Some countries don't have agreements with the UK, so you may be liable for tax both in the UK and overseas. It's a good idea to check if this is the case for your chosen destination. You may still be liable for taxes on UK rental incomes or investments, although your tax liabilities accompany you to your new country.

Once you have made the move overseas, you must declare your total income from every single worldwide income source, even if some of your income comes from UK investments. However, double tax relief is available where the income is taxable in both countries. The UK has these double taxation agreements with all the most popular retirement destinations, such as Australia, France and Spain.

Paying pension taxes when retiring overseas

Generally speaking, you will be taxed wherever you are a resident. The taxation of UK citizens abroad is complicated, but normally you will continue to pay UK taxes as long as HM Revenue & Customs considers you to be a UK resident.

Double taxation agreements with countries such as Australia, France and Spain mean you will not be taxed twice on the same income and that you can ask for UK income that is normally paid net of basic rate tax to be paid to you gross. Such payments include interest on bank and building society savings accounts, as well as income from bonds, pensions and annuities.

The taxation agreements vary from country to country and according to your income levels so you should consider discussing your situation with a tax adviser.

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Paying savings taxes when retiring overseas

As with tax on your pension, income from your savings is usually taxed by your country of residence. Be aware that National Savings & Investments accounts and cash ISAs are tax-free in the UK but are not sheltered overseas. Income from these is taxed like everything else.

Depending on where you live, there are local tax-free equivalents that may be worth investigating. In France, the Livret A is an instant access savings account that pays interest tax-free. You can hold up to a maximum of 22,950 in a Livret A account and a couple can have one each.

In Canada, residents can invest up to $5,500 a year in a Tax-Free Savings Account (TFSA). Like an ISA, this can be held in cash or stocks and shares.

Paying capital gains tax when retiring overseas

Once you become a resident in another country, you may be liable to pay capital gains tax. However, some countries have specific exemptions:

  • Your family home is excluded from capital gains tax in France
  • In Spain you are exempt if you are aged 65 or above and have lived in the property for three years or more
  • Your main residence is also exempt from capital gains tax in Australia, Canada, Ireland and South Africa
  • In Germany your home is exempt so long as you have lived in it for 10 years or more
  • In the US, capital gains of up to $250,000 are excluded from tax if they result from the sale of your main home
  • In Cyprus a limit of 85,430 applies on a similar basis
  • In Italy, the gain on the sale of your main home is exempt as long as the proceeds are reinvested in another main home within one year of sale
  • New Zealand does not charge capital gains tax

Paying inheritance tax when retiring abroad

Inheritance tax regulations vary considerably in other countries. In most cases, you will be charged an inheritance tax above a specific threshold based upon your entire estate.


Transfers between husband and wife or civil partners are exempt from inheritance tax in France. And each child has an allowance of 100,000. The inheritance tax is paid over and above this amount and it depends on who is inheriting and how much is involved.

For example, for children, the rates range between 5% and 45%. Siblings are taxed at the rate of 35% for sums up to 24,430, and then at 45%, after an allowance of 15,932.


In Spain, the amount of inheritance tax paid depends on the number of beneficiaries and what relation they had with the deceased. The taxable sum is reduced by at least 15,956 for each descendant and 7,993 for other related beneficiaries.

Husbands, wives and partners have to pay inheritance tax, however 95% of the value of the family home is exempt, up to a certain limit, provided the husband/wife/partner, children or parents of the deceased inherit it and own it for a further 10 years. Inheritance tax is payable at between 7.65% and 34% varying greatly depending on the Spanish region.


Inheritance tax was abolished in Italy but in 2006 was brought back in. Rates are comparatively low, varying according to the relationship of the beneficiary to the deceased. The surviving husband/wife and any children have a nil rate band of 1m each. Above this amount, tax is 4%. The rate is 6% for brothers and sisters and other close relatives and each sibling is given a 100,000 allowance.

United States of America and Canada

In the US, expect to pay inheritance tax at rates ranging from 18% to 35%, but only on estates worth more than $5,250,000. Moving north to Canada, assets are treated as additional income or capital gains if left to anyone else other than a surviving husband/wife or partner who won't pay tax on any assets passed to them.

Australia and New Zealand

Australia and new Zealand don't charge inheritance tax.

What are the inheritance rules for retiring overseas?

The rules dictating who you can leave your estate to vary from country to country.

For example, in France you cannot leave your entire estate to your spouse, as your children will benefit from an undisputable claim.

While retiring in Spain will be far more expensive if you do not take specific actions to protect your estate.

Bear in mind, retiring abroad and paying taxes to another country will not mean HM Revenue and Customs (HMRC) has no claim. In fact, the UK government may be able to claim your estate if you are still considered a legal resident there.

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