Could you Move to Europe and Receive Your UK Pension Tax-Free? Understanding Cross-Border Taxation and Double Taxation Relief
- TBA
- Jul 18
- 4 min read
In recent years, a growing number of British pensioners have opted to retire abroad—especially in EU countries.
According to the latest analysis, tens of thousands of UK retirees living in Europe are enjoying what some are calling a ‘hidden perk’: receiving as much as £35,000 a year in State Pension income, with little to no UK tax liability.
By contrast, millions of pensioners residing in the UK are paying income tax on their growing pension income. What lies behind this stark contrast? And how do the UK’s Double Taxation Agreements (DTAs) protect pensioners who receive income from overseas?
Let’s explore why retiring in Europe is being viewed by many older Britons as a tax-efficient strategy—and what legal mechanisms make it possible.
Tens of thousands of UK pensioners in Europe legally receive full pensions tax-free
According to August 2024 data from the Department for Work and Pensions (DWP), there are currently 480,906 UK State Pension recipients living in EU countries. Of these, around 42,000 receive pensions exceeding the UK’s personal allowance of £12,570—and yet pay no income tax on that income to the UK government.
Some receive up to £35,500 per year—equivalent to roughly £680–£690 per week.
The reason many UK pensioners abroad escape the UK tax net is due to the complexities of international tax law, particularly the UK’s network of Double Taxation Agreements with EU countries.
Higher-than-standard pension recipients – not everyone receives the same
The UK’s State Pension system is nuanced, and some individuals qualify for significantly more than the standard full pension (£11,976 per year or £230.25 per week in 2025/26). Some pensioners may receive up to three times that amount.
These higher payments often come from additional entitlements, such as:
Earnings-related schemes under the former State Earnings-Related Pension Scheme (SERPS), which may provide an extra £11,356 annually;
Deferred pension claims, where delaying your State Pension results in higher eventual payments;
Or periods of high contribution under the previous pension system.
Double Taxation Agreements: the ‘tax passport’ between the UK and EU
So why don’t these EU-based pensioners pay tax in the UK? It all comes down to Double Taxation Agreements (DTAs), which prevent individuals from being taxed twice on the same income in different countries.
Specifically, for retirees:
If a UK national resides in an EU country such as France, Spain, or Germany,
And that country has a DTA with the UK,
Then their UK State Pension is usually taxed only in their country of residence.
If that country either doesn’t tax foreign pensions or has low rates, the pensioner can receive their full pension tax-free or with minimal tax.
Examples:
France has complex rules but many British retirees achieve low tax liabilities through strategic planning
Portugal previously offered a 10-year zero-tax policy for foreign retirees (this has since changed)
Spain does tax pensions, but allowances and deductions can result in a relatively light tax burden
UK-based retirees face growing tax pressure
Unlike their European-based counterparts, pensioners in the UK are increasingly subject to income tax on their pensions. Since 2021, the UK’s personal allowance (£12,570) has been frozen and will remain so until at least 2028. Meanwhile, the State Pension is rising annually under the triple lock.
In April 2025, the full new State Pension increased by 4.1%, reaching £11,973 per year. This means even modest increases in pension income—or small amounts of additional income—can push individuals above the tax threshold and trigger basic rate tax of 20% or more.
As of now, around 3.3 million UK-based pensioners have pension incomes above the personal allowance and are liable for tax.
Is it worth moving to Europe to reduce your tax bill?
As this analysis shows, tax treatment for UK pensioners no longer depends solely on income levels—but also on where they live. A person with identical work history and pension contributions may enjoy dramatically different after-tax income simply because they live in France rather than Manchester.
That said, while retiring to Europe might sound attractive for tax reasons, it comes with some important caveats:
Does your chosen country tax pensions? Each country has different rules—professional advice is essential.
Healthcare and residency rights: post-Brexit, access to healthcare and residency in the EU has become more complex for UK nationals.
Exchange rate fluctuations: The value of your pension in euros may vary with GBP/EUR rates.
Cultural and lifestyle adjustments: Language, customs, and day-to-day living can pose adaptation challenges.
Some advice from TB Accountants
While Double Taxation Agreements can offer meaningful tax relief for British retirees abroad, they are not a perfect solution.
In practice, these arrangements have raised new questions about fairness: pensioners in different locations can be subject to completely different tax regimes, even if they’ve paid into the same system.
As the UK's relationship with the EU continues to evolve, DTAs may be renegotiated, and domestic tax policy may shift—potentially affecting how pensions are taxed both at home and overseas.
If you are planning to claim your UK pension or are considering retiring abroad, we strongly recommend engaging in professional tax and financial planning. After all, the comfort of your retirement depends not just on how much you receive—but on how much you keep after tax.
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