France Individual form and supporting tax documentation. Sometimes, emergency tax is applied to pension withdrawals, and you may be eligible for a tax refund if too much tax was deducted.

What is the most tax-efficient way to take my pension? This depends on your residency, income level, and personal objectives. Different pension schemes and pension plans offer various options for withdrawals and tax efficiency. A flexible International SIPP can often provide an optimal balance between access, investment choice, and cross-border efficiency.

Do I still need to file a UK tax return? Usually not if your only UK income is a pension now taxed in France. However, those with UK property or investment income, such as rental income, may still need to file annually.

What is an NT tax code and do I need one? The NT tax code tells a UK payer not to deduct income tax at source in specific cases, including when HMRC agrees you are non-resident and your pension is taxable only in your country of residence under a double tax treaty. Ask your provider to apply NT once HMRC has processed your residency form.

How does my national insurance record affect my state pension? Your national insurance record determines both your entitlement to the UK state pension and the amount you receive. The more qualifying years you have on your national insurance record, the higher your state pension is likely to be.

What happens to my pension when I die? When a pension holder dies, the treatment of their pension depends on the type of pension and their age at death. From April 2027, inheritance tax may apply to pension wealth passed to beneficiaries. It’s important to consider the tax implications for your estate and beneficiaries, as pension funds may be subject to inheritance tax and other rules.

Are there any pension savings that are completely free from tax? Some savings vehicles, like ISAs, allow you to withdraw money completely free of tax. These can be a tax-efficient way to save for retirement alongside your pension.

Key Takeaways

• If you live in France, your UK pension can generally be paid without UK tax under the double taxation treaty.
• Complete the France Individual form to have UK tax stopped at source.
• Declare your pension income correctly in France.
• Consider an International SIPP or QROPS for long-term flexibility and efficiency.
• Always seek professional advice before making changes.

Speak with a Cross-Border Pension Specialist

If you are living in France or planning a move, Harrison Brook can help you navigate the complex UK–France pension rules. Our independent advisers specialise in cross-border financial planning, ensuring your retirement income is structured in the most tax-efficient and compliant way possible.

Book a free consultation today to understand how you can avoid paying unnecessary UK tax on your pension while ensuring full compliance in France.