UK expat tax advice for living in Canada: CRA reporting, UK pensions, and property
Dual tax rules for UK expats in Canada under the UK-Canada treaty, covering UK rental income, pension transfers, and HMRC personal allowance claims.
Short answer: British expats living in Canada must report their worldwide income to the Canada Revenue Agency (CRA) whilst maintaining UK tax filings for UK-sourced rental profits or capital gains. Under the Canada-UK Double Taxation Convention, double taxation is eliminated via foreign tax credits, and UK citizens retain entitlement to the full UK Personal Allowance by claiming Section 56 / Box 16 on Form SA109.
Key points
- Tax residency in Canada triggers reporting of worldwide income on CRA T1 General returns.
- UK citizens living in Canada are entitled to the full UK Personal Allowance (£12,570) under treaty rules.
- UK rental income is taxed first in the UK and declared in Canada with a Foreign Tax Credit (Form T2209).
- UK State and occupational pensions are taxable in Canada under Article 17, with UK tax deducted offset or exempted via treaty codes.
- Form T1135 must be filed with CRA if you hold foreign property and assets costing over CAD 100,000.
Managing tax between HMRC and the Canada Revenue Agency
Moving to Canada from the UK brings unique cross-border tax considerations. Unlike the UK's 6 April tax year, Canada assesses tax on the calendar year (1 January to 31 December), with filing deadlines on 30 April (or 15 June for self-employed individuals).
Understanding the treaty tie-breaker rules under Article 4 of the Canada-UK Double Taxation Convention ensures that you are not incorrectly taxed as a dual resident on your non-Canadian earnings.
Have UK property, pensions, or investments in Canada?
Matthew prepares your non-resident UK tax returns, claims your full UK Personal Allowance under the UK-Canada treaty, and provides clear income and tax figures for your Canadian CPA.
The UK Personal Allowance for expats in Canada (Box 16)
Many non-residents mistakenly believe they forfeit their £12,570 UK Personal Allowance upon moving abroad. Because you are a British citizen or Commonwealth citizen living in Canada, you retain this entitlement in full.
Matthew ensures Box 15 and Box 16 of your SA109 residence pages are correctly claimed every year, ensuring up to £12,570 of UK rental profits or pension income remains completely tax-free in the UK.
Handling UK pensions and RRSP transfers
Transferring or drawing UK pensions while residing in Canada requires careful planning. While direct transfers into Canadian RRSPs are strictly limited under QROPS rules, drawing regular benefits under treaty relief prevents excessive PAYE withholding at source in the UK.
- UK State Pension: Taxable in Canada. No UK tax is withheld once proper treaty notifications are logged.
- Private & Workplace Pensions: Can be paid gross of UK tax with an HMRC 'NT' PAYE code after filing treaty relief forms.
- Lump Sum Drawdowns: The 25% tax-free lump sum permitted in the UK may be treated as taxable income under Canadian tax law unless structured appropriately.
Frequently asked questions
Do UK expats in Canada get the UK Personal Allowance?
Yes. Under Section 56 of the Income Tax Act 2007 and Article 27 of the UK-Canada Double Taxation Treaty, British citizens residing in Canada are fully entitled to the UK Personal Allowance (£12,570) to shelter UK rental income or pension income from UK basic rate tax. You claim this on Box 16 of the SA109 residence pages.
How is UK rental income treated in Canada?
You report gross UK rental income and expenses in both jurisdictions: on HMRC Form SA105 and on CRA Form T776. The tax paid to HMRC is claimed as a foreign tax credit on CRA Form T2209 to eliminate double taxation.
How are UK pensions taxed for Canadian residents?
Under Article 17 of the Canada-UK tax treaty, pensions arising in the UK and paid to a resident of Canada are taxable in Canada. An application can be submitted to HMRC for treaty relief under form 'Canada-Individual' to enable pensions to be paid without UK tax deductions.
What is CRA Form T1135 and does UK property count?
Form T1135 (Foreign Income Verification Statement) is mandatory for Canadian tax residents owning specified foreign property with a total cost exceeding CAD $100,000 at any point in the year. While personal-use real estate is exempt, foreign rental properties and UK investment portfolios must be reported.
Written and reviewed by Matthew S Manderson CTA ATT AMIT
Chartered Tax Adviser (CTA), Association of Taxation Technicians (ATT), Association of Malta International Taxation (AMIT). General guidance only; tax treatment depends on individual facts.