How US residents with UK pensions, the UK State Pension, and other UK income can stop UK tax being deducted at source, and pay the right tax only once, in the United States.
If you are a US resident with a UK pension or other UK income, there is a real risk you are being taxed twice: once by HMRC at source in the United Kingdom, and again by the IRS in the United States. This does not happen because the law requires it. It happens because the default system in the United Kingdom deducts tax before you ever receive your money, regardless of your US residency status or what the US-UK Double Tax Agreement says.
The NT tax code is the HMRC designation that puts a stop to this. NT stands for No Tax. It instructs your UK pension provider, or other UK income payer, to pay you gross, with zero income tax deducted at source. Combined with the protections of the US-UK Double Tax Agreement, it is the primary mechanism through which US residents avoid double taxation on UK income.
This guide explains what the NT tax code is, who qualifies, and exactly how to apply for it as a US resident.
What Is the NT Tax Code, and Why Does It Exist?
Under the Pay As You Earn (PAYE) system, UK income payers are required to deduct income tax before making any payment. Without any action on your part, your pension provider will apply either an emergency tax code or a standard tax code. Both can result in substantial and unnecessary UK tax deductions for US residents.
Once an NT code is in place, your income is paid to you in full with zero UK tax withheld at source. You are then responsible for declaring that income on your US federal tax return and paying any applicable tax in accordance with IRS rules and the US-UK Double Tax Agreement.
In plain terms
The NT tax code does not mean you pay no tax anywhere. It means the United Kingdom does not deduct tax at source. Instead of the UK taking tax first and leaving you to reclaim it, the income reaches you gross and you pay the appropriate tax once, in the United States, under the terms of the Double Tax Agreement. Under that treaty, most private pension income received by US residents is taxable only in the US, not in the UK. The NT code gives effect to this treaty position at source.
Who Can Apply for the NT Tax Code as a US Resident?
US residents, whether US citizens, Green Card holders, or other US tax residents, with UK income sources are among the most common applicants for an NT tax code. The US-UK Double Tax Agreement provides well-established treaty positions on most categories of UK-source income, making the application process clearly defined for this group.
You are likely to qualify if:
- You are resident in the United States for US federal tax purposes
- You are receiving, or are about to start receiving, income from a UK pension scheme, the UK State Pension, or another qualifying UK income source
- You are not resident in the United Kingdom for tax purposes, for example, you have left permanently and do not spend significant time there
- You can obtain IRS certification of your US tax residency, which you arrange by filing IRS Form 8802, to support the application
You may not qualify if:
- You remain a UK tax resident, for example, if you regularly spend 183 or more days per year in the United Kingdom
- Your income falls into a category where the Double Tax Agreement reserves taxing rights to the United Kingdom (most notably, government service pensions)
- You cannot obtain the required documentation from the IRS
Note on UK tax residency
The United Kingdom determines tax residency through the Statutory Residence Test (SRT), not by nationality. Most US residents who have left the UK permanently will be non-UK residents under the SRT. However, if you spend 183 or more days in the UK in any tax year, you will almost certainly be a UK tax resident regardless of your US connections. If your position is not straightforward, take specialist advice before applying.
The Default PAYE Position Without an NT Code
When you first take income from a pension held in the United Kingdom, your pension provider does not know your tax position. HMRC requires them to deduct tax by default. The provider will typically apply one of the following:
| Code | What it means | Practical effect |
| Emergency tax code (Month 1 basis) | Tax calculated as though this payment is your only income for the month, without reference to any annual allowance | Significant over-deduction, often 40% or more |
| Basic rate (BR) | Tax deducted at 20% flat with no personal allowance | Over-deduction if allowances or treaty relief applies |
| Standard code (e.g. 1257L) | Personal allowance applied, standard rates used | May still result in incorrect deductions for non-residents |
All of these can result in far more tax being deducted than you actually owe, or any tax being deducted at all, when the Double Tax Agreement exempts your pension from UK tax. Reclaiming over-deducted tax through HMRC is possible, but slow and administratively burdensome. Obtaining an NT code before you start taking withdrawals avoids the problem entirely.
The US-UK Double Tax Agreement: The Legal Foundation
The US-UK Double Tax Agreement (DTA) is the bilateral treaty that allocates taxing rights between the two countries across different categories of income, ensuring that the same income is not fully taxed in both jurisdictions. It is the legal foundation on which most NT code applications by US residents are based.
For US residents with pensions held in the United Kingdom, the DTA is generally favourable. Under Article 17, pensions paid in consideration of past employment are taxable only in the country of residence. This means a US resident should pay US tax on their UK pension, with the United Kingdom having no taxing rights and therefore no basis to deduct tax at source.
However, there are important nuances:
- Article 18 covers government service pensions, which are generally taxable only in the United Kingdom regardless of where you live
- Article 19 covers social security-type payments, the treatment of the UK State Pension under this article has specific implications for US residents
- The DTA contains provisions on tie-breakers and anti-abuse rules that can affect the analysis in complex cases
Critical: The DTA does not self-execute at source
The Double Tax Agreement alone does not prevent double taxation in practice. The treaty provides the legal basis for relief, but it does not automatically stop UK tax being deducted at source. You must actively apply for the NT code and satisfy HMRC’s process. Without the NT code, UK tax will be withheld regardless of the DTA position, and you will face the burden of reclaiming it, often many months after the deduction was made.
UK Income Sources: What the NT Tax Code Covers
The NT tax code is not limited to private pensions held in the United Kingdom. US residents may have a range of UK income sources, and the availability of an NT code varies depending on the type of income.
UK Private and Workplace Pensions
This is the most common category. Defined contribution pensions (including SIPPs), defined benefit occupational schemes, and workplace pensions can all potentially be paid gross under an NT code. The US-UK DTA generally reserves the right to tax these pensions to the United States for US residents.
The UK State Pension
The UK State Pension is paid by the Department for Work and Pensions (DWP) rather than through a pension provider. It is treated differently from private pension income for NT code purposes. The State Pension is paid gross by the DWP, but this does not mean it is free from UK tax liability. HMRC may still raise a tax liability against State Pension income if no other mechanism is in place.
The DTA treatment of the State Pension requires careful consideration. Many US residents do not need a formal NT code for State Pension income in the traditional PAYE sense, but they may need to address it through a combination of their US return, a Self Assessment return, and potentially the Form US-Individual 2002 process.
FBAR and FATCA obligations
The UK State Pension is not a financial account and does not itself create FBAR or Form 8938 filing requirements. However, if you have a SIPP, bank accounts, or other financial accounts in the United Kingdom with values exceeding the relevant thresholds, those will require separate reporting. The NT tax code process is separate from, and does not substitute for, your US information reporting obligations.
UK Rental Income
If you own property in the United Kingdom and receive rental income, that income has a UK source and is generally subject to UK tax regardless of where you live. The NT tax code mechanism does not apply to rental income. However, US residents receiving rental income from the United Kingdom have important options:
- The Non-Resident Landlord Scheme (NRLS) allows non-resident landlords to receive rental income gross if HMRC approves this. You apply using HMRC Form NRL1.
- Rental income from the United Kingdom must be declared on a Self Assessment tax return if it exceeds HMRC’s threshold.
- On your US return, this rental income is reportable as foreign source income. A foreign tax credit may be available for any tax paid, subject to the DTA and IRS rules.
Government Service Pensions
If you are a former civil servant, NHS employee, teacher, police officer, or armed forces member, your pension from the United Kingdom may be a government service pension. Under the US-UK DTA, government service pensions are generally taxable only in the United Kingdom. An NT code is not available for this type of pension income.
| Income Source | NT Code Available? | Key Process |
| UK private / workplace pension | Yes (typically) | Form US-Individual 2002 (certified via IRS Form 8802) |
| UK State Pension | Indirect / via DTA claim | Form US-Individual 2002 (Part C.1) or Self Assessment |
| UK rental income | No (separate NRL1 scheme) | Non-Resident Landlord Scheme (NRL1) |
| UK government service pension | No (UK taxing rights retained) | Self Assessment; specialist advice |
How to Apply for the NT Tax Code: Step-by-Step for US Residents
The following process is specifically for a US resident applying for an NT code on a private pension held in the United Kingdom. For US residents, the key additional element compared to other non-US applicants is that the form must be certified by the IRS, which confirms your US tax residency to HMRC, before HMRC will act on it. Understanding each step in advance, and following the correct order, helps avoid costly delays.
Step 1 Confirm Your Non-Resident Status
Before applying, confirm that you are legally non-resident in the United Kingdom under the Statutory Residence Test for the relevant tax year. Key questions to consider:
- Have you left the United Kingdom with no intention to return as a tax resident?
- How many days have you spent in the United Kingdom in the current and prior tax years?
- Do you have ties such as family, a home, or ongoing employment in the United Kingdom that count under the SRT?
If you are uncertain about your status, resolve this before proceeding. Applying while still tax-resident in the United Kingdom will not succeed and will delay the process.
Step 2 Apply to the IRS for US Tax Residency Certification (Form 8802)
HMRC requires evidence that you are formally recognised as a tax resident in another country. For US residents, this means obtaining IRS Form 6166, the Certification of US Tax Residency. To request Form 6166, you must submit IRS Form 8802 to the IRS:
- Form 8802 is available on the IRS website: irs.gov/forms-pubs/about-form-8802
- There is a user fee payable to the IRS (currently USD 85; verify the current fee on the IRS website before submitting)
- IRS processing typically takes 4 to 6 weeks, and can take longer during busy periods
- Form 6166 is issued for a specific tax year, request it for the year in which your UK income begins, or the most recently completed tax year
Allow time for Form 6166
IRS processing time for Form 8802 and the subsequent issuance of Form 6166 can be 4 to 6 weeks or longer. Factor this into your overall timeline alongside HMRC’s own processing time. Cameron James advises US-based clients to begin the Form 8802 process as early as possible, well in advance of when you intend to start taking income from your UK pension.
Step 3 Make a Taxable Flexible Access Withdrawal to Trigger the NT Code
An NT tax code can only be applied by HMRC to pension income that has been accessed flexibly and on a taxable basis. HMRC’s system recognises pension income through the PAYE records generated when a pension provider processes a taxable payment. Until such a payment has been made, there is no PAYE record for HMRC to attach the NT code to.
Important: Tax-free cash alone does not trigger the NT code
If the only withdrawals you have made from your pension are tax-free cash, whether as a Pension Commencement Lump Sum (PCLS) or as Uncrystallised Funds Pension Lump Sum (UFPLS) tax-free portions, you will not have accessed the pension flexibly on a taxable basis. The NT code cannot be applied until you make a taxable flexible access withdrawal.
The Cameron James Approach: The GBP 1,047.50 Regular Withdrawal
Cameron James guides clients through making a small regular withdrawal before using the NT code for larger amounts. The figure we typically use is GBP 1,047.50. This amount represents one twelfth of the current personal allowance (GBP 12,570 divided by 12). Because GBP 1,047.50 is exactly equal to one twelfth of the personal allowance, this withdrawal falls within the tax-free monthly threshold under the Month 1 emergency code. No UK tax is deducted, but the payments are processed as a taxable flexible access withdrawal, which creates the PAYE record needed for the NT code to be applied.
It used to be the case that you could take a small one off lump sum to trigger the tax code, and whilst this will still work for a UK tax resident who just needs to update to a new taxable code, it no longer seems to work with non-UK residents looking for a No Tax Code. We have been informed by multiple parties that this process no longer works and HMRC will not provide a No Tax (NT) Code to a UK pension unless there is a regular withdrawal attached. A one off ad hoc taxable payment will be updated to a standard UK resident tax code.
Why this matters for US residents
As a US person, you are required to report all worldwide income on your federal return, including pension withdrawals from the United Kingdom. A small regular withdrawal of GBP 1,047.50 creates no UK tax exposure and represents a modest amount of reportable income on your US return. Once the NT code is confirmed and in place, subsequent withdrawals can be made gross. Cameron James coordinates the timing and structure of withdrawals to minimise both UK and US tax friction.
Step 4 Complete the Relevant HMRC Form
The form you need depends on your specific circumstances:
| Your Situation | Form Required |
| You have left the UK and ceased employment or self-employment there | Form P85 (Leaving the UK: getting your tax right), submitted to HMRC |
| You are claiming relief under the US-UK DTA on pension income (most common route) | Form US-Individual 2002 (the US-specific double taxation treaty relief form) |
| You are a former civil servant or public sector employee receiving a government service pension | Specialist advice recommended: government pensions are typically taxable only in the UK regardless of US residency |
Form US-Individual 2002 is available at:
Form US-Individual 2002 requires: your personal details (name, address, US Social Security Number or ITIN); details of the UK income source (pension provider name, scheme reference, expected income level); confirmation of your US address and Taxpayer Identification Number; and your consent for the IRS to certify your US tax residency to HMRC.
Step 5 Submit Form US-Individual 2002 to the IRS for Certification
This is the step most commonly missed
For US residents the completed Form US-Individual 2002 does not go to HMRC first. It goes to the IRS, together with IRS Form 8802 and the applicable user fee. A common and costly mistake is sending the form straight to HMRC, which cannot act on an application the IRS has not yet certified. Send it to the wrong place and it will be rejected or returned, adding weeks or months to the timeline. The IRS certifies your US residency and forwards the form to HMRC on your behalf.
In making the application you consent to the IRS certifying your US residency directly to HMRC, so there is no need to post a separate certificate to HMRC yourself. For clarity on the IRS forms involved:
- IRS Form 8802 is the application you submit to the IRS to request Form 6166
Step 6 What to Include in the Package Sent to the IRS
The completed forms and supporting documentation are sent to the IRS, which certifies your residency and forwards them to HMRC. The package should include:
- Completed and signed Form US-Individual 2002
- IRS Form 8802 and the applicable user fee
- A photocopy of your latest P60 from the UK pension payer, if you are also reclaiming tax already deducted
- Details of the UK income source (pension provider, scheme reference, expected income)
- Copy of identification if requested
Where to send it
Department of the Treasury | Internal Revenue Service | Philadelphia, PA 19255-0625 | USA. The IRS certifies your residency and forwards the form to HMRC. BX9 1AS (HM Revenue and Customs, Pay As You Earn and Self Assessment, United Kingdom) is HMRC’s correspondence address for queries and for notifying changes once relief is granted, not where the application is sent. Always verify current addresses on GOV.UK and IRS.gov before posting.
Step 7 Await HMRC Processing and NT Code Issuance
Once HMRC receives a complete and correctly certified application, they will review it and, if satisfied, issue an NT tax code directly to your pension provider. They will also send you a PAYE Coding Notice confirming the code. Always confirm with your provider that the code is showing on their system before making any withdrawal.
Processing timescales
Standard HMRC processing times for NT code applications are typically 6 to 8 weeks from receipt of a complete application. In practice, during periods of high HMRC workload, this can extend to 3 to 6 months. Combined with the 4 to 6 weeks of IRS processing and certification time, Cameron James advises US-based clients to begin the full process at least 6 months before they intend to make their first pension withdrawal.
Step 8 Declare the Income on Your US Federal Tax Return
Receiving your pension or other UK income gross does not mean it is untaxed. As a US person, you are required to report all worldwide income on your US federal tax return (Form 1040), including pension income, the UK State Pension, and any rental income from the United Kingdom.
The US-UK DTA will inform how the income is characterised and whether any foreign tax credits are available. You should work with a tax adviser qualified in US cross-border taxation to ensure your US filing position correctly reflects the treaty treatment.
US-Specific Documentation Summary
| Document | Obtained From | Purpose |
| IRS Form 8802 | IRS (irs.gov) | Application to request Form 6166; USD 85 fee; 4 to 6 weeks processing |
| IRS Form 6166 | IRS (issued after Form 8802) | The IRS certification of your US residency; the IRS certifies and forwards it to HMRC with your Form US-Individual 2002 |
| HMRC Form US-Individual 2002 | GOV.UK | The US-specific DTA relief application form for UK-source pension income; sent to the IRS for certification |
| HMRC Form P85 | GOV.UK | Notifies HMRC you have left the UK and establishes your non-resident status |
| HMRC Form NRL1 | GOV.UK | Application to receive rental income from UK property gross under the Non-Resident Landlord Scheme |
Already Being Taxed Twice? How to Reclaim Overpaid Tax
If income tax has already been deducted from your UK income before you obtained your NT code, you have effectively been taxed twice. In most cases the deduction is recoverable, but the process takes time and requires action on your part.
Through Self Assessment
If you are registered for Self Assessment in the United Kingdom, you can reclaim overpaid tax through your annual UK tax return. This is the standard route if you have multiple UK income sources or have previously been in the Self Assessment system.
Through Form R43
If you are not in Self Assessment, Form R43 (Claim to personal allowances and tax repayment by an individual not resident in the UK) can be used to claim a refund. Note that non-residents do not automatically receive the personal allowance, although US residents may be entitled to it under specific DTA provisions.
Through Form US-Individual 2002
Form US-Individual 2002 can include a claim for repayment of tax already withheld. Submit it with supporting evidence of tax deducted (P60, P45, or pension payslips).
Time limits for reclaiming tax
HMRC’s standard time limit for making a tax repayment claim is 4 years from the end of the relevant tax year. Claims outside this window are generally not accepted. If you believe you have overpaid tax on pension or other income in prior years, act promptly.
Key Risks and Common Pitfalls for US Residents
Changing SIPP Provider After Obtaining the NT Code
An NT tax code is issued to a specific pension provider for a specific income source. If you transfer your pension to a different provider, the NT code does not automatically transfer with it. When you have transferred from one SIPP to another, you can ask HMRC to reassign the NT code to the new provider, but this requires you to contact HMRC directly by phone. Until the code is confirmed as showing at the new provider, that provider may revert to deducting tax at source, typically on an emergency basis, if a withdrawal is made in the interim.
IRS Form 6166 Timing
Form 6166 is issued for a specific tax year. If you apply late in the year and HMRC takes several months to process your application, your Form 6166 may relate to a prior tax year by the time HMRC processes it. Factor this in and, where necessary, consider requesting Form 6166 for the following tax year in advance.
Assuming the State Pension Is Automatically Covered
The UK State Pension is paid gross by the DWP, but it is not automatically exempt from UK tax as a result of the NT code process. Review your State Pension position separately from your private pension planning.
Conflating NT Code Relief with FBAR and FATCA Compliance
The NT code process relates to income tax treatment. It has no bearing on your US information reporting obligations. If you have a SIPP, bank accounts, or other foreign financial accounts and assets above the relevant thresholds, you will separately need to consider FBAR (FinCEN Form 114), Form 8938, and potentially other foreign reporting requirements.
Emergency Tax Applied at the Start of Withdrawals
Even with an NT code in place, the first payment from a pension scheme may still be processed on an emergency tax basis if the provider has not yet received or applied the code. Always confirm with your provider that the code is showing on their system before making any withdrawal.
Government Service Pensions: No NT Code Available
If any part of your pension income from the United Kingdom relates to government service (civil service, NHS, teaching, armed forces, police), the US-UK DTA generally gives the United Kingdom exclusive taxing rights over that income. An NT code is not available for this category.
How Cameron James Supports US-Based Clients
Cameron James is a cross-border financial advisory firm with specific expertise in US pension and investment planning for those with UK assets and income. Our advisers hold individual SEC authorisation via Beacon Global Advisor Network LLC (CRD 288833), enabling us to provide regulated investment advice to US residents with UK pension and investment interests.
For US residents with UK pensions and other UK income, we do not treat the NT code process as a hurdle to clear before financial planning begins. We run both in parallel, compressing the overall timeline from first consultation to first gross pension payment.
What Cameron James does
- We guide you through every stage of the NT code process, explaining what documentation you need and in what order
- We explain the IRS Form 8802 and Form 6166 process and help you understand the timelines involved
- We work alongside trusted US-qualified tax advisers who specialise in cross-border taxation and make introductions where needed
- We provide financial planning advice on your UK pension options, SIPP selection, drawdown structure, transfer analysis, in parallel with the NT code process
- We coordinate your first withdrawal correctly to activate the NT code without unnecessary UK tax exposure
- We help you understand the interaction between your UK income sources, pension, State Pension, rental income, and your overall tax position
What Cameron James does not do
Cameron James advisers are independent financial advisers, not US or UK tax advisers. We do not complete NT code applications on clients’ behalf, and we do not prepare US tax returns or provide US tax advice. For specific US tax guidance, including IRS compliance, FBAR, Form 8938, and the treatment of UK income on your US return, we recommend working with a qualified US tax professional who has cross-border expertise.
Frequently Asked Questions
Am I being taxed twice on my UK pension as a US resident?
Very possibly, yes, and it is more common than most people realise. If you are a US resident receiving income from a pension held in the United Kingdom and no NT code is in place, HMRC will deduct income tax at source before you receive your money. As a US person, you are also required to report that same income on your US federal return. Without relief, you are paying tax in both jurisdictions on the same income. The NT code is the mechanism that enforces the treaty protection in practice.
How do I avoid double taxation on my UK pension?
You avoid it by applying for an NT (No Tax) code and relying on the US-UK Double Tax Agreement. The DTA gives the United States primary taxing rights over most UK private pension income for US residents, and the NT code instructs your UK pension provider to stop deducting UK tax at source, so the income is taxed only once, in the United States. The treaty does not apply automatically at source, so without the NT code HMRC keeps deducting UK tax and you are left having to reclaim it. In practice the steps are to complete Form US-Individual 2002, then send it to the IRS together with Form 8802 and the user fee, and the IRS certifies your US residency and forwards the form to HMRC.
Does the NT code mean I pay no US tax on my UK pension?
No. The NT code means the United Kingdom does not deduct tax at source from your pension income. As a US person, you remain obligated to report the income on your federal return and pay any applicable US tax. The DTA determines how the income is characterised, generally as US-taxable income only for US residents with private pensions held in the UK.
Do I need an NT code for my UK State Pension?
The State Pension is paid gross by the DWP, so a PAYE-based NT code does not apply in the traditional sense. However, the State Pension still needs to be addressed within your overall tax planning. Depending on your total income position, you may have a Self Assessment obligation in the United Kingdom, and you will need to report the State Pension on your US return.
What is the difference between IRS Form 8802 and Form 6166?
Form 8802 is the application you submit to the IRS to request a US residency certification. Form 6166 is the document the IRS issues in response, certifying that you are a US tax resident. You submit Form 8802 to the IRS together with your Form US-Individual 2002, and the IRS certifies your residency to HMRC.
How long does the NT code process take for US residents?
Allow a minimum of 6 months from start to finish, and preferably longer. The IRS processing time for Form 8802 alone can be 4 to 6 weeks or more. HMRC processing of a complete application is typically 6 to 8 weeks but can extend to 3 to 6 months during busy periods. Cameron James advises clients to begin the process as early as possible.
Can I get a refund of tax already deducted from my UK pension?
Yes, in most cases. Overpaid tax can be reclaimed through Self Assessment, Form R43, or via Form US-Individual 2002, subject to the 4-year time limit from the end of the relevant UK tax year.
Does the NT code expire?
An NT code does not automatically expire, but it is tied to a specific income source and pension provider. If you change provider, move countries, or return to UK tax residence, the code will no longer be valid in its current form. It is your responsibility to notify HMRC of material changes in your circumstances.
Does the NT code apply to my UK State Pension?
The UK State Pension is treated differently from private or occupational pension income. It is paid gross by the DWP, but it may still create a tax liability that needs to be declared or offset. Review your State Pension position as part of a broader US tax planning exercise rather than assuming it is automatically covered by the NT code.
Related Guides on cameronjamesusa.com
To understand how the NT tax code fits within your broader US financial planning, the following guides are available on this website:
Arrange a Free Initial Consultation
If you are a US resident with UK pension income or other UK income sources, there is a good chance you are paying more tax than the law requires, or being taxed twice on the same income. The NT code, properly applied, stops UK tax being deducted at source and gives practical effect to the protections in the US-UK Double Tax Agreement. Getting the process right, in the right order, matters.
DISCLAIMER
This page is for informational purposes only and does not constitute financial, tax, or legal advice. Always consult a qualified and regulated financial adviser before making any decisions about your pension or financial planning arrangements. Tax laws are complex and vary by individual circumstance. Cameron James does not offer tax advice.
Information referenced in this document is drawn from publicly available HMRC guidance, IRS publications, and the US-UK Double Tax Convention. Verify current figures and procedures directly with the relevant authority before taking action.
