Retiring in Spain on a UK Pension 2026 -- Tax, Transfer and Treaty Rules

Last reviewed: 26 April 2026

Retiring in Spain on a UK pension in 2026 is the most common retirement destination scenario for UK expats in the European Union: Spain is home to the largest UK expat community in the EU, and the combination of uprated UK State Pension, relatively low cost of living on the costas, and a bilateral tax treaty that exempts private pension income from UK tax while making it taxable only in Spain creates a financially attractive retirement framework. For the full UK pension abroad framework, see our UK pension abroad guide. For the full Spain relocation guide, see our moving to Spain guide.

Retiring in Spain on a UK pension requires understanding the interplay between three separate frameworks: the UK-Spain Double Taxation Convention 2013 (which determines where pension income is taxed), the HMRC NT code procedure (which stops UK PAYE withholding on private pension income for Spanish residents), and Spain’s IRPF (Impuesto sobre la Renta de las Personas Físicas -- Spanish personal income tax, administered by the Agencia Tributaria at agenciatributaria.gob.es). Spanish income tax rates for 2025: 19% on the first EUR 12,450; 24% on EUR 12,451-20,200; 30% on EUR 20,201-35,200; 37% on EUR 35,201-60,000; 45% on EUR 60,001-300,000. The UK State Pension of £221.20 per week (approximately £11,502 per year, approximately EUR 13,693 per year at April 2026 FX) falls within the 24% IRPF band for a Spanish resident with no other income. EUR 1 is approximately £0.84 at April 2026.

UK State Pension in Spain: tax treatment and transfer

The UK State Pension paid to a Spanish resident is: (1) uprated annually by the triple-lock mechanism (highest of inflation, earnings growth, or 2.5%), as confirmed by gov.uk/state-pension-if-you-retire-abroad; (2) paid gross by DWP without UK PAYE deduction (the State Pension is specifically designated as non-PAYE income and is paid at the full weekly rate directly to the recipient’s UK or overseas bank account); (3) taxable in Spain under the UK-Spain DTC 2013 (gov.uk/government/publications/spain-tax-treaties). The DTC 2013 Article 17 provides that pensions paid in consideration of past employment are taxable only in the state of residence -- for State Pension recipients resident in Spain, the State Pension is therefore taxable only in Spain at Spanish IRPF rates. The State Pension is reported on the Spanish IRPF annual return (Renta, filed by 30 June following the tax year). For 2025 IRPF: the State Pension is treated as pension income (rendimientos del trabajo), eligible for the standard pension income reduction (reducción por rendimientos del trabajo, scaled by income level, providing partial income from EUR 0-19,700). The Agencia Tributaria at agenciatributaria.gob.es publishes the current IRPF reduction schedules. Amounts are converted to EUR at the ECB reference rate for the date of payment or the annual average rate.

Private pension drawdown: the NT code and IRPF

Private pension drawdown from a UK SIPP or defined contribution workplace pension by a Spanish resident is governed by UK-Spain DTC 2013 Article 17: "pensions and other similar remuneration paid in consideration of past employment" are taxable only in the residence state (Spain). This means: HMRC should not withhold UK income tax (PAYE) on SIPP drawdown paid to a Spanish resident; instead, the drawdown is taxed in Spain at the relevant IRPF band. The mechanism: the Spanish resident applies to HMRC’s CS&I2 team for an NT (No Tax) code specifying the UK-Spain DTC 2013 as the applicable treaty. The pension provider then pays the drawdown gross. The drawdown amount is declared on the Spanish IRPF return as pension income (rendimientos del trabajo). Planning consideration: pension drawdown rates in Spain (19-45% IRPF) are often lower than equivalent UK income tax rates for higher-income UK residents (40-45%); the DTC Article 17 exemption combined with lower Spanish marginal rates can be a material financial advantage for retiring in Spain on a UK pension. UK dividend rates from 6 April 2026 (Autumn Budget 2025 OOTLAR): 10.75%/35.75%/39.35% -- for UK Ltd company directors extracting pension via dividends, these are the applicable rates for UK-resident recipients. Non-resident dividend withholding at the DTC rate (typically 15% under Article 10) applies for Spanish residents extracting UK Ltd dividends. HMRC’s Pensions Tax Manual (gov.uk/hmrc-internal-manuals/pensions-tax-manual) covers the NT code application.

UK government service pensions: Article 19 and UK PAYE

UK government service pensions -- NHS, civil service, armed forces, teachers, police, and local government -- are not covered by the Article 17 private pension carve-out. Instead, Article 19 of the UK-Spain DTC 2013 (gov.uk/government/publications/spain-tax-treaties) provides that pensions paid by the UK government in respect of government service are taxable only in the UK, regardless of the recipient’s Spanish residency. The practical consequence: a UK national retiring in Spain with both an NHS pension (Article 19 -- UK-taxable only) and a SIPP (Article 17 -- Spain-taxable only) must manage two separate pension tax regimes simultaneously. The NHS pension continues to be paid via the NHS Business Services Authority with UK PAYE withholding; no NT code is available for Article 19 pensions. UK income tax at the applicable personal allowance (£12,570 for 2025/26) and income tax rates (20%/40%/45%) applies to the NHS pension amount. The NHS pension must also be declared on the Spanish IRPF return as foreign pension income (rendimientos del trabajo obtenidos en el extranjero); Spanish double taxation relief (deducción por doble imposición internacional) prevents double taxation on the UK tax already paid. This is the most complex common scenario for retiring in Spain on a UK pension that includes a government service pension. HMRC’s International Manual covers Article 19 in detail.

Modelo 720: Spanish overseas asset declaration

Modelo 720 is Spain’s annual overseas asset declaration, required for all Spanish tax residents (individuals who spend 183+ days in Spain in a calendar year) who hold assets outside Spain above EUR 50,000 in any of three categories: (1) bank accounts held outside Spain; (2) securities, shares, investment funds, insurance, or pension rights held outside Spain; and (3) real estate outside Spain. For a UK retiree resident in Spain who holds a UK SIPP, UK bank accounts, and UK property: all three categories may require Modelo 720 reporting if any category exceeds EUR 50,000 in total value. The filing deadline is 31 March for the prior calendar year; for example, the Modelo 720 for 2025 assets is due by 31 March 2026. Following a 2022 European Court of Justice (ECJ) ruling, the disproportionate penalties previously applicable to Modelo 720 non-compliance were reformed; however, penalties for late filing or omissions still apply. The Agencia Tributaria at agenciatributaria.gob.es administers Modelo 720 and publishes completion guidance (Ayuda Modelo 720). A qualified Spanish gestor or tax adviser handles Modelo 720 filings for most UK expat retirees in Spain.

Healthcare: S1 form for UK pensioners in Spain

UK nationals who receive a UK State Pension and retire permanently to Spain may access the Spanish SNS (Sistema Nacional de Salud) using the UK S1 form. The S1 form transfers the cost of the pensioner’s healthcare from Spain to the UK (NHSBSA, nhsbsa.nhs.uk). UK nationals who were resident in Spain before 31 December 2020 were entitled to S1 cover under the EU-UK Withdrawal Agreement; their S1 rights are protected by Article 23 of the Withdrawal Agreement. New UK arrivals to Spain after 31 December 2020 who are UK State Pension recipients may also access the S1 form under post-Brexit bilateral reciprocal healthcare arrangements -- the gov.uk/healthcare-abroad page confirms the current S1 eligibility for new UK arrivals in Spain. The S1 form is obtained from NHSBSA (nhsbsa.nhs.uk) and registered with the Spanish INSS (seg-social.es) at the local Social Security office; dependant family members may also be covered. For retirees not eligible for S1 cover, private health insurance is required (a condition of the Non-Lucrative Visa); premium costs run approximately EUR 60-150 per month (approximately £50-126) per person from Spanish insurers (Sanitas, AXA Spain, Mapfre Salud). The Ministerio de Sanidad at mscbs.gob.es oversees Spain’s SNS health access framework.

Pensions in IHT from 2027 and Spanish inheritance tax

Two IHT-related issues are relevant for UK nationals retiring in Spain on a UK pension. First, the UK IHT impact: from 6 April 2027 (Autumn Budget 2024), undrawn UK pension funds (SIPP balances, drawdown remainders, death benefits) will be included in the UK IHT estate for qualifying individuals. For a UK expat in Spain who is within the Finance Act 2025 IHT tail period (UK-resident in at least 10 of the prior 20 years, still within 10 years of departure), their undrawn SIPP balance will be subject to UK IHT at 40% above £325,000 nil-rate band from 2027. Pension drawdown timing before April 2027 is therefore a planning priority -- drawing down before April 2027 incurs IRPF in Spain (potentially at lower rates under the treaty), while leaving funds undrawn risks UK IHT at 40% post-2027. The HMRC Pensions Tax Manual (gov.uk/hmrc-internal-manuals/pensions-tax-manual) covers pension IHT from April 2027. Second, Spanish succession tax (Impuesto sobre Sucesiones y Donaciones): tax on inheritances in Spain is devolved to the autonomous communities; some communities (Madrid, Murcia) provide up to 99% relief on inheritance from direct relatives, while others (Asturias, Cantabria) have more limited relief. A UK retiree whose Spanish estate (property, bank accounts) passes to children resident in the same community should model the Spanish IHT position alongside the UK IHT exposure on worldwide assets. The Agencia Tributaria at agenciatributaria.gob.es publishes the applicable national ISD rates (which apply where the community rules are silent).

This article is for general information only and does not constitute tax, legal, financial or immigration advice. Rules and rates change; verify with the primary sources cited or consult a qualified adviser before acting.

FAQ

Is the UK State Pension taxed in Spain or the UK for Spanish residents?

The UK State Pension is taxable in Spain only for Spanish tax residents under the UK-Spain DTC 2013 Article 17 (gov.uk/government/publications/spain-tax-treaties). The pension is paid gross by DWP without UK PAYE deduction; it must be reported on the Spanish IRPF annual return (Renta, due 30 June) as pension income at the applicable IRPF band (19-47%). The State Pension is uprated annually by the triple-lock for Spanish residents. The gov.uk/state-pension-if-you-retire-abroad page confirms Spain’s uprated status.

Do I need an NT code for my UK SIPP if I live in Spain?

Yes. A UK NT (No Tax) code from HMRC’s CS&I2 team allows your SIPP provider to pay drawdown gross without UK PAYE withholding, as Article 17 of the UK-Spain DTC 2013 assigns exclusive taxing rights on private pension income to Spain. Apply to HMRC’s CS&I2 team using the DT-Individual form specifying the UK-Spain DTC 2013 as the applicable treaty. Without an NT code, the SIPP provider withholds basic-rate UK PAYE (20%) which must be reclaimed via UK Self Assessment. HMRC’s Pensions Tax Manual covers the NT code process.

What is Modelo 720 and do UK retirees in Spain need to file it?

Modelo 720 is Spain’s annual overseas asset declaration (Agencia Tributaria, agenciatributaria.gob.es) required for Spanish tax residents with overseas assets above EUR 50,000 in any of three categories: bank accounts, securities/pensions, or real estate. A UK retiree in Spain holding a UK SIPP, UK bank accounts, or UK property must file Modelo 720 annually by 31 March if any category exceeds the threshold. Following the 2022 ECJ ruling, penalties were reformed but late-filing penalties still apply. A Spanish gestor or tax adviser typically handles Modelo 720 filing.

Are UK government pensions (NHS, civil service) taxed in Spain?

No -- UK government service pensions are taxed only in the UK, regardless of Spanish residency, under Article 19 of the UK-Spain DTC 2013. HMRC withholds UK PAYE on NHS, civil service, armed forces, and teacher pensions paid to Spanish residents; no NT code is available for Article 19 pensions. The UK-taxed government pension must also be declared on the Spanish IRPF return; Spanish double taxation relief (deducción por doble imposición internacional) prevents double taxation on the UK tax already paid.

Will my undrawn UK pension be subject to UK IHT from 2027?

From 6 April 2027 (Autumn Budget 2024), undrawn UK pension funds (SIPP balances, drawdown remainders) will be included in the UK IHT estate for qualifying individuals. UK expats in Spain within the Finance Act 2025 IHT tail period (10-year UK residency within the prior 20 years) face UK IHT at 40% above the £325,000 nil-rate band on undrawn pensions from April 2027. Pension drawdown before April 2027 may be advantageous -- incurring Spanish IRPF at potentially lower marginal rates rather than UK IHT at 40%. HMRC’s Pensions Tax Manual covers the pension IHT framework.

How does Spanish inheritance tax apply to UK retirees in Spain?

Spain’s Impuesto sobre Sucesiones y Donaciones (ISD) is devolved to autonomous communities. Madrid and Murcia provide up to 99% relief on inheritance by direct relatives; other communities (Asturias, Cantabria) have less generous regimes. A UK retiree whose Spanish estate (property, bank accounts) passes to children resident in the same community may pay minimal or no Spanish IHT; those in less generous communities face higher charges. The Agencia Tributaria (agenciatributaria.gob.es) publishes national ISD rates applicable where community rules are silent.

Sources

1. GOV.UK -- UK-Spain DTC 2013 (Article 17 private pension carve-out; Article 19 government service pensions) (verified 26 April 2026)
2. Agencia Tributaria -- Spanish IRPF rates 2025 and Modelo 720 requirements (verified 26 April 2026)
3. HMRC -- Pensions Tax Manual (NT code procedure, pension IHT from April 2027) (verified 26 April 2026)
4. NHSBSA -- S1 form for UK State Pension recipients in Spain (verified 26 April 2026)
5. GOV.UK -- UK State Pension uprating for Spanish residents (triple-lock) (verified 26 April 2026)