RECORD numbers of Britons are fleeing the country for more appealing climates, lower taxes, more affordable property and fewer traffic jams. Latest figures from the Office for National Statistics show that 200,000 people left Britain for good in 2007, and the majority of them were retirees.
However, many of those who live the dream underestimate the financial implications. Many couples retiring to Spain, for example, think they will pay lower tax, only to be hit by a wealth tax of 0.2% to 0.5% of their worldwide assets.
And many couples fail to realise that in Spain and France, unlike in Britain, inheritance tax can be levied on assets passed between a husband and wife – and the rate is 30% on average.
According to a recent Sunday Times survey, Cyprus offers more advantages to the Briton pensioner who decides to live abroad.
Cyprus ranked first in the survey as it is regarded as the most suitable place for Britons to retire. The island is followed by Panama, France, Belize and Spain.
Cyprus is popular for 3 main reasons:
- Low income tax.
- Low property prices.
- No inheritance tax.
Property prices in Cyprus start from about £77,000 against £110,000 in Panama, £140,000 in France, £90,000 in Belize and £137,000 in Spain. (The Sunday Times admits however, that Cyprus is rapidly catching up with prices in more established retirement hotspots such as France and Spain).
Retired residents from overseas are taxed on their pensions at the rate of 5% above about €3,417 a year, whether it is a state, company or personal pension. To qualify for the low rate, you must have lived in the country for at least 183 days.
Alternatively, you can pay the normal rates, in which case the first €19,500 is tax free, rising to 30% on €36,301. So the smaller your income, the better off you are under the normal system.
Retired residents from overseas are taxed on their pensions at the rate of 0% in Panama, up to 50% in France, 1.75% in Belize and up to 42% in Spain.
The inheritance tax in Cyprus is 0% if the pensioner is no longer domiciled in the UK, in Panama and Belize it is also is 0%, while in France and Spain inheritance tax is 30%.
Among the advantages that Cyprus has is the short distance from Britain and English is widely spoken. A further bonus for Britons is that Cypriots drive on the left hand side of the road (most of the time).