Methodology & Sources
How the maths actually works.
Six countries, six very different ways of treating the same pension. Here's exactly what the calculator does for each, what the headline 2026 rates are, and — just as important — what it leaves out.
A word on what this compares
The tool answers one narrow question: of a given gross UK private-pension income, how much do you keep after income tax in each country That's it. It's a tax-only ranking, and tax is rarely the only thing that decides where someone retires — cost of living, healthcare, family, climate and language all weigh heavily, and none of them appear here. What the calculator does well is strip the tax question down to a single comparable number so you can see how big the differences really are before the other factors come into play.
One important assumption runs through everything: this models a private pension or SIPP. UK government service pensions — civil service, armed forces, police and many teachers — stay taxable in the UK under standard treaty terms no matter where you live, so for those the destination makes no difference to the tax. The pension-type toggle handles that case by taxing every row at UK rates.
The Gulf: zero, while you're there
The UAE, Qatar and Bahrain don't tax foreign pension income at all. Combined with an NT code from HMRC (which stops your UK provider withholding tax at source), a private pension drawn while you're Gulf-resident is genuinely untaxed in both countries. That's why the Gulf tops the ranking. The catch the calculator doesn't show: the UK State Pension is frozen at the rate in payment when you leave, because the Gulf isn't on the UK's uprating list — so over a long retirement, inflation quietly erodes that slice.
The UK: the baseline
Standard 2026/27 income tax: nothing on the first £12,570, then 20% to £50,270, 40% to £125,140, and 45% above. For a £60,000 pension that's an effective rate in the low twenties — the yardstick everything else is measured against. Worth noting that some non-residents lose the personal allowance, which the model doesn't strip out.
Spain and Portugal: the easy days are over
Spain taxes a foreign private pension as employment income on its progressive IRPF scale, which runs from 19% to around 47% and varies a little by region — Madrid sits at the lower end, Valencia and a few others higher. The model applies a small pensioner allowance and lets you nudge the regional rate. Spain's "Beckham Law" flat 24% gets mentioned a lot, but it's aimed at employment income for new arrivals and generally doesn't rescue pension income, so the tool doesn't apply it to pensions.
Portugal used to be the retiree's darling thanks to the Non-Habitual Resident regime and its 10% flat rate on foreign pensions. That door has closed. NHR shut to new applicants and was fully phased out through early 2025, and its replacement (IFICI, sometimes called NHR 2.0) deliberately excludes pension income. New arrivals now face standard progressive rates that climb into the high 40s, plus a solidarity surcharge at the top. The calculator reflects the post-NHR reality, not the old brochure.
France: two very different routes
Draw a French private pension as regular income and you face progressive income tax plus a 9.1% social charge — though if you hold an S1 health form, the social charge falls away, which the S1 toggle reflects. That's the default, and it's not especially gentle.
The interesting route is the lump sum. France allows a full pension encashment to be taxed at a fixed 7.5% in the right circumstances, which is why the France column can leap up the ranking when you switch to it. It's a genuine planning opportunity, often paired with reinvesting the proceeds into an Assurance-vie for succession purposes — but it's a one-off event with strict conditions, not a way to draw an income year after year, so treat that column as illustrative of the encashment rate rather than a sustainable annual figure.
Italy: the 7% headline act
Italy's flat-tax regime for foreign pensioners is the standout among the European options. Move your tax residence to a qualifying town in one of eight southern regions and you pay a flat 7% on all foreign-sourced income — pension, investments, rental, the lot — for up to 10 years. As of April 2026 the eligible-town population cap rose from 20,000 to 30,000, which pulled in dozens of more substantial towns that were previously excluded, including some genuinely desirable ones.
Two honest caveats the chart bakes in. First, the 7% only lasts 10 years — after that you revert to standard Italian IRPEF (23% to 43%), which is why Italy's line on the cumulative chart bends downward in rate after year 10. Second, switch the regime toggle off and you'll see what standard Italian rates look like, which are far less flattering. The 7% deal is real and powerful, but it's a time-limited incentive tied to where you live, not a permanent feature of retiring in Italy.
What the calculator deliberately leaves out
Quite a lot, and you should know what. It uses simplified effective rates rather than line-by-line returns, converts euro tax bands to pounds at a rough exchange rate (so the band thresholds shift if sterling moves), and ignores wealth taxes (relevant in Spain), succession and inheritance taxes (which differ wildly and can dominate the real decision), the State Pension freeze in the Gulf, the loss of the UK personal allowance for some non-residents, and the temporary non-residence rules if you ever move back to the UK.
None of that makes the ranking useless — it makes it a first cut. The tax gap between the best and worst destination is often large enough that it's worth knowing before anything else. But the moment a destination looks close, or a wealth or succession tax enters the picture, the decision needs a country-specific adviser rather than a comparison grid.
Sources
Rates verified against published 2026 sources: May 2026. Effective-rate approximations for comparison only. Not regulated financial or tax advice.