Because Britons are being economically squeezed in between high income tax rates and high VAT rates, whilst witnessing cuts to public spending at the same time, there comes a point when many who are resident in the UK baulk at having to personally fund a nation on the brink of bankruptcy.

If you’re already wondering whether you could move abroad and find a new nation with a lower rate of tax, the good news is that there are very few places within Europe where you will actually pay more tax than in the UK!

Avoid the Higher Tax Traps in Europe

Let’s get the higher tax countries out of the way first – if you want to ensure you don’t pay more tax than you’re already facing in Britain then avoid Belgium, Austria, the Netherlands, Denmark, Norway and Sweden.  The latter takes the top tax crown with the highest rate of personal income tax hitting 57% in 2011!

Remember also to look beyond the income tax rates and add on any social security contributions you will have to pay.  Factor in capital gains tax and corporate taxation too if you’re going to be buying and selling or running a business abroad.

Europe’s Flat Tax Havens

Europe has a high number of so-called flat tax havens.  These are nations where governments have taken the bold and progressive decision to keep personal income tax, and in some cases corporate tax too, at a flat and stable rate across the board.

In such a country any expat will be easily able to work out how much tax they will have to pay…

One of the lowest flat tax rates available is 9% - and you can ‘enjoy’ this rate if you move to Montenegro for example.  Alternatively Albania taxes at 10% as does Bulgaria; it’s 15% in the Czech Republic or Lithuania, 21% in Estonia and 25% in Latvia.

These nations are using flat tax to try and improve inward investment levels.  In some cases the quality of life achievable and enjoyable is on a par or better than in the UK, in other nations it’s likely to be worse!  It will be up to you to explore a country that appeals to you – and to look beyond its rate of personal taxation to ensure you really could enjoy a decent life therein.

Accessing Lower Progressive Income Tax Rates in Europe

If you don’t fancy any of the flat tax countries then how about looking around for nations where even the top rate of tax is less than in the UK?  Countries that are very popular with relocating Britons include Ireland, Malta, Cyprus, France and Spain – and all of these nations have progressive tax rates that stop way before reaching the top rate of income tax in the UK – i.e., 50%.

In Ireland for example, you can earn the equivalent of 57,000 pounds as a married couple before you tip over into the higher tax bracket – and on this substantial income you will pay just 20% income tax.  In Cyprus, if you’re in receipt of a qualifying pension income you will pay a maximum of just 5% income tax.

France and Spain can’t really be classed ‘low-tax’ nations as their highest income tax rates are in the 40% bracket – however, they are still lower tax nations compared to the UK.

Never Forget to Factor in Tax

When planning a move abroad many would-be expats factor in the cost of living, the price of property and even self-funding medical care or buying international health insurance, but all too often tax is forgotten.

Yet tax can make all the difference between a nation being a good place to live or a restrictive place that really does limit an individual’s buying power.  As stated above the likes of social security contributions have to be factored in too – and you should remember that unlike in the UK, many countries have stopped speculative investment behaviour by heavily taxing short-term profits generated from the resale of real estate.

The good news is that when considering tax in some nations you will find the overall rate is lower, (as demonstrated above), and that you can claim many expenses back against your annual tax bill.  Some nations allow you to claim back your commute costs (Germany for example), others allow you to offset any self-funded medical treatment you seek (Ireland for example.)

So, consider tax, factor it in and look for the breaks – there really are plenty of countries where you will pay a lot less in terms of personal income tax than the UK.

Other Useful resources: -
http://www.deloitte.com/taxguides
http://www.pwc.com/gx/en/tax/international-tax-services
http://www.kpmg.com/Global/en/IssuesAndInsights/ArticlesPublications/Pages/Latest-indirect-tax-news-country.aspx

Share