I Have a UK Pension and Live in Spain — Am I Being Taxed in Both Countries?
It's one of the questions I get asked most often, and it usually comes with a particular tone of resignation — as if the person already expects the answer to be bad news.
"I get my pension paid from the UK. They're taking tax off it there. And I assume Spain wants a cut too. So I'm just paying tax twice, aren't I?"
In most cases, the answer is no — but the reason why, and what you need to do about it, is genuinely important to understand. Because while double taxation is not what's supposed to happen, there are plenty of British pensioners in Spain for whom it is exactly what's happening — simply because nobody has told them otherwise.
The UK–Spain Double Taxation Treaty gives Spain the exclusive right to tax most UK private pensions once you are Spanish tax resident. In other words, once you become tax resident in Spain, the UK should generally stop taxing those pension payments altogether.
That means if HMRC is deducting income tax from your UK pension at source — which happens to almost everyone who first draws down a pension — that money is repayable. You are not supposed to pay it. And if you have been paying it, you can claim it back.
The short answer
What about the UK State Pension and government pensions?
The UK State Pension is, in most cases, also taxable only in Spain once you are Spanish tax resident. Like private pensions and SIPPs, it should form part of your Spanish income tax return — not your UK one.
There is, however, an important exception: certain government service pensions.
Pensions paid specifically in respect of service to the UK government — including some Civil Service, Armed Forces, police and similar public sector pensions — are subject to different treaty rules. Whether the UK or Spain has taxing rights over these pensions depends on the nature of the pension and your nationality. Misclassifying a government service pension in either direction can have material consequences.
If you are unsure which category your pension falls into, that is exactly the kind of thing a free initial conversation will resolve.
The 25% tax-free lump sum — is it tax-free in Spain?
This one catches a lot of people off guard.
In the UK, you are entitled to take 25% of your pension pot as a Pension Commencement Lump Sum — commonly called the "tax-free lump sum." It is described as tax-free because the UK does not tax it. But that is a UK domestic exemption, and Spain does not recognise it.
As a Spanish tax resident, the full gross amount you withdrew is taxable in Spain — including the portion your UK pension provider described as tax-free.
If you have already taken your lump sum as a Spanish resident without declaring the full amount in Spain, that is something that needs to be looked at carefully.
What if I haven't been handling this correctly?
More common than most people realise, and genuinely nothing to be embarrassed about.
The most frequent situations I encounter are:
- Pensioners who have been paying UK income tax on their pension for years because nobody told them to submit the DT-Individual Spain form to HMRC
- People who declared the net amount received rather than the gross amount before UK tax deduction — which understates the Spanish liability and creates a complication when the HMRC repayment eventually arrives
- Clients who took a lump sum from their SIPP or pension and didn't realise the full amount needed to be declared in Spain
In all of these cases, the situation is manageable. The key is addressing it proactively rather than waiting for a letter you don't want.
Is there any planning to do before I draw my pension?
Yes — and this is where taking advice early makes a real difference.
If you hold an uncrystallised UK pension and you are either about to move to Spain or have recently moved, there is a genuine planning window. The timing of when you draw your pension relative to when you establish Spanish tax residency has meaningful financial consequences that, once closed, cannot be reopened.
Similarly, if you have a spouse or partner who holds UK pension rights and is also Spanish tax resident — or about to become one — the same considerations apply to them.
This is advisory work rather than compliance, and it is exactly the kind of conversation worth having before decisions are made rather than after.
Frequently asked questions
Can HMRC refund tax deducted from my UK pension?
Where Spain has exclusive taxing rights under the Double Taxation Treaty — which applies to most UK private pensions held by Spanish tax residents — UK tax deducted at source may often be reclaimed after the appropriate forms have been submitted. The key form is the DT-Individual Spain, submitted to HMRC together with a Spanish tax residency certificate.
Do I still need to declare my UK pension in Spain?
Yes. UK pension income — including the UK State Pension — normally forms part of your Spanish income tax return, even where no UK tax should ultimately be payable. Declaring the income in Spain is not the same as being double-taxed; it is simply where the tax obligation now sits.
Does this apply to SIPPs?
SIPPs are generally treated as private pensions under the UK–Spain Double Taxation Treaty, meaning Spain would normally have exclusive taxing rights once you are Spanish tax resident. That said, every individual's circumstances should be reviewed, particularly if significant sums are involved or if withdrawals have already been taken.
So why is UK tax being deducted?
Because that is how the UK pension system works by default.
When you first take a flexible withdrawal from a UK pension — whether that's drawdown, a UFPLS, or a full encashment from a SIPP — HMRC applies an emergency tax code. This can result in the pension provider deducting more income tax than is actually due. That deduction happens automatically. The repayment does not.
In most cases, recovering the UK tax involves submitting HMRC's DT-Individual Spain form, together with a certificate of Spanish tax residence from the Agencia Tributaria. Once HMRC confirms eligibility, future payments can be made without UK tax deduction, and any tax already deducted can be refunded.
It sounds straightforward. In practice, most people don't know it exists.
Will I pay more or less tax in Spain than I would in the UK?
It depends — and this is where people are sometimes surprised in both directions.
Spain taxes UK pension income at general income tax rates, which are progressive. The rate you pay depends on the region you live in and your total income. Some people ultimately pay less tax than they would have in the UK; others pay more. Whether you are better or worse off depends on your total income, where in Spain you live, and how your pension is structured.
What the position should be, in either case, is properly organised — with the right income declared in the right country, the DT-Individual Spain form submitted to HMRC, and the Spanish return prepared correctly. Done properly, you pay what you owe in the right place. Done incorrectly, you can end up paying in both places, or underdeclaring and creating a problem for later.
Where do I start?
With a conversation.
Everyone's pension situation is slightly different — the type of scheme, when you moved to Spain, whether you've already drawn any benefits, whether HMRC has been deducting tax, whether your Spanish returns have been filed correctly. The right approach depends on your individual circumstances, not a generic checklist.
During a free initial consultation, we'll establish:
- which country should be taxing your pension income;
- whether you are paying unnecessary UK tax that can be reclaimed;
- whether previous Spanish tax returns need to be corrected; and
- whether there are planning opportunities available before further pension benefits are taken.
You'll leave with a clear understanding of where you stand and what, if anything, needs to happen next.
If you would like to have that conversation, you can reach me at hello@theexpataccountant.com or book directly using the link below.
Speak With The Expat Accountant
Miles Hemmings is a British accountant based on the Costa del Sol, specialising in UK and Spanish tax for British expats. The Expat Accountant provides UK self assessment returns, Spanish tax returns, and ongoing cross-border tax advice.*
*Tax rules depend on your personal circumstances and can change over time. Professional advice is always recommended.*