The tax position of current UK non-doms and future UK arrivals has become clearer following the publication of draft legislation. At 103 pages, the draft legislation is anything but straightforward and we provide only a very brief overview here.
Previously a person "domiciled" in another country could be UK tax resident for up to 15 years without paying UK tax on unremitted overseas income and gains. From 6 April 2025, the UK will only exempt qualifying overseas income and gains for the first four years after arrival (the "FIG Regime").
Current non-doms with wealth outside the country will still be subject to UK remittance tax on bringing this wealth into the UK. The latest UK Budget introduced a reduced rate of tax under the temporary repatriation facility to encourage this. In a recent announcement, the Chancellor indicated the scope of the temporary repatriation facility may be increased and this is an area to watch out for. The UK inheritance tax rules are also changing.
High net-worth individuals are particularly mobile and the UK is operating in an internationally competitive market for wealth and the individuals who control it. Therefore, we thought it would be useful to compare the old and new UK regimes to the current regimes potentially applicable to new arrivals in France, Italy and Spain (popular destinations for UK expats). Although there are other popular European alternatives and non-European low tax alternatives such as the UAE, we have focused on alternatives that we have known to be popular historically.
Obviously, each regime has a myriad of potential complications and proper advice (both tax and non-tax, such as immigration) must always be sought before any move is seriously considered. The summaries below are highly simplified and do not include the application of double tax treaties, social security contribution arrangements (including the social security protocol to the UK-EU Trade and Co-operation Agreement) or estate tax treaties.
Comparing the regimes
We have set out below important criteria that might be considered when comparing the tax regimes for new arrivals. Please note that this table does not taking into account the effects of double tax treaties, which should always be considered, particularly for employment income.
However, as above, readers should note that, in many cases, the application of double tax treaties, social security contribution arrangements or estate tax treaties will prevent or reduce the taxation that would otherwise have arisen under the rules described in the table below.
In particular, each of the jurisdictions discussed here has a significant suite of tax treaties (with each of France, Italy and Spain having a full tax treaty with the UK). Many of these treaties are similar, being based on the current (or a previous) version of the OECD model tax convention, but with differences that will require careful consideration in each case.
Also, some of the regimes discussed are not directly comparable. For example, the current UK "non-dom" regime uses the concept of "domicile" (very broadly, a concept linked to ancestry and the locus of someone's life).
Please note that this article and the summary below is not advice.
Taxation for new arrivals
| UK Non-Dom (applies up to 5 April 2025). | UK FIG (applies from 6 April 2025). |
France (special regime for impatriate employees and executives). |
Italy ("flat tax" / "substitute tax" regime). | Spain (special regime for displaced workers regime). | |
| Consecutive Years Tax Resident Before Subject to Tax on Foreign Income and Gains | 15 years (provided that you are not UK "domicile" ("non-dom") and were not born in the UK to UK parents). | Four years (provided that you have not been UK tax resident in the previous ten years). |
Eight years This regime provides a full tax exemption for any impatriation bonus, but only a 50% tax relief on passive income and capital gains on foreign assets, so this is not a full tax relief. Otherwise, you will be subject to tax immediately on becoming French tax resident. |
15 years (provided that you have not been Italian tax resident during the previous nine years). | Six years (provided that you have not been Spanish tax resident in the previous five years). |
| Will Tax Exempt Foreign Income and Gains be subject to Tax on Repatriation | Yes, (subject to complex rules and the reduced tax rate applicable under the temporary repatriation facility up to the 2027/2028 UK tax year). | No (UK FIG are UK tax exempt for the first four years of UK tax residency and then taxable, regardless of whether they are repatriated). | No (but the tax relief from the regime is only 50%, in some cases, as above). | No. | No (but active income, such as employment income earned abroad, is taxable under the special regime for displaced workers regime). |
| Headline Tax Rates on Income and Gains |
Headline Tax Rates on Income and Gains Top rate of 45% income tax (48% in Scotland). Lower dividend rate up to 39.35% (unless dividend income is exempt income which is repatriated, in which case the top rate is 45%). Rate of capital gains tax likely to be 24% in most cases, (subject to exemptions such as for own residence) and 32% for carried interest. Social security (national insurance) contributions are due up to 8% for employees (although reduced to 2% above earnings of £50,270 per year) and 13.8% for employers (to increase to 15% from 6 April 2025). |
No change from pre-6 April rates. |
Top rate of 45% income tax. Dividends and capital gains at a flat tax rate of 30%. Further contributions on high income may apply on top of income tax (for taxpayers with yearly revenues of €250k for a single person or €500k for a married couple). Security contributions are due up to 25% for employees and 45% for employers. |
Top rate of 43%-45% income tax (dependent on the municipality). Dividends and capital gains at a tax rate of 26%. In general, Social Security contributions charges are due up to 33% (for employees and 23.81% - 9.19% for employers). |
Top rate of 47% income tax. However, employment income is taxed at a flat rate of 24% for earnings up to €600,000 for those using the special regime for displaced workers. Dividends, interest and capital gains at tax rates ranging from 19% to 28%, depending on the amount. Social Security contributions are due as follows: up to approx. €60,000: max. 6.47% for employees and 31.98% - 37.73% for employers; any excess is subject to an additional 0.21% for employees and 0.95% for employers. |
| How is Foreign Employment Income Taxed (subject to double tax treaties) |
Exempt for the first three years for "non-doms" to the extent related to overseas duties. Also exempt after three years (assuming you remain "non-dom") if employment wholly outside the UK with a foreign employer. All exempt employment income becomes taxable if earnings repatriated. |
Exempt for the first four years, subject to a cap of the lower of 30% of Not exempt after four years. |
Employment income is taxed under the conditions and rates set out above. Foreign employment income does not benefit from a favourable treatment under the impatriate regime. |
Exempt if covered by the "flat tax" regime. However, in this case, no foreign tax credit can be claimed in Italy for taxes paid abroad (if any). In this scenario you may consider "opting out" (i.e. carve out) a specific jurisdicition from the "flat tax" regime, in which case the foreign income in that specific country would be subject to ordinary tax provisions). |
Employment income is taxed under the conditions and rates set out above. However, if the special regime for displaced workers applies, the Spanish tax authority will not provide confirmation of Spanish tax residence for use in confirming tax residence with other tax authorities. |
| Are there any charges to use the regime? | £30,000 per year if you have been UK tax resident for at least seven of the previous nine tax years. £60,000 per year if you have been UK tax resident for at least 12 of the previous 14 tax years. | No. | No. | Foreign income is subject to a "flat tax" of €200,000 with the exception of capital gains arising from a transfer of “qualified shares” of a non-resident company in the first five years after becoming tax resident in Italy. | No. |
| Administrative Requirements |
Annual claim. Requirement to quantify foreign. |
Annual claim. Requirement to quantify foreign income and gains. |
Applicable without any particular claim to be submitted. |
Annual claim. Possible to seek advanced clearance as regards the implications. |
Claim should be submitted to the Spanish Tax Agency within six months of commencing employment in Spain. |
The reference to "consecutive years" above significantly simplifies the position and foreign income, gains and estates can be brought into charge for tax in the above jurisdictions in situations where years of residence are not consecutive. For example, in the case of the UK FIG Regime, if you spend two years being UK tax resident, followed by a third year not UK tax resident, followed by a fourth and fifth being UK tax resident, you will not be able to claim any relief under the UK FIG Regime in the sixth year.
Also, when setting out the headline rates of income tax, capital gains tax and inheritance tax above, we have left out the many reliefs that may be available to reduce the headline rates and amounts subject to tax. These reliefs vary between jurisdictions and it is not possible to do justice to their complexity and variety here.
This article only scratches the surface of the complex tax regimes for new arrivals operating in the UK, France, Italy and Spain. The tax regimes in each of the jurisdictions discussed in this article are also a constantly evolving (and politically contentious) area, with changes happening constantly. However, it will hopefully provide useful for anyone thinking of moving to or from any of the jurisdictions mentioned.
DWF has extensive experience of advising on tax in all the countries covered in this article and if we can be of assistance please do not hesitate our Tax & Private Capital teams.
Authored by Sarah Mestre Plasencia
