Major update as thousands of Brits pay no tax on state pension

Tens of thousands of British retirees living in Europe are receiving generous UK - some as high as £35,000 a year - without paying income to .

Despite exceeding the £12,570 personal allowance, many avoid the so-called "retirement tax" because they are no longer UK tax residents. According to the Department for Work and Pensions (DWP), around 42,000 of the 480,906 British pensioners in the EU receive more than the tax-free threshold, yet escape UK tax due to residency rules and double taxation agreements with EU countries. Britain's complex pension system allows retirees to boost payments through deferrals and legacy top-ups like Serps, with some receiving up to £690 a week (or £35,500 a year), the .

These high payouts are typically tied to the old state pension, which is easier to increase.

But back home, millions are being pushed into paying tax on their state pensions, as frozen tax thresholds collide with increases. About 3.3 million UK-based pensioners now receive more than the personal allowance.

While the full new recently rose to £11,973 per year, those on the older scheme can significantly exceed this through earnings-related boosts.

Former pensions minister Baroness Altmann warned that the frozen thresholds now sit perilously close to the full pension, creating unequal tax outcomes for retirees depending on where they live.

She told the Telegraph: "For those who receive high amounts of Serps, the state pension is far more generous than for those who paid during the non-Serps years.

"This means that anyone who lives in other countries will be paying a different amount of tax, depending on the rules where they live - and some may pay no tax at all."