Living abroad – and what it could mean for taking your pension

Dubai – How UK pensions are taxed

There is no personal income tax to pay in the UAE, which is a big attraction for many foreigners moving to the gulf state. But what does it mean if you’re a British expat living in Dubai and you’re accessing a UK pension?

According to Tony Smith, Head of Tax, Technical & Advice Delivery – Asia & Middle East at St. James’s Place, the assumption is that a UK pension is subject to UK tax, regardless of where the pension saver now resides.

“However, we need to consider the taxation regime in the country of residence and any relevant double taxation agreement (DTA) that exists,” he explains.

“For clients resident in the UAE, the terms of the DTA between the UK and the UAE state that ‘pensions and other similar remuneration paid to a resident of a Contracting State shall be taxable only in that State’. This means UK pensions can be paid gross and with no liability in the UAE.”

In other words, UK pensions can be taken tax-free, with no UK or UAE tax levied.

Tony adds that the pension holder would need to obtain a tax residence certificate in the UAE and submit this with a DTA claim form to the HMRC. “A tax code can then be issued such that no UK tax is deducted at source.”

Singapore – How UK pensions are taxed

The situation is different in Singapore. Generally, most income derived from sources outside Singapore is not subject to tax in Singapore.

This means UK pension income is not taxed in Singapore and instead remains taxable in the UK.

British expats living in the ‘Lion City’ will usually be able to take 25% of their UK pension tax-free (the “pension commencement lump sum”, or PCLS), and the rest will be liable for UK income tax.

Hong Kong – How UK pensions are taxed

To the north-east, in Hong Kong, the position is broadly the same. Tony points out that Hong Kong has a territorial system of taxation and therefore only taxes certain income arising in Hong Kong. UK pension income is not subject to tax in Hong Kong.

Instead, British expats’ pension pots are taxable in the UK. After the PCLS, the remaining 75% is liable for the pension saver’s highest UK income tax rate.

Tony notes that the key differentiator in the taxation of those resident in Singapore or Hong Kong is the wording of their DTAs, so it’s worth checking those carefully⁴.

Changes to IHT fuelling expat pension withdrawals

Most pensions will be subject to IHT from April 2027, as a result of last year’s Budget. Expats usually have to pay inheritance tax on their UK assets, so this will soon include unused pensions too.

“The Budget change has prompted some expats to consider realising UK pension assets, as removing funds from the UK will reduce their UK IHT exposure immediately,” notes Tony.

He points out that if money is taken from a pension earlier than planned to reduce an IHT liability, any subsequent income tax bill needs to be carefully considered. “This strategy is particularly attractive for clients resident in a jurisdiction with an advantageous DTA, such as the UAE.”

However, in a country like Hong Kong or Singapore, there could be a significant tax bill as pension withdrawals are subject to UK income tax.

Tony observes: “We are seeing many clients accessing their UK pension funds from the UAE, not just to benefit from an IHT reduction, but because there is no UK income tax liability.  

“More widely, the UAE is an attractive location for all tax purposes and we are seeing that reflected in the number of people from the UK choosing to relocate here.”

Five pension tips for expats

1. Check what your pension scheme allows in terms of taking benefits as a non-UK resident. Also check the scheme’s death benefits and options for beneficiaries.
2. Understand the tax liability of taking UK pension benefits when living abroad, and the terms of any DTA.
3. Take care if you’re subject to the temporary non-residence rules. Flexi-access drawdown (FAD) payments are subject to these provisions. They mean if a client enters FAD and takes income payments, that income could be taxable on their return to the UK if it’s within five years of their departure and they were previously UK tax resident for four out of seven years. This applies to income in excess of £100,000.
4. If you draw pension benefits to take advantage of a lower tax regime and/or reduce UK IHT exposure, beware of spending the money too quickly, and leaving yourself with too little during retirement. 
5. Get advice. Tony’s top tip is recommending that expats take financial advice and tax advice.

The value of an investment with St. James's Place will be directly linked to the performance of the funds you select and the value can therefore go down as well as up. You may get back less than you invested.

The levels and bases of taxation and reliefs from taxation can change at any time and are dependent on individual circumstances.

Sources
¹UK Parliament – 19 November 2024. 
²Middle East Monitor – 15 July 2024 
³RELO – October 2025
⁴According to Tony Smith, in Hong Kong, the terms of the DTA state that “pensions and other similar remuneration (including a lump sum payment) arising in a Contracting Party and paid to a resident of the other Contracting Party in consideration of past employment or self-employment and social security pensions shall be taxable only in the first-mentioned Party”. In Singapore, “the terms of the DTA state that, pensions and other similar remuneration paid in consideration of past employment or self-employment and any payments made under the social security legislation of either Contracting State, and any annuity paid to an individual who is a resident of a Contracting State and is subject to tax in respect thereof in that State, shall be taxable only in that State”. October 2025.