UK pension double taxation in Italy

Pensions, detractions, deductions and more……

I wanted to share some info on pensions (state/social security and personal) and the tax deductions and detractions that you/we can take advantage of in Italy to help reduce our taxable burden in this article .

As it has been observed many times, unlike many countries which offer non-taxable income allowances (US and UK as examples), Italy does not. Therefore we pay tax from Euro number 1. However, Italy does also have a system of deductions and detractions which can be used to offset against income to try and reduce the tax burden. If I am being honest I can’t say that they are as good as a non-taxable allowance in terms of their effect on income, but they can be help.

Pensions

Regarding the subject of UK pension payment:

UK state pension.
I am not sure why but a number of people have contacted me since 2024 to say that their commercialista is now saying that you need to declare your UK state pension on your Italian tax return and pay tax on it.  It has always been the case that it needed to be declared.  This is, of course, is the correct course of action but makes me question why some commercialisti are only now waking up to this fact. It always worries me when I get a surge of the same enquiry. My concern is for those people who have been legitimately taking advice from well meaning professionals who have not been doing the right thing and will now start to file. This could mean that the Agenzia delle Entrate will be alerted to the fact and may come asking for back payments, fines and penalties. If this is the case then they have 5 years to do so, and they have a sneaky habit of doing so about 4 years and a few months after the filing.

If you find yourself in such a situation then please remember that your commercialista has to carry insurance in the event of them mis-advising you. As long as you have the proof that they did so (which may be the hardest thing to prove because often they just provided verbal confirmation that something did not need declaring) then you can ask them to carry any costs incurred by you as a result of an error on their part. The hard part is proving it and then having that discussion with them. Check those historical emails discussions!!!

Sign the P85 with HMRC
On a similar note I recently met 2 people (2025) in the same Umbrian comune who had received a letter from the AdE which stated that they were no longer able to apply for the double taxation credit for tax paid in the UK on their UK personal / occupational pension payments. Now, this might sound like a contravention of the double taxation treaty, but as the AdE stated in their letter (which I managed to gain sight of), the correct action is that when someone leaves the UK with a pension in payment, they must apply to HMRC for gross income payments by applying through the DT (double taxation) individual form on the HMRC website. Failure to do so means that the AdE is not obliged to offer any tax credit for tax paid in the UK and instead can charge full Italian tax. This means that you could pay in Italy and the UK until such time as you have received a gross payment authorisation from the UK: Back payments can be claimed from HMRC (where tax credits have not been awarded already) by completing the DT individual form but this can take time.

In my experience, over the last 15 years, Umbria and Tuscany have always been at the leading edge of tax legislation and implementing it to the letter of the law so its not beyond imagination that this may spread out across Italy. However, there are instances in Abruzzo and Marche as well. If you are the holder of a UK pension, are still paying tax in the UK and claiming that back through the credito d’imposta option every year, it would be advisable to apply for UK gross pension payments via the DT indivdual claim form on the HMRC website, before the AdE refuses you the option and you end up paying twice. https://www.gov.uk/tax-right-retire-abroad-return-to-uk

• Deductible expenses (oneri deducibili) reduce your taxable income, meaning you pay tax on a lower income.
• Detractable expenses (oneri detraibili) give you a direct reduction in the tax you owe – usually a 19% tax credit on the value of item you are claiming, unless otherwise specified.

Both are valuable, and knowing the difference helps you understand how the savings work.

Healthcare expenses (19%)

Without a doubt the most common category is healthcare expenses ( detractable at 19%)

What you can claim is as follows:

• Pharmacy receipts (scontrini parlanti) showing the name of the medicine and your tax code (codice fiscale)
• Doctor visits (GPs and specialists)
• Surgeries and hospital stays (private and public)
• Diagnostic tests, X-rays, and blood work
• Dental care (e.g., orthodontics, if medically necessary
• Physiotherapy and rehabilitation
• Medical devices (e.g., glasses, hearing aids, prosthetics)

There is a franchigia related to these expenses, which means that it is only the accumulated expenses over €129.11 which are considered eligible. If your total health expenses are below this amount then you cannot detract from tax. (You cannot claim this credit if the expense is covered by insurance)

To give an example……if my total expenses are €800 during the year, then the calculation is €800 – €129,11 = €670,89, on which I apply the 19% tax credit = €127,47 tax credit.

This example may not seem much but a few years ago I had to have some urgent dental care which cost €10,000. It was not covered by insurance and so I had to pay myself. That year I had a tax credit of €1875,46. Every little helps.

So, for all those trips to the farmacia make sure you present your codice fiscale to the pharamcist and they will normally tell you whether it is an item that qualifies or not.

** FARMACIA AND HEALTH EXPENSES ARE NOW REGISTERED AUTOMATICALLY ON THE AGENZIA DELLE ENETRATE WEBSITE (YOU CAN ACCESS THE WEBSITE AND CHECK THEM YOURSELF) HOWEVER THERE ARE OCCASIONS WHEN THEY DON’T APPEAR SO MAKE SURE YOU KEEP YOUR RECEIPTS AND GIVE THEM TO YOUR COMMERCIALISTA / FISCALISTA WHEN YOU FILE YOUR RETURNS **

Home renovations and energy efficiency (various rates from 36% to 50%)

This is by far and away the next biggest category for gaining tax credits. I know myself because in 2024 we spent alot of our savings on the new home and this year we will be applying for almost all of these bonuses as tax credits.

The key incentives for home improvements are as follows:

• Bonus Ristrutturazioni (Renovation Bonus) – 50% for general home upgrades
• Ecobonus – 50–65% for energy-saving improvements (e.g., insulation, windows, solar panels)

On your ‘Prima Casa’ you can claim a 50% tax credit up to a maximum spend of €96000, spread over 10 years.

On your second home or property (other than Prima Casa) it is a 36% on a maxi psend of €96000 spread over 10 years.
(excluding boilers which burn fossil fuels, such as caldaia gas)

• Sismabonus – 50% on Prima Casa for 2025 then 36% for 2026/27 for work related to protection against sismic risks
  36% on non-Prima Casa in 2025, falling to 30% from 2026/27.
• Bonus mobili (e grande elettrodomestici) – tax credit of 50% on spend of up to €5000 on electrical appliances and furniture that are linked to renovations.
• Nuovo contributo per elettrodomestici ad alta efficienza – 30% up to €100 discount on electrical domestic appliance purchases, outside renovation works
• Green Bonus – 36% on garden and green area improvements.

A FEW THINGS I LEARNED BY GOING THROUGH WORKS LAST YEAR:

1. All payments must be made by traceable means i.e bonifico or credit card payment. No trace, no bonus!
2. If paying by bonifico then you need to use the bonifico per agevolazione fiscale option with your bank NOT the bonifico ordinario option. It asks for more info, such as the partitia IVA of the company / person you have worked with and this is needed for the bonus.
3. If you employ single workmen working alone then you don’t need an authorisation (SCIA or CIA) from the local authority but if they are a ‘dita edilizia’ (this can include even 2 people working together as a construction company) then you need to have a ‘piano di sicurezza’ from an architect who will need to draw that up and provide you with the necessary numbers/reference codes. No ‘piano di sicurezza’ no bonus! (Our’s cost about €1000)
4. Your workmen can apply for 10% IVA (VAT) on purchased items, but this is not necessarily a given. Our commercialista recommended that we signed a document ‘richiesta di applicazione dell’IVA ad aliquota ridotta’ for each workman / company so they would be authorised to apply for it as the materials would fall under the approved renovation works.

Insurance premiums

This is a category which people often fail to utilise because there are some questions over whether foreign insurance premiums paid can be deducted in an Italian tax return.

The policies which qualify are Life insurance, accident ( both max €530) and long-term care insurance (LTC) – (€1291)

They must qualify ( even if issued outside Italy) under the following conditions:

1. Policy must be with an EU or EEA-authorized insurer (i.e. the company must be licensed to operate in the EU/EEA under EU regulations).
2. The policy must cover eligible risks: life, accidents, disability, or LTC.
3. The beneficiary must be the taxpayer or close family (not a third party like a bank).
4. The contract must not be speculative (e.g., pure investment policies are excluded unless they include real coverage of life or disability).

I myself still insist on entering my life policies issued in the UK years ago, before Brexit, and which cover me throughout the EU and were issued whilst the UK was still in the EU. I principally have life insurance contracts with Legal and General and they provide cover across the EU. The other alternative is to take out Italian equivalent policies especially for things like health insurance. It’s worth getting a quote from one of the bigger insurance providers such as Generali (or Genertel, their online offering) Allianz, Zurich, Groupama, Unipol Sai, Banca Intesa, Reale etc

Other categories include:

Donations (19-30%)
donations to recognised NGO’s, religious institutions or universities.

Mortgage interest (19%)
You can deduct interest on mortgages for your first home (prima casa) up to a cap of €4,000 per year.

Education expenses (19%)

• Kindergarten through university tuition (both public and private, up to limits)
• School meals and after-school program
• University housing (if located outside the student’s home province)

Max annual deduction for private schools may vary by level and region, with a cap around €800 per child.

Rental deductions

If you rent your main home, you may claim a tax credit based on your income and contract type.

For example: Ordinary rental contracts (contratto 4+4), Student housing and transfers for work (if you’ve moved for employment reasons)

The credit varies depending on income, age, and contract type (e.g., up to €495.80 or more).

Family related deductions and credits

Dependent children and other family members, alimony and maintenance payments (deductible), Nursery/kindergarten costs (detraction up to €632 per child)

Disabled persons (LEGGE 104/1992 BENEFITS)
Special deductions and detractions for people with disabilities or their caregivers, including: 19% for adapted vehicles (with limits), full deduction of medical devices, assistance costs, etc.

Sport and Youth activities (19%)

Up to €210 per child under 18 for gym, swimming, dance classes, etc. Applies to recognized sports facilities and clubs.

If you would like to discuss these or any other tax or financial planning related issues for your life in Italy then please don’t hesitate to contact me on  gareth.horsfall@spectrum-ifa.com or call / message on +39 3336492356
Always happy to help where I can!

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