A large number of people living in Ireland hold a UK pension, whether from years working in Britain, a cross-border career, or a return home after time abroad. The tax treatment is more favourable in some ways than expats elsewhere enjoy, thanks to a long-standing treaty, but it also contains a trap on lump sums that catches people out, and an inheritance picture that is about to become more complicated. This guide explains how UK pension income is taxed once you live in Ireland, how to stop UK tax being deducted, why Ireland may tax part of your tax-free lump sum, and how the coming change to UK inheritance tax interacts with Irish inheritance tax on death. It is a starting point for understanding your position, not personal tax advice.
If you are resident in Ireland, you are liable to Irish income tax on your worldwide income, which includes your UK pension. The UK-Ireland Double Taxation Convention, in force since 1976, resolves who actually taxes it: pensions and similar payments made for past employment to a resident of one country are taxable only in that country of residence. In plain terms, once you are genuinely Irish resident, your UK private or workplace pension is taxable in Ireland, not in the UK. It should be paid to you gross, and you declare and pay Irish tax on the full amount. Irish tax on pension income works through the same structure as other Irish income: income tax at the standard and higher rates, and the Universal Social Charge on occupational pensions. You do not pay PRSI on an occupational or social welfare pension. The UK State Pension is also taxable in Ireland under the treaty, as it is not a government service pension. The important exception is a UK government service pension, such as civil service, military or police, which the treaty generally keeps taxable in the UK regardless of your residence.
The most common and expensive mistake is assuming your UK pension will simply be paid without UK tax once you move to Ireland. It will not. Left alone, your UK provider deducts UK tax through PAYE, and you can end up taxed in both countries until you fix it. The mechanism to stop this is the IRL-Individual form, which is the treaty relief claim for Irish residents. The process matters: you complete the form, but you send it first to Irish Revenue, not to HMRC, because Irish Revenue must certify that you are tax resident in Ireland. Irish Revenue then sends it on to HMRC, who arrange for your pension to be paid without UK tax deducted. If you have already been overpaying UK tax, you can generally reclaim it for previous years using Form DT-Individual for treaty relief, or Form P55 for a pension overpayment. Because you should have been declaring the gross UK pension to Irish Revenue all along, it is also worth checking your Irish returns are correct, not just stopping the UK deduction going forward.
This is the single most surprising point for people moving to Ireland with a UK pension, and it can be very expensive. Under UK rules you can generally take up to 25% of your pension as a tax-free lump sum. That is tax-free in the UK. But Ireland does not simply mirror the UK's treatment. Since 1 January 2023, Ireland applies a lifetime tax-free limit of 200,000 euros to retirement lump sums, and this limit takes into account both Irish and foreign pension lump sums. Where a lump sum from a foreign pension, including a UK pension, is paid to someone who is resident in Ireland at the time, any amount above the lifetime tax-free limit is taxed: broadly, the portion between 200,000 and 500,000 euros at the standard rate of income tax (20%), and the portion above 500,000 euros at the higher rate (40%), with the Universal Social Charge also applying. So a large UK tax-free lump sum, taken while you are Irish resident, can attract significant Irish tax. As with other countries, the timing of when you take the lump sum, and your residence position at that moment, can make a very large difference, and it is a decision to plan carefully rather than stumble into.
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For many years, UK pensions have been an efficient way to pass wealth on, because unused pension funds generally sat outside the estate for UK inheritance tax. That is changing. From 6 April 2027, most unused UK pension funds are brought within the scope of UK inheritance tax on death. This matters even if you live in Ireland, because UK inheritance tax can still reach UK-based assets and, depending on your overall position, the pension itself. For someone who has built up a substantial UK pension and moved to Ireland expecting it to pass to their family efficiently, this is a material change to the plan, and one that is worth understanding well before it takes effect rather than after. It also does not operate in isolation from Ireland's own inheritance tax, which is where the picture becomes genuinely cross-border.
Ireland taxes inheritances differently from the UK, and the difference matters. UK inheritance tax is charged on the estate of the person who died. Irish Capital Acquisitions Tax, or CAT, is charged instead on the person who receives the inheritance, the beneficiary, at a rate of 33% above their available tax-free threshold. For children inheriting from a parent that threshold is currently 335,000 euros, with lower thresholds for other relationships. So on the same UK pension passing to an Irish-resident child, you can in principle have UK inheritance tax charged on the estate and Irish CAT charged on the beneficiary. The saving grace is that a specific UK-Ireland treaty covering inheritance tax and CAT exists, set out in a 1978 convention, and it provides relief so that the same asset is not fully taxed twice on the same event. In broad terms, credit is given for tax paid, based on where the asset is situated, so that the total is not simply the sum of both taxes. This relief is valuable but it is not automatic and it is not simple: it must be claimed, with a certificate of the UK inheritance tax paid, and the interaction depends on the specific assets, who inherits, and where they live. For anyone with a meaningful UK pension and Irish-resident beneficiaries, this is exactly the kind of situation where getting the analysis right in advance is worth far more than discovering the position after death.
The Irish position on UK pensions has a few moving parts that pull in different directions. On income, the treaty is helpful and, done properly, your pension is taxed once, in Ireland. On the lump sum, Ireland is less generous than the UK, and a large tax-free UK lump sum may not be tax-free for you. On inheritance, the coming UK change and Ireland's beneficiary-based CAT create a two-country picture that a treaty softens but does not remove. The common thread is that the decisions worth getting right, when and where to take your lump sum, how your pension income is structured and declared, and how your estate is arranged for beneficiaries who may be in Ireland, the UK, or elsewhere, are best made deliberately and in advance, with both tax systems considered together. None of this is a reason to avoid holding a UK pension in Ireland. It is a reason to plan it properly.
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Assuming your UK pension is automatically paid tax-free once you live in Ireland is the most common error. Without the IRL-Individual claim, your provider keeps deducting UK tax, and you can be taxed in both countries until it is corrected. The form, certified by Irish Revenue, is what fixes it.
It is tax-free in the UK. In Ireland, only the first 200,000 euros of lifetime pension lump sums is tax-free, and the excess is taxed at 20% up to 500,000 euros and 40% above that. Taking a large UK lump sum while Irish resident, without realising this, can produce an unexpected and substantial Irish tax bill.
People modelling their Irish tax on a UK pension often stop at income tax and forget the Universal Social Charge, which applies to occupational pension income and, above the relevant threshold, to large lump sums. Leaving it out understates the true tax cost.
Anyone who moved to Ireland assuming their UK pension would pass to their family free of UK inheritance tax needs to revisit that assumption before April 2027. The change is significant and the planning window is finite.
They are neither. They are two different taxes, charged on different people, softened by a treaty that gives relief but requires a claim. Assuming they simply add up overstates the bill; assuming only one applies understates it. The interaction needs to be worked out for your specific circumstances.
Michael spent over thirty years working in the UK and built a UK pension of around £900,000 before returning to live in Ireland. He planned to take his 25% tax-free lump sum, roughly £225,000, shortly after settling back home, and assumed it would be tax-free as it would have been in the UK. He also assumed his pension would pass to his two children, both living in Ireland, without a UK tax charge.
A review before he acted flagged two things he had not appreciated. First, his lump sum would be taken while he was Irish resident, so Ireland's lifetime limit of 200,000 euros applied and a large part of his lump sum would face Irish tax, at 20% and then 40% on the higher portion. The timing and structure of taking it were reconsidered in light of that. Second, the April 2027 change meant his unused pension would no longer sit cleanly outside UK inheritance tax, and with Irish-resident children, Irish CAT would also come into play on what they received. Rather than assume the worst or ignore it, his position was mapped across both tax systems, including how the UK-Ireland inheritance treaty relief would apply so the same fund was not taxed twice over in full.
Michael made his decisions on an accurate, two-country picture rather than a UK-only assumption. The lump sum was approached with the Irish limit in mind, and his estate was arranged with both UK inheritance tax and Irish CAT, and the relief between them, properly understood ahead of the 2027 change.
Illustrative example, not a real client.
Clarity Global Wealth helps people living in Ireland with UK pensions understand and plan their position across both tax systems. That starts with the basics done properly: making sure your UK pension is paid without unnecessary UK tax through the correct treaty claim, and that it is declared correctly in Ireland. It extends to the decisions that carry the most tax, in particular the timing and structure of any lump sum given Ireland's lifetime limit, and the arrangement of your estate given the April 2027 UK inheritance tax change and the way Irish Capital Acquisitions Tax falls on your beneficiaries. Because these questions sit in two jurisdictions at once, we coordinate with regulated tax and financial advisers in both Ireland and the UK, so the plan you act on is appropriate and compliant on both sides. The UK-Ireland relationship is, in tax terms, one of the more favourable, but it has specific traps, and the value is in planning around them before they crystallise rather than after.
This guide is provided for general information only and reflects our understanding of the rules as at the date of publication. It is not personal financial, investment, pension or tax advice, and should not be relied upon as such. Rules and tax treatment can change and depend on your individual circumstances and country of residence. You should always seek regulated advice specific to your situation before taking action.
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