Retiring to Canada from the UK – 5 things you need to know
Retiring to Canada
Many Brits dream of retiring to Canada, drawn by its stunning landscapes, high quality of life, and excellent healthcare system. Every year, thousands make the move, seeking a fresh start in a country known for its friendly communities and outdoor lifestyle. However, retiring abroad comes with its challenges, and proper planning is essential to avoid costly mistakes.
I recently started working with a client who made the leap and retired to Canada. Through his experience, I learned that there are several things he wished he had known before making the move. Here are five key insights that could help others considering the same journey.
1️⃣ It pays to obtain a UK NT (no tax) code before drawing any pension benefits in Canada.
Otherwise, an emergency UK tax code will likely be used, resulting in lots of tax being deducted and held for almost a year.
Once you have an NT code, no UK tax will be deducted.
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.
2️⃣ If tax is deducted, HMRC will eventually reimburse it.
This will be done automatically, but it can take months. You should not have to complete a tax return or apply for this refund.
3️⃣ The tax-free portion of your pension is not tax-free in Canada.
While HMRC will not deduct tax on it, in Canada, it is 100% taxable income.
If possible, you should look to draw down this portion of your pension before you move to Canada.
4️⃣ Banks in Canada charge around 2-2.5% for converting from GBP to CAD, (this cost is usually hidden in their crappy exchange rates).
By setting up a GBP account with an online platform like Wise, you can make significant savings.
5️⃣ When reporting foreign income in Canada, you have to do the conversion in your tax return using the Bank of Canada’s exchange rate.
This means you are likely to pay tax on more money than you actually receive.
Retiring to Canada: Useful Resources
- British Expats Guide – moving to Canada from the UK
- MoneySense – best places to retire in Canada
- Pension Wise – living abroad
- Gov.uk – state pension if you retire abroad
* Sources checked on 13th December 2022
Retiring to Canada from the UK
FAQs
A UK NT code allows you to receive pension benefits without UK tax deductions. Without it, an emergency tax code may be applied, leading to significant tax being withheld until it’s refunded, which can take almost a year.
To obtain a UK NT code, you need to apply to HM Revenue & Customs (HMRC). Once granted, your pension provider will stop deducting UK tax from your pension payments.
If tax is deducted, HMRC will automatically reimburse it. However, this process can take several months, and you typically won’t need to complete a tax return or apply for the refund.
No, the tax-free portion of your UK pension is fully taxable in Canada. It’s advisable to withdraw this portion before moving to Canada to avoid Canadian taxation on it.
Canadian banks often charge around 2-2.5% for currency conversion, hidden within unfavorable exchange rates. Using a GBP account with an online platform like Wise can result in significant savings.
When reporting foreign income in Canada, you must use the Bank of Canada’s exchange rate for conversion. This may result in paying tax on a higher amount than you actually received due to exchange rate differences.
No, the UK State Pension is frozen at the rate it was when you left the UK if you move to Canada. This means you won’t receive annual increases linked to inflation.
Transferring a UK private pension to a Canadian scheme is complex and may not be possible due to differing regulations. It’s essential to seek professional financial advice to explore your options.
Even after moving to Canada, you might still be considered domiciled in the UK for inheritance tax purposes, potentially subjecting your worldwide assets to UK inheritance tax. Professional advice can help determine your domicile status and tax obligations.
Yes, several resources can assist you, including the British Expats Guide for moving to Canada, MoneySense for the best places to retire in Canada, and official Canadian government websites on immigration and family sponsorship.
Talk to an Expert
Retiring to Canada can be a wonderful move—but for many British expats, the financial side becomes complicated fast. Pensions, tax residency, currency, investments, healthcare planning, and estate rules all change the moment you relocate.
I’m Ross Naylor, a UK-qualified Chartered Financial Planner and Pension Transfer Specialist with nearly 30 years’ experience helping people retire abroad with confidence, including advising expats moving to Canada on how to structure their pensions and investments tax-efficiently.
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 need clarity on how UK pensions are taxed in Canada, how to avoid double taxation, what to do with your ISAs, how currency affects your income, or how to structure your retirement cashflow, I’ll help you build a plan that works on both sides of the Atlantic—now and for the long term.
Book a confidential consultation