UK-Italy Double Taxation Agreement: Who Taxes What

The UK-Italy double taxation agreement is the 1988 Convention between the two countries, in force since 31 December 1990. It decides which country can tax each type of income and gain when you live in one country and have income from the other.

Under the double taxation agreement UK/Italy, private pensions and the State Pension are taxed only where you live. Government service pensions are usually taxed only by the country that pays them. Rent and property gains are taxed first where the property is. Dividends, interest and royalties are taxed where you live, with a capped tax in the country they come from.

This guide goes through the treaty article by article, in both directions: Italian residents with UK income, and UK residents with Italian income.

If you'd like this checked for your own situation, see our international tax advice service.

What is the UK-Italy double taxation agreement?

When was it signed, and is it still current? It was signed at Pallanza on 21 October 1988 and entered into force on 31 December 1990. It has applied in Italy from 1 January 1991, and in the UK from 6 April 1991 for Income Tax and Capital Gains Tax.

As at October 2026, GOV.UK shows no protocol, no replacement treaty and no version modified by the OECD's multilateral instrument, so the 1988 text is the one to read. For the general rules, see UK double tax treaties.

👉 GOV.UK: Italy tax treaties (1988 Double Taxation Convention)

Which taxes does it cover, and which does it leave out?

What does Article 2 list? For the UK: Income Tax, Corporation Tax, Capital Gains Tax and Petroleum Revenue Tax. For Italy: personal income tax (IRPEF), corporate income tax and local income tax. Three things are not on that list:

• Inheritance tax. There is a separate, much older UK-Italy estates convention from the Estate Duty era, with no deemed domicile clause.

• Social security. National Insurance and Italian contributions follow separate rules.

• IVIE and IVAFE. These are Italy's annual taxes on the value of foreign property and foreign financial assets held by Italian residents. They aren't listed in Article 2, and the treaty has no article on taxes on capital.

👉 GOV.UK: Inheritance Tax: Double Taxation Relief

Residence and the tie-breaker in the year you move

Can you be resident in both countries at once? Yes, and it's common in the year you move. The UK decides residence under the Statutory Residence Test for a tax year running 6 April to 5 April. Italy uses the calendar year.

Since 2024, Italy treats you as resident if, for most of the calendar year, you have your residence there, your domicile there (where your main personal and family relationships are), or you are physically present there.

Italy applies that test to the whole year. Move in May and you'll usually be Italian resident from 1 January, including months when you still lived in the UK. The UK's split-year treatment is a UK rule only, and the treaty has no split-year provision of its own.

Article 4 settles the overlap. The tests run in order: permanent home, centre of vital interests, habitual abode, nationality, then agreement between the two tax authorities. See our guide to dual tax residency and the tie-breaker tests.

👉 Camera dei deputati: Tassazione delle persone fisiche (in Italian)

Double taxation agreement UK/Italy: who taxes what

Which country taxes each type of income? The treaty works the same way in both directions. "Source" is the country the income comes from, and "residence" is the country you're treaty resident in.

Image 1 — UK-Italy treaty: who taxes each type of UK income when you live in Italy

UK-Italy treaty: taxing rights by income type

The UK doesn't deduct tax from ordinary dividends or bank interest, so for Italian residents the UK's disregarded income rules usually matter more than the caps. If Italy withholds more than the treaty rate from a UK resident, the excess is reclaimed from Italy.

Article 10's paragraphs on UK dividend tax credits are obsolete, because UK dividends stopped carrying a tax credit on 6 April 2016.

For employment, Article 15 exempts you in the country where you work only if you're there for no more than 183 days in any fiscal year, your employer isn't resident there, and the cost isn't borne by a branch there.

👉 HMRC manual: Italy treaty summary (DT10154)

UK Italy tax treaty: pension income

Which country taxes a UK pension if you live in Italy? It depends on the type of pension. For the UK's own rules, see our guide to the tax treatment of pension income.

Image 2 — UK pensions for Italian residents: which article applies and which country taxes

• Private and workplace pensions, and annuities. Taxable only in Italy under Article 18. HMRC's list classes NHS pensions paid by the NHS Business Services Authority (NHSBSA) or the Scottish Public Pensions Agency as non-government, so they belong here too.

• The UK State Pension. It isn't paid for past employment, so HMRC gives relief under Article 22 (other income). The result is the same.

• Government service pensions. Civil service, armed forces, local authority, police, fire and teachers' pensions (except independent school service) are taxable only in the UK under Article 19. The exception is where you're both an Italian national and resident in Italy; then only Italy taxes them.

The treaty has no separate rule for lump sums. A lump sum that is tax-free in the UK is not automatically tax-free in Italy, so take Italian advice before you draw one.

Italy has a 7% flat tax for people with foreign pensions who move to a small municipality in one of eight southern regions (or certain earthquake-affected towns), after five tax years of not being Italian resident. Italian law sets a population limit, so check the town qualifies. The treaty still decides which pensions Italy may tax, so a UK government pension stays taxable in the UK.

Italy also has a fixed annual flat tax on foreign income for new residents, and an impatriate regime that taxes only half of a qualifying incoming worker's earnings. The flat tax amount depends on when you moved, so check the current figure with the Agenzia delle Entrate.

👉 HMRC manual: government and non-government pensions (INTM343040)

UK and Italian property under the treaty

You live in Italy and let out a UK property: who taxes the rent? The UK does, first, under Article 6. Unless HMRC approves gross payment, your agent or tenant deducts basic rate tax (20% for 2026/27) under the non-resident landlord scheme, and you file a UK return. Italy then taxes the same rent as your country of residence and gives credit for the UK tax.

The UK also taxes gains on UK land under Article 13(1), and you must report the sale within 60 days of completion even if no tax is due. See non-resident capital gains tax.

In the other direction, a UK resident with a flat in Italy pays Italian tax on the rent and on any gain, then reports both in the UK and claims credit for the Italian tax. See our guide to UK tax on foreign income.

For shares and other assets, only your country of residence taxes the gain. But under Article 13(5) the country you left can still tax an individual's gain if you were resident there at any time in the five years before the sale and the gain isn't subject to tax where you now live.

How double taxation between Italy and the UK is relieved

What happens when both countries can tax? Article 24 makes the residence country give relief. The UK gives credit for Italian tax against the UK tax on the same income, but never more than the treaty allows Italy to charge.

Italy includes the UK income in your Italian taxable income and deducts the UK tax, limited to the share of Italian tax that the income represents. But Italy gives no deduction where the income is taxed in Italy by a final withholding tax at your request, so ask your Italian adviser how any flat-rate regime treats UK tax.

How to claim relief under the UK-Italy double tax treaty

Is relief automatic? No. Each route has its own form.

• Italian resident, UK pension, annuity, interest or royalties. Use form DT-Individual. There is no Italy-specific form. The Agenzia delle Entrate certifies your residence, and HMRC then tells the payer to stop deducting tax (an NT code) and repays tax already taken.

• Italian resident filing a UK return. Claim on the SA109 residence pages with helpsheet HS304 and a certificate of Italian residence, or HS302 if you're resident in both countries.

• UK resident with Italian income. Report it on the foreign pages and claim Foreign Tax Credit Relief.

• UK resident facing Italian withholding. Get a certificate of residence from HMRC; Article 29 requires one for refund claims. The Agenzia delle Entrate's guidance for non-residents sends refund claims to its Pescara Operating Centre, within 48 months.

👉 HMRC form: Double Taxation Treaty Relief (Form DT-Individual)

👉 HMRC helpsheet: HS304 Non-residents, relief under double taxation agreements

👉 HMRC helpsheet: HS302 Dual residents

👉 GOV.UK: Apply for a certificate of residence

Worked examples

Example 1: Margaret retires to Puglia

• Margaret is a British citizen, not an Italian national, and resident only in Italy. In 2026/27 she has an NHS pension of £18,000 paid by NHSBSA, a State Pension of £12,000 and UK rental profit of £9,000.

• NHS pension and State Pension: taxable only in Italy (Articles 18 and 22). After her DT-Individual claim, the NHS pension is paid with no UK tax deducted.

• Rent: taxable in the UK first (Article 6). As a British citizen she keeps the £12,570 personal allowance, so her UK tax is nil.

• Italy taxes all three as her country of residence.

If the £18,000 were a civil service pension, only the UK could tax it (Article 19). Her UK taxable income would be £18,000 + £9,000 − £12,570 = £14,430, and UK tax at 20% would be £2,886.

Example 2: Luca in London with Italian income

• Luca is a long-term UK resident and higher rate taxpayer. He has rental profit of £10,000 from a flat in Milan and pays Italian tax of £2,100 on it.

• UK tax on the rent at 40% is £4,000. He claims credit of £2,100 and pays HMRC £1,900.

• He also receives a £2,000 Italian dividend with £520 withheld. The treaty cap is 15%, which is £300.

• His UK credit is limited to £300. The other £220 has to be reclaimed from Italy.

Common mistakes with the UK-Italy tax treaty

• Treating every public sector pension the same. Civil service and armed forces pensions stay taxable in the UK. NHS pensions paid by NHSBSA don't.

• Assuming Italy splits the year. Italy tests residence for the whole calendar year, so a spring move usually means dual residence from January.

• Expecting the treaty to cover everything. It doesn't cover inheritance tax or social security, and it has no article on capital taxes such as IVIE and IVAFE.

• Reading it like a modern treaty. It has no arbitration clause, no general anti-abuse test, no rule for shares in property-rich companies and no lump sum rule.

• Not claiming. Without a DT-Individual or a claim on your return, UK tax keeps being deducted.

Frequently asked questions

Is there a double taxation agreement between the UK and Italy?

Yes. The UK-Italy Double Taxation Convention was signed on 21 October 1988 and has been in force since 31 December 1990. GOV.UK lists no protocol or later amendment.

Is my UK pension taxed in Italy or the UK?

If you're resident in Italy, a UK private or workplace pension and the UK State Pension are taxable only in Italy. A UK government service pension, such as a civil service pension, is taxable only in the UK unless you're both an Italian national and resident in Italy.

Which form do I use to claim relief under the UK-Italy double tax treaty?

Italian residents use HMRC's form DT-Individual for UK pensions, annuities, interest and royalties, because there is no Italy-specific form. If you file a UK tax return, you claim on the SA109 residence pages using helpsheet HS304.

Do I pay UK tax on rental income if I live in Italy?

Yes. The treaty lets the UK tax rent from UK property first, usually through the non-resident landlord scheme and a UK tax return. Italy also taxes the rent and gives relief for the UK tax.

Does the UK-Italy tax treaty cover inheritance tax?

No. The 1988 Convention covers Income Tax, Corporation Tax and Capital Gains Tax in the UK and income taxes in Italy. Inheritance tax falls under a separate, much older estates convention, and Italy's IVIE and IVAFE wealth taxes are not listed either.