UK Pension Tax For Expats: How An NT Tax Code Can Help Avoid Double Taxation
TL;DR
An NT (No Tax) code is a tax code from HMRC that stops UK pension providers from deducting UK tax at source when you live outside the UK. It’s especially useful for expats living in countries with a Double Taxation Agreement (DTA), because it lets pension income be taxed where you reside rather than automatically under UK PAYE. You must apply for it — it isn’t automatic — and even with an NT code you’ll still declare and pay tax in your country of residence.
Received an NT Tax Code on Your Pension?
Receiving an NT tax code can be welcome news for many British expats, but it can also raise important questions about how your pension income should be taxed and what your wider financial responsibilities may be.
While an NT tax code means that UK tax is no longer being deducted from your pension income, it does not necessarily mean that no tax is due. The tax treatment of your pension will often depend on your country of residence, local tax rules and any relevant double taxation agreements.
Understanding how your NT tax code fits into your overall financial position is important. Tax residency, pension income, State Pension benefits, investment arrangements and long-term retirement planning all need to be considered together rather than in isolation.
Every expat’s circumstances are different. What may be appropriate for one person could create complications for another, particularly when multiple countries and tax systems are involved.
Book a discovery call with Ross to understand how an NT tax code fits into your personal circumstances and how it may affect your wider retirement and financial planning strategy.
Last updated June 2026
NT Tax Code
If you’re a UK expat receiving income from a UK pension, understanding the No Tax (NT) tax code is crucial.
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.
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.
>>> Did you know? There are currently over one million British living abroad and receiving pensions, with Spain, Australia, and France among the top destinations.
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.
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.
Income tax is calculated using 1/12th of the standard personal allowance and 1/12th of the basic rate and higher rate tax bands.
Anything above that is subject to additional rate tax.
The emergency tax code for the 2024/25 and 2025/26 tax years is 1257L.
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.
Using the emergency tax code 1257L M1, Mike’s pension income will be taxed as follows:
| Tax Band* | Amount for 1 month | Rate of tax* | Tax |
|---|---|---|---|
| Personal allowance | £1,047.50 | 0% | £0.00 |
| Basic rate | £3,141.67 | 20% | £628.33 |
| Higher rate | £7,286.67 | 40% | £2,914.67 |
| Additional rate | £28,524.16 | 45% | £12,835.87 |
| Total | £40,000.00 | £16,378.72 |
* 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).
While Mike can reclaim this tax, the process is time-consuming and frustrating.
Many expats prefer to apply for an NT tax code in advance to avoid this hassle.
Why an NT Tax Code Is Only Part of the Picture
Receiving an NT tax code can feel like a significant milestone for many British expats. It often confirms that UK tax is no longer being deducted from a pension income source, but it is important to understand that an NT code is only one element of a much broader financial planning picture.
One of the most important factors is tax residency. Your tax obligations are usually determined by where you are resident for tax purposes rather than simply where your pension is paid from. Understanding your residency status is often the starting point for determining how your pension income should be taxed.
Double taxation agreements can also play a crucial role. These agreements are designed to prevent the same income being taxed twice, but the rules vary from country to country. Understanding how the relevant treaty applies to your circumstances can help ensure you are paying the correct amount of tax in the correct jurisdiction.
Your State Pension may also need to be considered separately. While an NT tax code may apply to certain private or workplace pensions, different rules can apply to State Pension income depending on where you live and your overall tax position.
For many expats, private pension income forms a significant part of their retirement strategy. Understanding how different pension arrangements interact with local tax rules can help you make informed decisions about income withdrawals, investment strategies and long-term retirement planning.
It is equally important to understand the tax rules in your country of residence. An NT tax code may stop UK tax being deducted, but your pension income may still be taxable locally. Failing to understand local reporting and tax obligations can sometimes lead to unexpected liabilities or compliance issues.
Finally, NT tax codes should be considered within the context of long-term retirement planning. Decisions relating to pension income, investments, tax efficiency, estate planning and future residency changes often work best when viewed as part of a coordinated strategy rather than as isolated issues.
An NT tax code may affect where tax is collected, but it is only one part of a much wider cross-border financial planning picture.
Understanding how all these moving parts fit together can help you make better decisions, avoid unnecessary complications and ensure your retirement plans remain aligned with your long-term objectives.
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.
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.
Unsure Whether Your NT Tax Code Is Correct?
Receiving an NT tax code can be a positive development, but it is important not to assume that the position is automatically correct simply because HMRC has issued the code. The rules surrounding pension taxation for British expats can be complex, particularly when multiple countries, tax systems and pension arrangements are involved.
Every expat’s situation is different. Factors such as where you live, how long you have been overseas, your tax residency status and the type of pension income you receive can all affect how your pension should be taxed.
Tax residency matters. In many cases, the country where you are tax resident will determine where pension income should ultimately be taxed. Understanding the interaction between UK tax rules, local tax legislation and any applicable double taxation agreement is essential.
Pension arrangements also vary considerably. Some expats receive income from workplace pensions, others rely on SIPPs, personal pensions, State Pensions or a combination of multiple sources. Each arrangement can have different tax implications depending on your circumstances.
Mistakes can be costly. Incorrect tax treatment, misunderstandings around residency or failures to report pension income properly can sometimes lead to unexpected tax bills, penalties or administrative complications that could have been avoided through early planning.
If you are unsure whether your NT tax code is appropriate for your situation, or you would like a second opinion on how your pensions and tax affairs fit together, professional advice can help provide clarity and peace of mind.
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
| Scenario | UK Tax Deducted? | Action Needed |
|---|---|---|
| Receiving UK pension with NT tax code | No tax deducted | Declare income in country of residence |
| Receiving UK pension without NT tax code | Tax deducted at PAYE rates | File UK tax return to reclaim |
| Living in a country without a DTA | UK tax deducted | May not be eligible to reclaim UK tax |
Case Studies: Real Experiences with NT Tax Codes
Case Study 1: Steve’s Costly Mistake
Steve, a 59-year-old British expat living in Dubai, decided to take advantage of the local nil tax rate by drawing down 100% of his pension fund.
However, he didn’t realise he needed to apply for an NT tax code before making the withdrawal.
When he received his pension proceeds, he was shocked to find that his pension provider had automatically deducted UK tax at an emergency rate.
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.
She followed the correct procedure:
- Confirming her tax residency in Spain by obtaining the required certificate.
- Making a small taxable withdrawal to establish a PAYE record.
- Completing the DT-Individual form and getting it certified by the Spanish tax authorities.
- Submitting everything to HMRC.
As a result, her NT tax code was in place before she made her first full pension withdrawal.
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
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Applying for an NT tax code can save UK expats thousands in unnecessary tax deductions.
Common NT Code Mistakes
- Assuming it happens automatically.
- Becoming non-resident but never informing HMRC by completing form P85.
- Believing an NT code means “tax free”.
- Taking a large pension withdrawal before the code is issued.
- Not understanding local taxation rules.
- Assuming every pension qualifies.
Real People, Real Results
“Taxation, pensions, inheritance, capital gains and investing are areas that need qualified and expert advice. I would certainly be lost without him. If you are an expat looking for sound financial advice, then you would do well to reach out to Ross.”
— Malcolm Ridge
NT Tax Codes
FAQs
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.
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.
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.
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.
No. It only stops UK tax deductions. You still have to declare your pension income in your country of residence and pay tax there.
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.
If this happens:
- Contact HMRC to confirm the NT tax code.
- Ensure your pension provider has the correct details on file.
Common Mistakes Expats Make With NT Tax Codes
An NT tax code can be a valuable tool for British expats, helping to ensure that pension income is taxed in the appropriate jurisdiction. However, misunderstandings about how NT tax codes work are surprisingly common and can sometimes lead to unexpected tax liabilities, compliance issues or missed planning opportunities.
Assuming no tax is due anywhere
One of the biggest misconceptions is that an NT tax code means your pension income is completely tax-free. In reality, an NT tax code simply means that UK tax is no longer being deducted at source. In many cases, the income may still be taxable in your country of residence, and local reporting requirements may still apply.
Not understanding local tax obligations
Many expats focus on the UK side of the process but overlook their responsibilities overseas. Different countries have different rules regarding pension income, tax declarations and reporting requirements. Failing to understand local obligations can result in unexpected tax bills or compliance problems.
Failing to notify HMRC of changes
An NT tax code is often based on specific information about your residency status and circumstances. If those circumstances change, such as moving to a different country or returning to the UK, HMRC may need to be informed. Failing to keep HMRC updated can sometimes result in incorrect tax treatment.
Confusing tax residency with nationality
Many British expats assume that because they are British citizens, UK tax rules automatically apply to their pension income. In reality, tax residency is often far more important than nationality when determining where income should be taxed. Understanding the distinction is essential for effective cross-border financial planning.
Ignoring wider retirement planning considerations
An NT tax code is only one aspect of retirement planning. Decisions about pension withdrawals, investment strategies, State Pension income, estate planning and future residency changes can all influence your long-term financial position. Focusing solely on the tax code may mean missing more important planning opportunities elsewhere.
Many expats only discover these issues after problems arise. Taking the time to understand how your NT tax code fits within your wider financial situation can help prevent unnecessary complications and provide greater confidence about your future plans.
An NT tax code can be beneficial, but misunderstanding how it works can lead to unexpected tax bills and avoidable complications.
Professional advice can help ensure that your tax position, pension arrangements and long-term retirement plans remain aligned, regardless of where in the world you choose to live.
Further Reading
🔗 What Happens to Your UK Pension If You Move Abroad?
🔗 Inheritance Tax on Pensions for British Expats: May 2026 Update
🔗 Retiring Abroad: The Complete UK Expat Guide
🔗 Should I Consolidate My Pensions? A Guide for British Expats
The Bottom Line
An NT tax code can be an extremely valuable tool for British expats receiving income from a UK pension.
In the right circumstances, it can prevent unnecessary UK tax from being deducted and help ensure your pension is taxed in the country that has the legal right to tax it under the relevant Double Taxation Agreement.
However, obtaining an NT code is not as simple as informing your pension provider that you have moved abroad.
Your eligibility will depend on factors such as your country of residence, your tax residency status, the type of pension you receive and the terms of the applicable tax treaty.
Even where an NT code is available, it is important to remember that this does not mean your pension income is tax-free. In most cases, the income will still be taxable somewhere.
The good news is that with the correct planning and paperwork, expats can avoid being taxed twice on the same income and ensure their retirement finances are structured as efficiently as possible.
If you are living overseas and UK tax is being deducted from your pension, or you are planning a move abroad and want to understand how your pensions will be taxed, it is worth seeking advice before making any major decisions.
A little planning upfront can often save a great deal of time, cost and frustration later on.
Talk to an Expert
Receiving an NT tax code can be reassuring, but it does not necessarily mean your tax obligations have disappeared. Understanding how UK tax rules, overseas tax systems and double taxation agreements interact is often more important than the tax code itself.
I’m Ross Naylor, a UK-qualified Chartered Financial Planner and Pension Transfer Specialist with nearly 30 years' experience helping British expats understand how pensions, tax residency and cross-border financial planning work together.
Many people assume that once an NT tax code has been issued, the matter is resolved. In reality, questions often remain around local tax liabilities, reporting obligations, pension income planning and how future changes in residency could affect your overall tax position.
I firmly believe your location in the world should never be a barrier to expert, impartial and transparent financial advice you can trust.
Whether you're trying to understand how an NT tax code affects your pension income, how double taxation agreements apply, what happens if you move country, or how your tax position fits into your wider retirement strategy, I can help you understand the bigger picture and avoid costly misunderstandings.
An NT tax code is often just one part of a much bigger financial planning discussion. Over the years, I have helped more than 250 expat families make sense of complex tax and pension arrangements, helping them make informed decisions with greater confidence.
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