| Foreign pension | taxable in the UK in full where the treaty gives the UK the taxing right |
| Most work pensions | taxed by the country you live in under most UK treaties |
| Funds and ETFs from continental Europe | usually offshore funds under UK law |
| Non-reporting fund | gain on sale taxed as income (up to 45%), not as a capital gain (18% or 24%) |
| FIG regime | 4 years of relief on foreign pensions, income and gains, at the cost of your allowances |
| ISA allowance 2026/27 | £20,000 a year |
| Updated | November 2026 |
Foreign pensions: what the UK taxes
Once you are UK resident under the statutory residence test, foreign pensions count as UK income. The law (ITEPA 2003, section 575) taxes them in full. Older sources still mention a flat 10 percent deduction; it is no longer in the current text. If you arrive mid-year and a split year applies, only the pension arising in the UK part of the year counts.
Whether the UK may tax the pension at all is a matter for the treaty with your home country. HMRC sums it up: under most treaties a pension for past employment is taxed only in the country of residence. The exceptions are what matter, and they differ from treaty to treaty. A pension the UK may not tax under the treaty is still reported: with the payer, the pension and the treaty in the 'any other information' box of the return.
Income tax in England, Wales and Northern Ireland runs in three bands: 20 percent up to £50,270, 40 percent up to £125,140 and 45 percent above, after the £12,570 personal allowance. Scotland has its own bands.
Who taxes your pension: the usual pattern
Most UK treaties give the country where you live the right to tax most work pensions, so once you live in the UK, the UK taxes your occupational and private pensions from home. A non-resident with a UK work pension can, in turn, usually claim relief from UK tax.
Three kinds of pension often follow other rules, and this is where treaties differ most. State and social security pensions are, in some treaties, taxed only by the country that pays them. Pensions for government service are usually taxed by the paying state unless you are a national of the other country. And lump-sum payments from pension funds sometimes stay with the source country. Your home pension fund may also have its own rules on paying out to someone living abroad.
Where a pension is exempt in the paying country under the treaty but taxed in the UK, you usually apply for relief in the paying country before payment, with HMRC confirming your UK residence. The general mechanics are in the UK's tax treaties.
Your pension in the first four years: the FIG regime
Since 6 April 2025 newcomers have the four-year FIG regime: in your first four UK tax years after at least ten years outside, you can exempt foreign income and gains. Foreign pensions are included, apart from a few excluded special cases. So a pension from home that the treaty would make taxable in the UK can be relieved in those years.
The price: make the claim and you lose the personal allowance and the £3,000 CGT annual exempt amount for the year, whether you relieve only income or only gains. There is no credit for foreign tax on relieved income. And a claim on foreign income can cut tax relief on your contributions to a UK pension, though not below the basic £3,600. For a small pension the claim often does not pay; for a large one it often does. You decide year by year, and you have until twelve months after the normal filing date.
The portfolio: why your ETF can become a trap in the UK
Now the part almost everyone underestimates. A fund set up outside the UK is an offshore fund under UK law if it meets certain conditions. HMRC names the SICAV and the Irish ICAV as examples, which are exactly the legal forms most ETFs bought in continental Europe come in. Each share class counts as a fund of its own.
One question decides: does the exact share class have reporting fund status with HMRC? A reporting fund reports its income every year to HMRC and to investors. You pay tax on your share of that income even if the fund accumulates and pays nothing out. When you sell, the gain is an ordinary capital gain at 18 or 24 percent capital gains tax, reduced by the income already taxed.
If the share class has no reporting status, the gain on sale is usually an offshore income gain. It is subject to income tax instead of capital gains tax, so up to 45 percent, and the CGT annual exempt amount does not help. For corporate bond funds with more than 60 percent in interest-bearing assets, the income is taxed as interest. For interest, Budget 2026 of 28 October 2026 announced higher rates: 24, 44 and 49 percent from 6 April 2027, to be legislated through the Finance Bill 2026-27.
Reporting or non-reporting: the difference
What the two statuses mean for you as a UK-resident investor.
| Reporting fund | Non-reporting fund | |
|---|---|---|
| Ongoing income | taxable even if nothing is paid out (excess reportable income, treated as received 6 months after the end of the reporting period) | only distributions are taxable |
| Gain on sale | capital gains tax, 18% or 24%, £3,000 exempt amount | offshore income gain: income tax up to 45% |
| What you need | the fund's annual report | HMRC's list and the fund house's confirmation |
| Held in an ISA | nothing to declare | nothing to declare |
HMRC, HS265 Offshore funds; GOV.UK, Capital Gains Tax rates and allowances
The four years as a window
This is where the FIG regime becomes a tool. Offshore income gains are among the income you can relieve in your four years. If you bring a portfolio full of non-reporting funds, you can restructure it in that time, for example into share classes with reporting status, and exempt the gain with a claim. After that the full charge as income applies. Whether it pays depends on what you lose in allowances that year and what your home country says about the sale.
So look at home as well. Whether and how your home country still taxes you when you leave, for instance on unrealised gains, is set by its own law. The right order is almost always: leave home cleanly first, then use the UK window.
ISA and UK pension as the new home for your money
In the long run your money belongs in the wrappers the UK favours. The Individual Savings Account, or ISA, takes up to £20,000 in the 2026/27 tax year, free of tax on income and gains. Offshore funds may sit inside an ISA too, and then you do not declare their income, reporting status or not. You can only open an ISA as a UK resident; once you leave, you cannot pay in. Budget 2026 keeps the cash ISA limit at £20,000 from 6 April 2027 as well. How ISAs work day to day is in ISAs and everyday tax.
The second wrapper is the UK pension. Contributions qualify for tax relief up to 100 percent of your annual earnings, capped by the £60,000 annual allowance. Remember the interaction above: a FIG claim can cut that relief in the same year.
Frequently asked questions
Do I pay UK tax on my state pension from home?
It depends on the treaty. Some treaties leave state and social security pensions with the paying country only; others let the country of residence tax them. Either way you mention the pension in your UK return, with a reference to the treaty if the UK may not tax it.
Is there still a 10 percent deduction on foreign pensions?
Not in the current legislation. Section 575 ITEPA 2003 makes the full amount of the pension taxable income.
How do I know whether my ETF is a reporting fund?
HMRC publishes a list of approved reporting funds. What matters is the exact share class, not the fund's name. The fund house can confirm the status to you.
Should I sell my portfolio before I move?
That depends on your gains, your home country and your funds. Sell while non-resident and you usually pay no UK tax on foreign gains, but you may pay your home country's. Sell after arriving and you can relieve gains under the FIG regime. Work out both routes before you act.
Sources: legislation.gov.uk: ITEPA 2003, section 575 (taxable foreign pension income); GOV.UK: Foreign notes 2026 (SA106 notes); GOV.UK: HS265 Offshore funds; GOV.UK: Approved offshore reporting funds; GOV.UK: HS266 Foreign income and gains (FIG) regime (2026); HMRC Manual: RFIG45100 Qualifying foreign income; GOV.UK: Budget 2026; GOV.UK: Individual Savings Accounts; GOV.UK: Tax on your private pension contributions
