Last Updated on 28th August 2025
Most expats living in Cyprus or planning a relocation focus on Cypriot taxation, the healthcare system and how to achieve permanent residency to become established residents on this beautiful island.
However, what many don’t realise, especially prospective expats yet to make the leap, is that tax reforms here in the UK can have a significant impact on their plans, and revisiting their finances is key before they complete a move to Cyprus.
Following the raft of announcements included in the last Autumn Budget, and updates provided since, we’ve clarified some of the most relevant reforms UK nationals need to be conscious of, and why these may affect the best options when it comes to managing their wealth.
Changes to UK Inheritance Tax for Cypriot Expats
The UK inheritance tax threshold has been frozen once again, this time until April 2030, which means the nil-rate band will have remained static for 21 years. While this may not directly affect all expats, it will mean families who might have previously been unconcerned with British inheritance tax now need to incorporate this into their tax planning.
There are, however, two major changes that are likely to have more sweeping impacts:
- The inclusion of UK pension funds in the scope of inheritance tax
- Changes to the way expats are assessed as domiciled
Expats relocating who choose to leave UK pension funds in situ will now need to account for the fact that their pensions and death benefits will be included in inheritance tax calculations from April 2027, added to the value of the total estate and taxed in the usual way.
For many, the new long-term residence test will also be a major factor. This replaces the previous system where an individual’s domiciliary status was the primary aspect in determining whether they were subject to inheritance and other taxes against only assets based in the UK or their worldwide assets and incomes.
The latter uses a 10-year rule, where individuals who leave the UK might still be subject to UK inheritance tax for the next 10 years, regardless of their residency status. That might mean more expats relocate sooner, to reduce the potential of their heirs becoming subject to UK IHT.
The Removal of Exemptions Against Pension Transfer Taxes for Retirees Moving to Cyprus
Another reform that could have a further impact on those retirement plans is the news that transfers made between UK pensions and Recognised Overseas Pension Schemes (ROPS), which were previously exempt from the 25% Overseas Transfer Charge (OTC), are no longer.
There are currently no HMRC-approved ROPS in Cyprus, but many expats have chosen to transfer their pensions to qualifying schemes in Gibraltar, Malta, or other European countries to claim the exemption and optimise their pension tax efficiency.
Now, this exemption only applies if the person is a resident in the same country as the location of their ROPS transfer scheme, which means they may need to decide between:
- Leaving pension funds in the UK and accepting the exposure to future UK-based inheritance tax, OR
- Accepting a 25% tax burden associated with their pension transfer
As always, alternative strategies are available for discussion, such as restructuring pension assets.
That doesn’t mean there is a universally beneficial way to avoid all exposure to pension or inheritance tax, but that expert cross-border tax and pension planning can go a long way to minimising your long-term tax exposure.
Changes to Income and Investment Taxation in the UK
As with inheritance tax, the income tax rates have remained frozen, albeit with assurances that the thresholds won’t remain static past the currently scheduled end date of April 2028. At that point, they are expected to increase with inflation, which will be welcome news for taxpayers who have tipped over into ever-higher tax brackets.
However, that also means more UK taxpayers will end up in a higher income tax bracket over the next three years.
Capital gains tax increases may have a more dramatic impact on the tax plans of those with gains due to be realised in the near future, given that the allowance was already cut considerably from £12,300 to £3,000 in phases between 2023 and now. This is coupled with an increased tax liability on gains related to investment returns, hiking up the rate from 18% to 24%.
Business asset disposal relief rates have, though, increased to 14% from the 2025-26 tax year and are due to climb to 18% next year, which may provide some offset for business owners likely to sell as part of their plans to relocate to Cyprus.
UK taxpayers who currently hold an ISA are generally expected to restructure these savings during the move, as an ISA loses its tax efficiency for non-residents. That said, the frozen maximum annual contribution, fixed at £20,000 until 2030, could expedite those decisions for taxpayers currently taking advantage of the tax perks.
Why Tax-Efficient Planning Matters More Than Ever for British Expats Moving to Cyprus
UK tax reforms will have an impact on almost every expat relocating to Cyprus, whether they’ll need to make judgements about the right ways to transfer their pensions, sell or transfer UK-based assets to avoid inheritance tax exposure, or rethink their asset sales in light of higher capital gains tax.
The best advice, as always, is to consult with an experienced wealth manager who has in-depth insights into the current tax regimes in both the UK and Cyprus, and who can apply that knowledge to your specific assets, wealth, income, and relocation plans.
Expats who complete their move to Cyprus will find that the localised tax regime is widely beneficial, with no national inheritance tax, limited capital gains tax scope, and appealing tax systems for overseas pension benefits. However, putting the right plans in place before the move can make all the difference.
Transferring assets out of the UK and into Cyprus can result in significantly lower long-term tax burdens. We recommend contacting either the Chase Buchanan Private Wealth Management Cypriot office or our UK Administration Centre for more personalised information and advice.
All investments carry risk, including the potential loss of capital. You should carefully consider whether investing is suitable for you, taking into account your personal circumstances, financial situation, and risk tolerance.
*Information correct as at July 2025
