Getting an NT Tax Code on Your UK Pension from Abroad: Who Qualifies, Why the First Payment Is Usually Over-Taxed, and How to Claim It Back

November 2026

By Will Glyn

A first UK pension payment that arrives in a bank account abroad is often a good deal smaller than expected. HMRC’s own PAYE manual says PAYE (Pay As You Earn, the UK system of deducting income tax at source) applies to all pensions paid to non-residents, except where the pension arises wholly from work done abroad. Unless HM Revenue & Customs (HMRC, the UK tax authority) has told your provider otherwise, tax comes off before the money leaves the UK.

The usual fix is an NT code. NT stands for “No Tax”. It is a PAYE code, and for people living overseas it can be used where a double taxation agreement gives relief from UK tax on particular UK income. Whether you get one depends on three things you meet in a fixed order: whether your pension is eligible at all, when you are allowed to apply, and what the treaty says about the kind of payment you are taking. Get the order wrong and the tax has to be claimed back, against a time limit.

Before going further: PWA is not a tax or legal adviser, and this article is educational. Treaties differ from country to country, so read what follows as a map of the process rather than an answer for your own position.

First, check the pension can get an NT code at all

The pensions that most often fail at this first hurdle are those paid for service to the UK government. HMRC’s notes to the claim form say that under many treaties the UK keeps the primary right to tax a government pension. The notes stop short of saying all treaties, which is why the treaty has to be read rather than assumed.

Tax Adviser magazine gives a worked example of how this goes wrong. The person confirms his residence with the foreign tax office and submits the form, then HMRC tells him his police pension is UK state funded and taxable in the UK. Months of paperwork, and no NT code at the end of it.

Civil service, armed forces and police pensions are the ones I check first. Some teachers’ schemes and other public-sector arrangements are less clear-cut. I would not assume either way, because the treaty text and the scheme administrator settle it.

There is an exception that matters if you are not British. HMRC’s notes for residents of France say a pension paid for service to the UK government or a local authority is taxable in the UK. Exceptionally, someone who is a national and resident of France, without also being a UK national, can claim exemption. The German notes follow the same pattern, citing Article 18(2) of that treaty. Whether your treaty has a similar carve-out is a question for its text.

What the claim needs before you send it

The claim is made on form DT-Individual (Double Taxation Treaty Relief). It applies for relief at source from UK income tax on pensions, purchased annuities, royalties and interest paid from sources in the UK. HMRC also publishes country-specific versions for residents of certain countries, so check gov.uk for yours before downloading the general form. HMRC’s Digest of Double Taxation Treaties summarises the relief available under each treaty.

The wording of the relief varies. For France, for example, HMRC says certain types of pension and most annuities can be exempted from UK income tax. “Certain types” is the phrase to look for in your own treaty.

You also need to be non-resident in the UK. If you left the UK in the current tax year, the form asks you to confirm you will be non-resident, or eligible for split-year treatment (where the tax year is divided into a UK part and an overseas part), under the Statutory Residence Test. That test is the UK’s set of day-count and ties rules for deciding residence. HMRC does not simply wave claims through: its staff guidance tells officers not to allow a treaty claim automatically.

One point catches people out later. An NT code only stops UK deduction. In most countries you still need to declare the income locally, even if no tax is due on it there, so check your country’s rules.

The timing trap: HMRC wants a pension already in payment

This is the step that costs people money. The form asks for the payer’s name, its reference number and the date payments began, so in practice it is completed once the pension is already in payment. HMRC usually wants the pension to have paid out once, so that a PAYE record exists, before it will issue an NT code, and the code can then take several months to come through.

So when you take your first drawdown, meaning your first withdrawal from the pension, your provider has no tax instruction from HMRC for you and has to guess. When a payment has not previously been reported to HMRC under PAYE, the system defaults to an emergency tax code. A first flexible payment from a pension is usually taxed on an emergency “month 1” basis, as though you would take that amount every month, which can produce a large temporary over-deduction.

Here is an illustration using round numbers rather than a sourced rate: suppose you draw £10,000 for the first time and the emergency code takes £2,000 of it. If your treaty gives taxing rights to the country where you live, that £2,000 should never have left, and it sits with HMRC until you claim it.

One way round this is a small first payment, of around £1,000, so the PAYE record exists before HMRC is asked for an NT code. Your larger withdrawal then waits for the code. How large that first payment is, is a planning choice. Taking taxable income from drawdown can have side effects, including triggering the money purchase annual allowance, a much lower yearly cap on what you can pay into a pension from then on. A defined benefit pension also has no small-payment option. So I settle the sequence with a client before the first payment, not after it.

Getting the first payment back, and the four-year limit

The same form can recover tax already taken. For a pension taxed under PAYE, the form says not to list those payments in Part D, and HMRC arranges any refund; for other income, tick box 2(a) or (b) in Part F to claim repayment of UK income tax due to you under the treaty. If you file a UK Self Assessment return anyway, you can claim the treaty relief on the residence pages instead, using HMRC helpsheet HS304.

The deadline is the part I see clients underestimate, because the clock runs from the end of the tax year in which the tax was taken, not from when you notice it. The usual limit for an overpayment claim is four years from the end of the relevant tax year (Schedule 1AB, Taxes Management Act 1970.)

A worked example, using the UK tax year that runs from 6th April to 5th April. Tax taken in 2026/27 can be claimed until 5th April 2031. Tax deducted from a first payment in January 2023 sits in 2022/23, which ended on 5th April 2023, so the last day to claim is 5th April 2027, about five months from today. Anyone who started drawing a few years ago and never claimed should check that year first.

Lump sums: the treaty wording decides

The UK–US treaty is a useful example because its pension article treats regular payments and lump sums differently. Article 17(1)(a) makes pensions taxable only in the state where the recipient lives. Article 17(2) says a lump sum from a pension scheme in one state, owned by a resident of the other, is taxable only in the state where the scheme was established. For a US resident with a UK pension, that means the UK keeps the right to tax a lump sum, so the treaty gives no exemption from UK tax on it. An NT code is not the tool for that payment.

The line between a lump sum and a regular payment is not always clear. “Lump sum” is not defined in the treaty or in UK tax legislation. That matters for flexible drawdown, where a payment may be neither plainly regular nor plainly one-off.

US citizens have a further layer. The treaty contains what is called a saving clause, which lets the US tax its own citizens and residents as though the treaty did not exist, with only a short list of exceptions, and the lump sum rule in Article 17(2) is not on that list. Advisers disagree about how that plays out for the tax-free lump sum, which in the UK is normally up to 25% of a pension (capped at £268,275 for most people) that you can take without UK income tax. For a US taxpayer, the NT code deals with UK withholding. The US return needs its own analysis from a US cross-border tax specialist.

Other treaties word lump sums differently, so I read the pension article of the actual treaty before a client takes one.

Countries that tax only what you bring in

Some countries tax foreign income only when it is brought into the country. HMRC’s form deals with this directly. It asks whether the tax authorities in your country of residence tax you only on the amount you remit to or receive there, and whether you remit all the income shown on the form. The declaration itself can be made by reference to an amount in pounds remitted to that country.

Where your treaty limits relief for people taxed on a remittance basis, the relief follows the amount transferred. Suppose you draw £40,000 in a year and bring £30,000 into the country where you live. The claim would cover the £30,000, and the other £10,000 would not be covered. The figures are only an illustration. How each country applies its remittance rule, and what it does to the order of withdrawals and transfers, is a question for a local tax adviser before the first payment.

Residence evidence for the UAE and Hong Kong, and what HMRC asks of Qatar

The usual process has the form certified by the tax authority where you live. The form tells you to send it to the taxation authority of your country of residence. Some countries’ procedures have you send it directly to HMRC instead.

In places such as the UAE, the authority issues a certificate of residence rather than stamping HMRC’s form. Tax Adviser magazine describes a UAE resident applying for a tax residence certificate to forward with the form. HMRC’s own notes tell Kuwaiti residents to enclose a copy of their certificate of residence, which shows the mechanism is recognised. For the UAE and Hong Kong, HMRC’s notes ask for a certificate of residence. For Qatar, HMRC asks for a statement of residence plus a copy of your Qatari residence permit. Check the current notes for your country.

Two practical points. Ask for a stand-alone certificate confirming you are resident under the treaty, to go with the form. Under UAE Cabinet Decision 85 of 2022, 183 days’ presence in a 12-month period is enough on its own, and there is a separate 90-day route for people with a UAE residence permit and a permanent home or job there. Confirm the current criteria with the UAE Federal Tax Authority before you rely on either.

A short checklist

• Pension type — confirm whether it was paid for UK government or local authority service, and read what your treaty says about that category.
• Treaty wording — read the pension article and HMRC’s treaty digest for your country, including any rule on lump sums.
• Residence evidence — arrange the certification or residence certificate from your local tax authority, and confirm you meet the UK non-residence test.
• First payment plan — decide the size and timing of the first payment before it happens, knowing it will probably be taxed on an emergency code.
• The claim — send the DT-Individual (or country-specific) form once payments have started, with the payer’s reference. For a pension taxed under PAYE, HMRC arranges any refund itself.
• The clock — diarise four years from the end of each tax year in which tax was deducted.
• Local reporting — declare the pension in your country of residence if its rules require it, NT code or not.

How We Can Help

At PWA, we advise on pensions and retirement planning for people living abroad, including existing UK pensions and SIPPs. My part is the planning around the claim: how much to draw, when, and how that income fits with where you live. The treaty claim itself sits with tax specialists. If you don’t already have a relationship with a cross-border tax professional, we’d be happy to put you in touch with one. And if you are planning a first drawdown and want to talk it through, you can book a call with me.

This article is for general education only and is not tax or legal advice. Treaties, HMRC guidance and time limits change, and the right answer depends on your residence, nationality and pension type. PWA’s planners work as part of Financial Services Network (FSN) Ltd, Mauritius FSC licence C116016070. Rules described are as at November 2026.

Will is an Independent Financial Adviser with over a decade of experience helping expats make the most of their international status.