If you’re a UK expat receiving income from a UK pension, understanding the NT tax code is crucial.Â
This tax code allows you to receive your pension income without UK tax deductions at source, provided you meet the eligibility criteria.
Many UK pension providers apply PAYE (Pay As You Earn) tax deductions by default, even if you’re a non-resident.Â
To prevent this and avoid unnecessary tax reclaim processes, you need to apply for an NT tax code from HM Revenue & Customs (HMRC).
This guide explains everything you need to know about the NT tax code, how to apply for it, common pitfalls to avoid, and real-life case studies of expats who have successfully navigated the process.
What is an NT Tax Code?
The NT (No Tax) code is a tax code issued by HMRC to individuals living outside the UK.
It is available to those who receive taxable UK income but are entitled to have their income paid without UK tax deductions due to a Double Taxation Agreement (DTA) between the UK and their country of residence.
Key points about the NT tax code:
- It applies to UK pension income (such as SIPPs and defined benefit pensions) for non-residents.
- It prevents tax from being deducted at source by the pension provider.
- You must apply for it manually – it is not issued automatically.
- It does not mean you don’t pay tax at all – tax is still due in your country of residence.
Why Do You Need an NT Tax Code?
If you don’t have an NT tax code, your pension provider will deduct tax at source under the UK PAYE system.Â
In addition, in the majority of cases, schemes paying out a single or ad-hoc withdrawal, or making the first payment of a regular pension, will use an emergency tax code on a month 1 (M1) basis.
This doesn’t take into account any previous payments made in the current tax year.Â
Income tax is calculated using 1/12th of the standard personal allowance and 1/12th of the basic rate and higher rate tax bands.Â
Anything above that is subject to additional rate tax.
The emergency tax code for the 2024/25 and 2025/26 tax years is 1257L.Â
This will give a tax-free amount of £1,047.50 (£12,570/12) and the rest of the payment will be taxable.
Example
Mike is retired and lives in Poland.
He crystallised £50,000 from his Scottish Widows SIPP in March 2025, taking tax-free cash of £10,000, and drawing pension income of £40,000 under flexi-access drawdown.Â
Using the emergency tax code 1257L M1, Mike’s pension income will be taxed as follows:
* Based on UK income tax rates and bands (except Scotland).
This results in the pension income being taxed at an effective rate of 40.9% (£16,378.72 / £40,000).Â
While Mike can reclaim this tax, the process is time-consuming and frustrating.Â
Many expats prefer to apply for an NT tax code in advance to avoid this hassle.
Double Taxation Agreements (DTAs) and NT Tax Code Eligibility
A Double Taxation Agreement (DTA) is a treaty between two countries that prevents individuals from being taxed twice on the same income.Â
The UK has DTAs with many countries, allowing pensions to be taxed only in the country of residence.
Countries with DTAs that typically allow NT tax codes include:
- Australia
- Canada
- Dubai
- France
- Poland
- Portugal
- Spain
If you are unsure whether your country has a DTA with the UK, you can check the official HMRC DTA list.
Who Needs an NT Tax Code?
Here’s a breakdown of when an NT tax code is needed:
- You are non-resident in the UK for tax purposes.
- You have a pension income from a UK pension scheme.
- You live in a country with a DTA with the UK that allows pensions to be taxed only in your country of residence.
Comparison Table: UK Tax Deduction vs. NT Code Benefits
Case Studies: Real Experiences with NT Tax Codes
Case Study 1: Steve’s Costly Mistake
Steve, a British expat living in Dubai, didn’t realise he needed to apply for an NT tax code before withdrawing from his pension.
When he started drawing his pension, his provider automatically deducted UK tax at an emergency rate.Â
Steve was unaware that he needed an NT tax code to prevent this.Â
Over the course of a year, he lost thousands in unnecessary tax deductions.
To reclaim this, Steve had to file a UK tax return, a process that took several months.
Case Study 2: Sue’s Smart Planning
Sue, a retiree living in Spain, took the right steps early and successfully obtained an NT tax code before drawing from her UK pension.
Before withdrawing any pension funds, she followed the correct procedure:
- Confirmed her tax residency in Spain by obtaining the required certificate.
- Made a small taxable withdrawal to establish a PAYE record.
- Completed the DT-Individual form and got it certified by Spanish tax authorities.
- Submitted everything to HMRC in advance.
As a result, her NT tax code was in place before she made her first full pension withdrawal.Â
This meant she received her pension without UK tax deductions and declared it as income in Spain.
Sue avoided the stress of reclaiming overpaid tax and had full control over her pension income.
How to Apply for an NT Tax Code
1. Confirm Your Tax Residency Status
Determine your tax residency status by reviewing local regulations in your new country.Â
Ensure you meet the criteria for non-residency in the UK under the UK Statutory Residence Test.
2. Request a Nominal Pension Withdrawal
Before applying, ask your pension provider to process a small, taxable withdrawal from your pension or SIPP.Â
This nominal payment establishes a PAYE record with HMRC, which is necessary for obtaining an NT code.
3. Complete the Relevant HMRC Forms
Depending on your country of residence, you will need to fill out the appropriate Double Taxation Relief form.Â
For most expats (but not all, do check your country of residence), this is Form DT-Individual.
Ensure that you:
- Include the PAYE details of your pension scheme withdrawal.
- Answer all applicable sections based on your country of residence.
- Follow any country-specific guidance included in the form.
4. Obtain Certification from Your Local Tax Authority
Most countries require proof of tax residency to certify your eligibility for double taxation relief.Â
Depending on your location, this could involve:
- An official stamp on the DT form from your tax office.
- A separate tax residency certificate (required in countries like the UAE).
5. Submit Your Application to HMRC and Await Confirmation
Send the completed DT-Individual form, along with any supporting documents, to HMRC at the address specified on the form.Â
Including a copy of your National Insurance number and pension details can help expedite processing.
HMRC will review your application and, if successful, issue an NT tax code to your pension provider.Â
This process can take at least 12 weeks, often longer. Be patient and follow up if necessary.
6. Notify Your Pension Provider
HMRC usually sends the NT tax code directly to your pension provider, but it’s advisable to confirm receipt with your provider and ensure it has been correctly applied to future pension payments.
7. Continue to Monitor Your Tax Position
Keep a record of:
- Your NT tax code application.
- Correspondence with HMRC and your pension provider.
- Any tax assessments in your country of residence.
Review your tax situation annually to ensure ongoing compliance with both UK tax regulations and those of your new country of residence.
Applying for an NT tax code can save UK expats thousands in unnecessary tax deductions.
NT Tax Codes: Frequently Asked Questions
1. What is an NT tax code, and who qualifies for it?
An NT tax code (No Tax code) is issued by HMRC to non-residents receiving UK income, such as pensions, so that tax is not deducted at source. You qualify if you live in a country with a Double Taxation Agreement (DTA) with the UK and are tax resident abroad.
2. How do I apply for an NT tax code?
You must:
- Confirm your tax residency in your new country.
- Make a nominal withdrawal from your pension to create a PAYE record.
- Complete the HMRC DT-Individual form (or equivalent).
- Obtain certification from your local tax authority.
- Submit your application to HMRC and wait for approval.
3. How long does it take to get an NT tax code?
It typically takes 12-16 weeks, though it can take longer if there are processing delays at HMRC. Expats should apply well in advance of needing to withdraw pension income.
4. What happens if I withdraw my pension without an NT tax code?
Without an NT tax code:
- Your pension provider deducts UK tax at source (PAYE).
- You may be taxed at an emergency tax rate, which could be up to 40%.
- You’ll have to file a UK tax return to reclaim any overpaid tax.
5. Does an NT tax code mean I pay no tax at all?
No. It only stops UK tax deductions. You still have to declare your pension income in your country of residence and pay tax there.
6. Can I use an NT tax code for all types of UK income?
No. NT tax codes mainly apply to pension income (SIPPs, personal pensions, and defined benefit pensions). Other UK income—such as rental income—may still be taxable in the UK.
7. What if my pension provider refuses to apply my NT tax code?
If this happens:
- Contact HMRC to confirm the NT tax code has been issued.
- Ask your pension provider to update their PAYE records.
- If tax is deducted incorrectly, file a UK tax return to reclaim it.
8. Do I need to reapply for an NT tax code every year?
Not necessarily. Once issued, the NT tax code usually remains valid unless your residency status changes. However, some countries require annual certification of tax residency.
9. Can I get an NT tax code if I split my time between the UK and abroad?
If you spend too much time in the UK, you may still be considered UK tax resident and not eligible for an NT tax code. You must pass the Statutory Residence Test (SRT) to qualify.
10. What happens if I move to a different country after getting an NT tax code?
If you relocate, your tax residency changes, and your NT tax code may no longer be valid. You may need to:
- Reapply for an NT tax code under the new country’s DTA.
- Update HMRC with your new tax residency details.
The Bottom Line
Applying for an NT tax code can save UK expats thousands in unnecessary tax deductions.Â
By planning ahead, confirming tax residency, and submitting the correct forms, you can ensure your pension income is paid gross, with no deductions at source.
Need help with cross-border pension planning?Â
Schedule a call today to discuss your situation.
Post last updated on 11th February 2025
