Find out how retiring in another country might effect the amount of income tax you pay, as well as the amount of tax you pay on your savings and pension when you do so.
Do I have to pay taxes if I live in another country?
If you move permanently outside of the country, you will still be responsible for paying income tax.
However, if you have income from investments or rentals in the UK, you can still be subject to taxation in the UK.
Even though some of your income may have originated in the UK, you are required to report all of it to the tax authorities in your new country of residence. However, double tax relief may be available in situations when the income is taxable in both countries.
This is due to the fact that the United Kingdom has entered into what is known as a double-taxation agreement with a large number of other countries.
These agreements are in place between the UK and several of the world’s most desirable retirement destinations, including Australia, France, and Spain.
Retirement in other countries and the taxation of pensions
Your home nation will typically be the one to tax the money you receive from pensions.
It is not subject to double taxation, but it may cause your other income to be subject to a higher tax band if you live overseas.
The rates at which individuals are subject to income tax are highly variable across nations. In the majority of nations, you are permitted to keep a certain amount of money without having to pay taxes on it. After that, however, you will be subject to taxation at progressively higher rates depending on the income bracket you are in.
Retirement in other countries as well as taxes on savings
The money you earn through savings is typically subject to taxation in the nation in which you live. The revenue from NS&I premium bond prizes and cash Isas, both of which are exempt from taxation in the UK, are not exempt from taxation outside of the UK. As a result, the income from both sources is taxed along with the income from everything else.
There may be local tax-free alternatives that are worth looking into if you live in certain places; it all depends on where you live.
The Livret A is a type of savings account that may be accessed instantly and offers interest that is exempt from taxation in France. A Livret A account can retain a maximum balance of 22,950 euros at any given time. Each member of a couple can have their own.
One benefit of being a resident of Canada is the ability to open a tax-free savings account with a maximum annual contribution of $6,000. (TFSA). This, like an Isa, can be invested in cash or stocks and shares of various companies.
Taxation of capital gains and retiring outside the country
When you become a resident of a country outside of your home country, you may also be subject to taxes on your capital gains (CGT).
In Spain, if you are over the age of 65 and have lived in the property for at least three years, you are exempt from CGT, whereas in France, the family house is exempt from CGT. Fortunately, in France, CGT does not apply to the family home.
In addition to these countries, the CGT does not apply to your primary residence if you live in Australia, Canada, Ireland, or South Africa. If you have resided in the property for at least ten years, the German government will not tax you on it.
If you sell your primary residence in the United States, all capital gains that you make are exempt from taxation up to a limit of $250,000; this limit increases to $500,000 if you are married and file your taxes jointly.
In a manner analogous to that described above, Cyprus has set its cap at €85,430. If the proceeds from the sale of your primary residence are invested in the purchase of another primary residence in Italy within one year of the sale, the gain that you realise from the sale of your primary residence is exempt from taxation. CGT is not something that is levied in New Zealand.