Imagine waking up to golden sunrises and spending afternoons by the sea – sounds like a dream come true, right? Well, that’s exactly what retirement overseas can offer.
But before you can enjoy this picture-perfect life, there’s one serious challenge that could put your financial security at risk – the pension income tax implications.
For UK expats, private pensions and the state pension are taxed very differently depending on whether you’re in Spain, Portugal, or France, as each country has its own set of tax rules.
Today, we’re breaking down how each of these locations taxes UK pensions so you know exactly what to expect when planning your retirement abroad.
How Spain Taxes Your UK Pensions
Spain uses a progressive income tax system, which means the more you earn, the higher the tax rate you pay.
Tax Bands and Rates
How much tax you pay depends on where you live – different regions (or autonomous communities) set their own tax rates. When you add the national tax and the regional tax together, the total tax rate can be as low as 19% or as high as over 47%.
It’s also important to note that your pension is considered “general income,” not “savings income,” and is therefore subject to the progressive rates.
For the national portion of the tax, the bands are:
- Up to €12,450: 19%
- €12,451 to €20,200: 24%
- €20,201 to €35,200: 30%
- €35,201 to €60,000: 37%
- €60,001 to €300,000: 45%
- Over €300,000: 47%
Tax Filing Obligations
If you live in Spain for more than 183 days in a tax year, you’re classed as a resident for tax purposes, which means you’ll need to file a tax return every year.
On your Spanish tax return, you’re obligated to report all your income from around the world (including your UK pensions) – even if you’ve already paid tax on them in the UK.
Spanish-UK Double Taxation Treaty (DTA)
Luckily, Spain and the UK have a DTA. This agreement helps make sure you don’t pay tax twice on the same income.
Our network of tax advisors help UK retirees in Spain navigate the Double Taxation Treaty to ensure they’re only paying the tax they owe, and not a penny more.
Note: A key exception is for UK government service pensions (e.g., police, civil service, or armed forces), which are only taxable in the UK.
Allowances and Deductions
Spain offers several forms of tax relief through allowances and deductions that help reduce your taxable income. For instance, there’s a personal allowance of €5,550, with an additional €1,150 if you’re over 65, plus extra relief for disabilities or dependents.
You may be able to benefit from deductions for contributions to social security and pension plans, as well as for charitable donations.
How France Taxes Your UK Pensions
Like Spain, France uses a progressive income tax system – the more you earn, the more tax you pay.
Tax Bands and Rates
France doesn’t have regional income taxes like Spain. So, the same rates apply across the whole country.
The tax bands for 2025 are:
- Up to €11,497: 0%
- €11,498 to €29,315: 11%
- €29,316 to €83,823: 30%
- €83,824 to €180,294: 41%
- €180,295 and above: 45%
A key part of the French system is the Family Quotient. Instead of taxing each person individually, France taxes the “tax household.”
Tax Filing Obligations
If you live in France for more than 183 days in a year, you’re classed as a tax resident. As a result, you need to file an annual tax return reporting all your worldwide income. Again, this includes your UK pensions even if you’ve already paid tax on them in the UK.
French-UK Double Taxation Treaty (DTA)
A DTA between the UK and France prevents you from paying tax twice on the same income.
Note: An important exception is for UK government service pensions (e.g., military, civil service, police), which remain taxable only in the UK, not in France.
Allowances and Deductions
Retirees can benefit from a flat 10% deduction on pension income, up to €14,426, or opt to deduct actual professional expenses if those are higher. Contributions of up to 10% of your earned income to certain retirement savings plans (like a PER) are also deductible, capped around €37,094. You may also be able to claim additional relief through charitable donations.
How Portugal Treats Your UK Pensions
Portugal uses a progressive income tax system, where tax rates rise as your income increases.
Tax Bands and Rates
Portugal’s income tax rates start at 12.5% and rise to a top rate of 48%.
The tax bands for 2025 are:
- Up to €8,059: 12.5%
- €8,060 to €12,160: 16%
- €12,161 to €17,233: 21.5%
- €17,234 to €22,306: 24.4%
- €22,307 to €28,400: 31.4%
- €28,401 to €41,629: 34.9%
- €41,630 to €44,987: 43.1%
- €44,988 to €83,696: 44.6%
- Over €83,696: 48%
While Portugal was previously famous for its Non-Habitual Resident (NHR) scheme, which offered a flat 10% tax rate on foreign pensions, this program has now ended for new applicants.
While Portugal’s famous Non-Habitual Resident (NHR) scheme – which offered a flat 10% tax rate on foreign pensions –has ended for new applicants, those who moved before the closure may still benefit from it. If you’re a UK expat, it’s important to understand how this interacts with UK pension rules to stay fully compliant. Our team of expat tax experts can guide you through these complexities.
Tax Filing Obligations
To qualify as a Portuguese tax resident, you generally need to spend more than 183 days in Portugal in a calendar year or have a permanent home there. As a tax resident, you must report your worldwide income, including UK pensions, to Portuguese tax authorities.
Portuguese-UK Double Taxation Treaty (DTA)
Portugal and the UK have a DTA to prevent you from being taxed twice on the same pension income. Under this treaty, you typically pay tax on your pensions in Portugal, not in the UK.
Note: The UK government service pensions (e.g., from the military or civil service) are an exception and remain taxable only in the UK.
Allowances and Deductions
Portugal offers a range of tax deductions that can help reduce your overall taxable income. You can deduct a percentage of certain expenses, such as healthcare costs – up to 15% of non-reimbursed medical expenses, capped at €1,000 per year.
Final Thoughts
Understanding how your UK pension is taxed abroad can save you from costly surprises and help you maximise your retirement income. Spain, France, and Portugal each have different rules, but the good news is that with the right planning, you can often minimise your tax burden.
If you’d like expert guidance tailored to your circumstances, Expat Taxes is here to help. Book a consultation today and take the guesswork out of your retirement planning.
Introducing Expat Taxes
Expat Taxes is an online tax advisory service designed for individuals with cross-border tax needs. Our network of qualified tax consultants and accountants has helped many expats handle the complexities of UK tax laws and international compliance.
Disclaimer: This article is for general informational purposes only and does not constitute tax, legal, or immigration advice. The content is not a substitute for professional advice tailored to your individual circumstances. Please note that we are not immigration specialists, and you should seek appropriate advice for any immigration-related matters.