Tax Considerations for UK Residents Moving to Italy

For most people planning an international move, tax is one item on a longer list of practicalities. For UK nationals with significant foreign income, including investment portfolios, pension income, and overseas business interests, Italy’s tax landscape can, in the right circumstances, be the primary reason for choosing Italy over any other destination.

This guide covers the key elements of the Italian tax position for new residents from the UK, the main things to understand about the UK side of the equation, and where the two interact. It is an orientation guide, not tax advice. The decisions involved are significant enough to warrant proper specialist input on both sides.

For an overview of the move itself, our complete guide to moving to Italy from the UK covers visas, residency, healthcare, and logistics in full.

Most people who move to Italy do so for reasons that have nothing to do with tax: the climate, the culture, the slower pace, proximity to family or property they already own there. For those people, the Italian tax picture is background context, something to understand and plan for, but not the driver.

For a smaller, specific group, UK nationals with substantial foreign income, the picture is different. Italy has operated a flat-rate tax regime for new residents since 2017 that replaces the normal progressive tax treatment of foreign-sourced income with a fixed annual payment, regardless of how much foreign income you actually earn. For those with large investment portfolios, significant pension income, or major overseas business interests, this can represent a material change in their overall tax position.

Whether that change works in your favour depends on your specific circumstances. What follows is a factual account of how the regime works, what it costs, and what it does and does not cover.

Italy introduced the flat-rate new resident regime in 2017 under Article 24-bis of the TUIR (Testo Unico delle Imposte sui Redditi, Presidential Decree No. 917/1986). The scheme was designed to attract internationally mobile high-net-worth individuals to establish Italian tax residency, drawing on similar frameworks operating in Portugal, Switzerland, and the UK’s former non-dom regime.

Who Qualifies

To be eligible, you must not have been an Italian tax resident in at least nine of the ten tax years immediately preceding the year you establish Italian residency. Italian tax years follow the calendar year. If you have spent time in Italy in the past, you will need specialist advice to determine whether and when you qualify.

What the Scheme Covers

Once you opt in, your entire foreign-sourced income, including dividends, interest, capital gains on foreign assets, foreign rental income, foreign pension income, and royalties, is removed from the ordinary Italian progressive tax system and replaced with a single annual substitute tax, regardless of the actual amount earned abroad. You pay a fixed lump sum; the Agenzia delle Entrate does not require sight of your total foreign income for the purposes of this charge.

Italian-sourced income remains outside the scheme and is taxed at ordinary IRPEF rates.

The Rate History

The scheme launched at €100,000 per year. That figure applied from 2017 until Decree-Law No. 113/2024 (the Decreto Omnibus), which doubled it to €200,000 for individuals establishing Italian residency after 10 August 2024. Existing participants at the time were not affected and continued at €100,000.

From 1 January 2026, Italy’s 2026 Budget Law (Law No. 199/2025) raised the substitute tax further, to €300,000 per year for new elections. Individuals who opted into the scheme before 1 January 2026 are grandfathered at their rate at the time of election. If you established residency between 10 August 2024 and 31 December 2025, your rate remains €200,000. If you established residency before 10 August 2024, your rate remains €100,000.

Family Members

Qualifying family members, including spouses, children, parents, and siblings, can be included in the scheme under a separate election, at an additional charge per person. For elections made from 1 January 2026, the family member rate is €50,000 per person per year. Those who joined before that date pay the prior rate of €25,000.

Duration

The regime runs for up to 15 years from the tax year in which you first establish Italian residency and opt in. There is no extension beyond this period. Once the 15 years are exhausted, you move onto ordinary Italian taxation.

Electing into the Scheme

You elect into the regime via the relevant section (section NR) of your Italian annual tax return (Modello Redditi Persone Fisiche) in the first year of residency. Alternatively, and before establishing residency, you may apply for an advance ruling from the Agenzia delle Entrate to confirm your eligibility. The ruling is not mandatory, but it gives certainty before you commit to the move. Your Italian tax adviser will guide you through this process.

Leaving the Scheme

You can revoke the election at any time. If you do, the revocation is permanent: the regime cannot be reinstated once abandoned. The election also terminates automatically if you fail to pay the substitute tax by the 30 June annual deadline, or if you cease to be an Italian tax resident.

What the Flat Tax Does Not Cover

The substitute tax replaces Italian tax on foreign-sourced income only. The following remain subject to ordinary Italian taxation:

• Italian-source income, including employment income, Italian rental income, and Italian business income
• Capital gains on Italian assets
• Inheritance and gift taxes on Italian-sited assets (though foreign-sited assets are exempt from Italian inheritance and gift tax for the duration of the regime)

Ordinarily, Italian tax residents are required to pay two annual charges on assets held abroad: IVAFE, a tax on the market value of foreign financial assets (standard rate 0.2%, or 0.4% for assets held in certain low-tax jurisdictions), and IVIE, a tax on foreign real property (currently 1.06% of taxable value, increased from 0.76% from FY2024). Both are declared via the Quadro RW section of the Italian tax return.

For participants in the Article 24-bis flat-rate regime, both IVAFE and IVIE are waived on foreign assets for the duration of the scheme. This exemption is a material feature of the regime, not an incidental benefit. The Quadro RW reporting obligation is also suspended for covered assets while the scheme is in force.

If you choose not to opt into the flat-rate scheme, or when the scheme ends after 15 years, ordinary IVAFE and IVIE apply in full on your foreign-sited assets. At those rates, a substantial international portfolio or overseas property holding can give rise to a significant additional charge each year.

Even within the flat-rate scheme, Italian-sourced income is taxed at Italy’s progressive rates. For the 2026 tax year, the IRPEF rates published by the Agenzia delle Entrate are:

• 23% on taxable income up to €28,000
• 33% on income between €28,001 and €50,000 (reduced from 35% under Italy’s 2026 Budget Law)
• 43% on income above €50,000

Regional surcharges of between 1.23% and 3.33%, and municipal surcharges of up to 0.9%, apply on top of the national rate and vary by location.

For those who do not qualify for the flat-rate scheme, or who choose not to apply, these IRPEF rates apply to worldwide income from the point at which Italian tax residency is established.

Ceasing UK tax residency is a matter of law, not intention. It is governed by the UK’s Statutory Residence Test, which applies a set of conditions based on time spent in the UK, whether you have maintained a UK home, and a series of connecting factors. The change does not happen automatically on the date you leave. Getting the SRT position right is essential, and it typically requires specialist advice in the tax year of departure.

No UK Exit Tax, but a Five-Year Shadow

The UK does not impose an exit tax: there is no deemed disposal of worldwide assets at the point you leave. HMRC’s guidance on temporary non-residence confirms that gains realised during your non-resident period are not brought into charge at departure.

However, the temporary non-residence rules mean that if you return to UK tax residency within five complete UK tax years of leaving, certain gains and income categories realised during your absence can be brought back into charge in the year of your return. The rules are not an exit tax, but they are an effective deterrent against short-term non-residence planning. If your intention is a long-term move to Italy rather than a temporary arrangement, the five-year window is unlikely to affect you, but it is worth understanding before you leave.

UK-Sourced Income

HMRC retains taxing rights over UK-sourced income regardless of where you live. UK rental income from property you continue to own, income from UK partnerships, and certain UK pension income will still give rise to UK tax obligations after your departure. The UK-Italy Double Taxation Agreement, signed in 1988 and in force since 31 December 1990, allocates taxing rights between the two countries and prevents the same income from being fully taxed twice.

Under the treaty, private and most occupational pensions are generally taxable in Italy as the country of residence. UK government-service pensions, including civil service, armed forces, police, and teaching, remain taxable in the UK only. The treaty contains tie-breaker provisions (Article 4) that determine residency where both countries might otherwise have a claim.

Non-Dom Status and the Remittance Basis

If you previously benefited from UK non-domiciled status and the remittance basis, it is worth noting that the remittance basis was reformed with effect from 6 April 2025. Those who had structured their affairs around remittance basis treatment should take specific advice on the implications for their transition to Italian residency. The interaction between the two regimes is individual to each taxpayer’s position.

UK Tax Year Timing

The UK tax year runs from 6 April to 5 April. Italy’s tax year is the calendar year. The date on which your UK residency ceases, and the date on which you establish Italian residency, will determine which country taxes income earned in the transition period. Careful planning around these dates, ideally before you commit to a move date, can materially affect your position in the first year.

How Do I Elect into Italy’s Flat-Rate Tax Scheme?

The election is made via the NR section of your Italian annual income tax return (Modello Redditi Persone Fisiche) in the first year of Italian tax residency. Before establishing residency, you can also apply for an advance ruling from the Agenzia delle Entrate to confirm your eligibility. The ruling gives legal certainty before you commit. Your Italian tax adviser will handle the mechanics, but the decision to apply, and the timing, is one to make jointly with your advisers on both sides.

Does the Flat Tax Cover My UK Pension Income?

Most private and occupational pensions are allocated to the country of residence under the UK-Italy Double Taxation Agreement. Once you are an Italian tax resident, private pension income will typically be taxable in Italy. Under the flat-rate scheme, that foreign-sourced pension income is covered by the substitute tax rather than ordinary IRPEF. UK government-service pensions, including civil service and armed forces, are an exception: they remain taxable in the UK regardless of where you live. The precise treatment depends on the nature and source of your pension, and requires individual advice.

What Happens If I Return to the UK before the 15 Years Are Up?

If you return to UK tax residency, you cease to qualify for the Italian flat-rate regime. Your Italian tax position reverts to ordinary IRPEF on worldwide income from the point of departure. On the UK side, the temporary non-residence rules mean that if you return within five complete tax years of leaving, gains and certain income realised during your Italian residence period may be brought back into UK charge in the year of return. Both consequences carry potentially significant financial implications, and you would need specialist advice on both sides promptly.

Can I Still Own UK Property and Use the Flat-Rate Scheme?

Yes. Owning UK property does not prevent you from establishing Italian tax residency or opting into the flat-rate regime, provided you genuinely establish Italy as your tax domicile and habitual abode under the relevant tests. Rental income from UK property remains UK-taxable under the DTA, and UK property gains are subject to UK CGT regardless of where you live. Owning UK property while claiming Italian residency also requires careful management of your UK ties under the Statutory Residence Test.

Do I Need Both a UK and an Italian Tax Adviser?

In almost all cases, yes. The UK and Italian tax systems interact in ways that are difficult to navigate with only one jurisdiction covered. Your Italian adviser will handle the election, the Agenzia delle Entrate ruling if applicable, and your annual Italian compliance. Your UK adviser will handle the SRT analysis, the P85 notification to HMRC, your final UK self-assessment return, and the ongoing treatment of any remaining UK-source income. The two advisers also need to be coordinated on timing, since decisions made on one side can have unintended consequences on the other.