25 Things You Need to Consider Before Moving to Gibraltar from the UK
25 Things You Need to Consider Before Moving to Gibraltar from the UK
November 27, 2022
Everyone dreams about living in Gibraltar. Enjoy the perfect lifestyle in retirement whilst taking full advantage of low tax in Gibraltar.
Whilst Gibraltar is a fascinating place you need to plan your move carefully before establishing residency in Gibraltar.
While the idea of living in Gibraltar may be incredibly appealing, it’s still an important, life- changing decision that should not be taken lightly. It’s easy to get carried away with excitement and neglect the research and planning process.
These are some of the things you need to consider before moving to Gibraltar from the UK.
The first thing you should do is catch a flight and visit Gibraltar to gain first hand experience of what it is like to live in Gibraltar. Every country is unique and different. You need to experience the way of life in Gibraltar before you put down your roots in a new place.
The fact that you speak the same language does not mean you will understand and immediately feel comfortable in the culture.
Gibraltar is not for everyone. There are many expats here and enjoy living in Gibraltar however there are those that visit and decide not to proceed with Gibraltar residency.
2. Renting a house in Gibraltar versus buying property in Gibraltar
You are under no obligation to purchase a property. It’s almost always advisable to rent first until you have tested the waters and are absolutely certain that you plan to stay. This gives you the freedom and flexibility to search for the right property within your price range in a district or area where you want to live and which is close to amenities.
You need to be aware of the conditions for renting an apartment. You should speak to a local estate agent to establish whether landlords are open to a six-month break clause in rental agreements in case you find a property in Gibraltar to buy much sooner than you expected.
The demand for property in Gibraltar remains driven by an influx of foreign buyers - mainly retirees, senior executives and high net worth individuals. Due to Gibraltar property supply shortages finding suitable accommodation in a convenient location can be challenging. These supply and demand imbalances are driving Gibraltar house prices considerably higher. A Post-Brexit Treaty with the European Union that allows visa-free travel within the Schengen Area is likely to enhance Gibraltar’s appeal and exacerbate the problem further.
3. Exiting the UK and the UK Statutory Residency Test
You need to be aware of the factors which determine whether you are considered a UK tax resident in a particular tax year. Clearly the number of days you physically spend in the UK is quite important but it’s not the only consideration. You also need to consider the pattern of your presence as well as your links with the UK including family, property, working life and social connections.
The 2013 UK Statutory Residency Test allows you to plan the date in which you become non-resident and determines how much time you can still spend in the UK based on your ties and connections without accidentally triggering UK tax residency.
Whilst exiting the UK cleanly at the end of the UK tax year on the 5th April is preferred there are situations where split year rules apply automatically – as follows:
i) You start full-time work overseas.
ii) Your spouse or partner is starting full-time work overseas.
iii) You cease to have a UK home.
There is little point in moving to Gibraltar to take advantage of a benign tax environment without having first planned your UK exit strategy. It is therefore advisable to seek appropriate tax advice from a relocation expert who understands the interaction between the UK and Gibraltar tax regimes and can help you optimise your tax position.
You should not forget to advise HMRC of your departure date by completing Form P85 which you can obtain from your local tax office or via www.hmrc.gov.uk
4. UK Domicile and UK Inheritance Laws
Whilst there is no inheritance tax to pay in Gibraltar the act of moving to Gibraltar and obtaining your Gibraltar residency certificate does not end your exposure to UK inheritance tax. If you are deemed UK domiciled (which most UK nationals born in the UK are) because your father considered the UK to be his permanent home at the time of your birth then you remain liable to UK inheritance tax on your entire estate.
You could potentially argue that you have shed your domicile of origin and acquired a domicile of choice because you are settling in Gibraltar with the intention of living there permanently. Unfortunately, there is absolutely no guarantee that this will stick. This path is fraught with difficulty as there are no fixed rules and the burden of proof always falls on you to demonstrate beyond any reasonable doubt that you have successfully acquired a domicile of choice.
You may also avoid UK inheritance tax after 5 years of non-UK tax residency, however it’s far more complicated than that as your UK ties including business interests, social and family connections, property ownership or your intentions to eventually return to the UK would trigger domicile for UK inheritance tax purposes.
HMRC have been known to challenge insignificant ties and if you return to the UK temporarily for say 1 year on health grounds that would be enough to trigger UK domicile. The good news is that once you settle in Gibraltar you can restructure your financial affairs to legitimately reduce your exposure to UK inheritance tax. This is probably a safer and better route.
5. The rights of British citizens to establish Gibraltar residency
All residency applications which are processed under the provisions of Gibraltar’s Immigration, Asylum and Refugee Act continue to treat British nationals who have no material connection with Gibraltar as EU nationals. Individuals wishing to take up residency in Gibraltar must do so as a ‘qualified person’. The practical effect of this is that as a British citizen you may only take up residency in Gibraltar on a self sufficiency basis if you are a UK pensioner who intends to make Gibraltar your permanent home and transfer your UK medical rights to Gibraltar or you enter the country on an employed or self-employed basis. You may also establish residency as a Category 2 individual. The requirements have become more onerous and are subject to change in the future. You are better off hiring the services of a professional firm that can secure Gibraltar residency for you.
6. Expat insurance
Your existing insurance policies may not provide continuity of cover. You must review your insurance to ensure these remain in force after you have left the UK. It’s important that you have sufficient protection in place to ensure your dependants can maintain their standard of living should an unthinkable event occur. Speak to a financial specialist about your needs and requirements and consider different types of insurance to protect yourself and your family.
7. Protection from currency fluctuations
If you move to another country you will have to convert your pounds sterling to local currency for your spending needs. This makes you susceptible to currency movements which may potentially reduce your disposable income in local currency terms. The benefit of moving to Gibraltar is that the pound sterling still reigns supreme so you completely eliminate currency risk. You can also maintain your wealth in sterling-denominated assets, providing a seamless transition to your new country of residence.
8. Quality of healthcare in Gibraltar
There is a very high standard of healthcare in Gibraltar, including an out-patient health centre, a community hospital, elderly residential care and a mental health institution. These services as well as any referrals to UK or Spanish-based specialist facilities or hospitals are completely free. However, to qualify for free healthcare you must have reached normal retirement age and request for your UK medical rights to be transferred to Gibraltar or work locally and contribute towards the social security system. If you retire to Gibraltar from the UK and have concerns about the response time of emergency services, waiting queues for operations, doctor to patient ratios or the conditions of the facilities; you can always pay for private health insurance to gain access to the best doctors in accredited clinics or hospitals.
Gibraltar is considered a safe place with a very low crime rate with incidences of violence a rare occurrence. Even though the Straits of Gibraltar are in a fault zone there is a very low risk (not more than 2%) of a potentially damaging earthquake in the area in the next 50 years.
10. Choice of goods
You will not end up frustrated by a lack of choice in Gibraltar. The supermarkets are well stocked with your favourite British brands, and many familiar British high street names such as Marks & Spencer, Monsoon, Mothercare, Evans and Matalan can be found on Main Street.
11. Gibraltar living costs
The fact that there is no VAT in Gibraltar does not make it a cheap place to live. Gibraltar living costs are 1.05X more expensive than the UK national average. It is also ranked as the fourth most expensive place to live in the United Kingdom and overseas territories. You need to ensure that your pensions, savings and investments can sustain your lifestyle in retirement. Although clearly its not all about money as the high quality of life in Gibraltar may be more aligned with the things you value and which are important to you.
12. Schooling in Gibraltar
You need to consider your children’s schooling requirements. You will be pleased to hear that Gibraltar provides an excellent standard of education which is directly comparable with the UK. Instruction is in English and follows the UK national curriculum. There are a few private schools in Gibraltar, however the public schools are just as good. Local students pursue degree level courses at UK universities.
13. Social life in Gibraltar
Although making new friends as an adult can be daunting, developing a social life in Gibraltar can be achieved with minimal effort. For such a small place Gibraltar has a surprisingly bustling social scene. It has a rich tradition in arts and culture, with a large number of sporting facilities for recreational use and its fair share of tourist attractions as well as a wide selection of restaurants with a choice of international cuisines. The best way to meet people is by getting involved in sports or leisure activities.
14. Does Gibraltar’s size matter?
Gibraltar is small and crowded, with a surface area of just 6.8 kilometres providing a home to 34,000 people. Those that claim that this makes it too small a place to live seem to forget that the hinterland is right on your doorstep. It’s no different to living in Castle Combe in Wiltshire and deciding to drive to Bath. You can easily cross the land border into Spain to explore the historic cities of Seville and Granada or make the short Straits crossing and visit Morocco in Africa. You can also own a second home in Spain.
Crossing the land border into Spain can be tedious at times. However, if the current negotiations between the UK and the EU culminate in a treaty in which Gibraltar joins the Schengen Area, the physical barriers at the land border will be removed, facilitating considerably the free movement of both vehicles and persons. Gibraltar tax residents will enjoy unfettered access to the Schengen Area and not be subject to the post Brexit restrictions of 90 out of 180 day rules.
15. Moving to Gibraltar and establishing residency in Gibraltar
If you are considering living in Gibraltar and establishing your residency in Gibraltar you need to know that to be considered ordinarily resident in Gibraltar for any year of assessment you need to be present in Gibraltar for a minimum period of 183 days in aggregate or spend in excess of 300 days over three consecutive years. Essentially, you need to be present in excess of 100 days per year. Being ordinarily resident does not offer you any protection nor does it guarantee that you will not be challenged by a third country concerning your tax residence by virtue of the number of days you spend there. If you travel back to the UK you need to be mindful of the UK Statutory Residency Test which determines, based on your ties, the number of days you can spend in the UK without retriggering UK tax residency. If you have children, grandchildren, elderly parents or even business interests there you need to consider these commitments before you settle in Gibraltar. The point to remember is that each country has its own distinct rules regarding tax residency. For example, if you spend more than 183 days in Spain or your centre of economic and vital interests are in Spain, you are taxed in Spain. It’s that simple.
You need to be comfortable spending more than 100 days in Gibraltar each year. That’s the first thing to get your head around. You also have to give some thought to your overall travel plans to ensure your residency in Gibraltar is not compromised as a result of time spent in a third country(ies.)
16. Expat financial advice in Gibraltar
One of the most difficult areas to navigate when you are planning a life in Gibraltar as an expat is how to manage your finances. You need to consider the financial implications of moving to another country early on in the process.
You may feel very comfortable dealing with your current UK-based financial adviser with whom you have had an excellent personal relationship spanning many years or even decades. However, due to the complex cross border nature of the financial advice you will require you are better off with a local financial adviser who has a deep understanding of the differences and interaction between the UK tax system and tax in Gibraltar.
It’s advisable to work with a relocation expert/financial adviser who is authorised and regulated by both the UK Financial Conduct Authority as well as the Gibraltar Financial Services Commission and that provides tailored expat financial advice covering tax, financial and retirement planning advice. You should not underestimate the importance of having a professional by your side who can help you maximise the opportunities and avoid the pitfalls that affect those who are less well prepared. We recommend that you begin the process early well before your eventual move.
17. Cashflow analysis
We have already established that Gibraltar living costs are marginally higher than those in the UK. What we haven’t told you is that you will probably end up having more spending money in Gibraltar than you would back home in the UK due to a lower tax burden. You do however need to ensure that your incomings comfortably exceed your outgoings so you may sustain your lifestyle in retirement. Whether you are tight for money or just financially disciplined it makes no difference - you should draw up a budget and stick to it. You need to accept that there will inevitably be unexpected costs along the way which you will need to absorb.
We recommend the use of sophisticated cash flow analysis tools for budget setting. Based on a set of interchangeable variables (such as size of investment, future income requirements, expected investment returns, anticipated inflation rates, tax rates and life expectancy) we can help to determine on a worst-case, base-case and best-case scenario when your pensions, savings and investments are likely to run dry. Whilst you need to be able to enjoy your lifestyle in retirement you should also be careful not to live beyond your means and hopefully be able to pass on what is left of your estate to your children/heirs.
18. Working in Gibraltar
If you are thinking of moving to Gibraltar to pursue a professional career you will find plenty of well-paid jobs in Gibraltar in the gaming, financial services, crypto, compliance, insurance, legal and accountancy sectors. The work culture is very similar to the UK, it’s fast paced and dynamic with a completely different mindset to mainland Spain.
19. Opening a bank account in Gibraltar
This might sound a bit strange but opening a bank account in Gibraltar, especially if you are completely new to the country, can be terribly complicated. You need to demonstrate that you have close ties to the territory through employment, property ownership or business interests to open a bank account. Although there are a number of banks in the territory the most popular ones for expat retirees are NatWest Bank and the Gibraltar International Bank.
20. Moving your belongings to Gibraltar
If you are shipping your belongings to Gibraltar you need to start packing early. Make a decision about what you want to bring with you, what can be put in storage and what you wish to sell or give away to charity. It is probably not a good idea to bring too much as you want to start afresh and buy new things over time to fit in with your new life. There are a number of firms specialising in removals from anywhere in the UK to Gibraltar. Redwood International have a good reputation in the marketplace for removals and relocation services.
21. Restructuring your financial assets to pay minimal tax in Gibraltar
The implementation of a double tax treaty between the UK and Gibraltar, which came into force in March 2020, abolishes double taxation of income and capital gains but not UK dividends. These are potentially exempt in Gibraltar as well as in the UK after five complete tax years of non-UK tax residency. Whilst cross border tax issues add another layer of complexity to your financial situation it also offers a tax planning opportunity to restructure your financial assets in a way which minimises your tax burden.
The first thing you need to do before you even consider moving to Gibraltar is to learn how Gibraltar tax works. You might be obsessed with the idea of retiring to Gibraltar but you need to put that at the back of your mind and prioritise. It makes sense to speak to a local professional first about income tax in Gibraltar.
Ideally, you want to pay less tax in Gibraltar than you would back home to increase your disposable income. With specialist advice you can restructure your pensions, savings and investments to be tax efficient in Gibraltar.
You really need to have a good grasp of Gibraltar tax before hopping on a plane because there are serious consequences if you get it wrong. There is no point in being penny wise and pound foolish. It is worth engaging the services of a tax adviser who can simplify the process and avoid any nasty tax surprises.
22. Ensuring your UK investments are suitable in Gibraltar
Some of your pensions, savings and investments lose their tax efficiency when you are no longer a UK tax resident. It’s important that these assets are tax optimised in line with Gibraltar tax. You also need to think about how much you are prepared to invest, your risk tolerance and your investment horizon as well as accessibility to capital. If you depend on the performance of your investments to sustain your lifestyle in Gibraltar you must not neglect your investments. You need clear goals and not allow your emotions to get in the way of a good long-term investment. It’s important you consult a professional who specialises in giving investment advice to expats living in Gibraltar.
23. Reviewing your UK pensions
British expats often consider their UK pensions as their most important asset and main source of income to sustain their lifestyle in retirement. If you are considering moving to Gibraltar with the intention of living in Gibraltar permanently then you need to find out what will happen to your UK pensions when you have moved abroad, how it can be managed and how much tax you are expected to pay. You can of course leave your pensions in the UK and be subject to UK tax which can be as high as 45% on any pension drawings. The alternative is to transfer your UK pension benefits to a Gibraltar based Qualifying Recognised Overseas Pensions Scheme (QROPS) which limits the amount of Gibraltar tax payable on your pension income to just 2.5% tax.
There are also death tax charges to consider. If your UK pension benefits remain in a UK pension scheme and you die after the age of 75 your beneficiaries would pay death tax charges at their marginal rate of tax which could be as much as 45%. The tax treatment inside a QROPS would be considerably more favourable. If your spouse is the nominated beneficiary, and they stay put in Gibraltar, the tax due on any pension drawings would be capped at 2.5%. When your spouse eventually passes away, provided you have both been UK non-residents for at least five complete tax years, your UK-based beneficiaries would be entitled to the residual value of your pension fund without being subject to UK inheritance tax.
You also need to think about the UK lifetime allowance charge. If your UK pension fund is close to or likely to exceed the lifetime allowance limit which is currently £1,1073,100, you should consider moving your UK pension benefits to a QROPS to avoid a potential LTA charge of up to 55% in the future.
There are various options available to you with different tax implications. It is very important you receive pension advice by a suitably qualified financial adviser in Gibraltar before making any pension decisions.
24. Estate planning in Gibraltar with UK domicile and UK inheritance tax in mind
You should review your estate planning before moving to Gibraltar. Whilst there is no inheritance tax to pay in Gibraltar you are still probably considered UK domiciled for UK inheritance tax purposes. Your estate planning arrangements therefore need to take UK inheritance tax laws into account.
If your estate is already in excess of the nil rate band and likely to continue growing in the foreseeable future you need to consider your options. It’s worth pointing out that inheritance tax is a voluntary tax. There are ways of reducing your UK IHT exposure whilst still UK tax resident. You can make gifts to your children and/or establish a UK bond settled inside a discounted gift trust and protect against any potential IHT liability, that could arise if you die within the seven years of making the gift, by taking out a gift inter vivos life assurance policy.
There are tax planning opportunities for expats too which help reduce your exposure to UK inheritance tax. You can invest in a totally flexible pension arrangement known as a qualifying non-UK pension scheme (QNUPS) to protect yourself from UK inheritance tax. Even though there are no specific guidelines regarding the level of post-tax contributions you can make into the pension scheme, these must be reasonable and commensurate with your overall wealth, earnings, age and future income requirements to avoid being captured by UK income tax anti-avoidance provisions.
You should take suitable advice from a qualified professional to ensure your assets are passed on to your heirs in a timely manner with minimum administration and taxation.
25. Selling your UK main residence and Principal Private Residence Relief
You may have to sell your main UK residence to fund the acquisition of a property in Gibraltar. It would be advantageous to do so whilst CGT exemptions remain in place. If you sell your UK property before leaving the UK it’s obviously exempt from UK capital gains tax. If you sell your main home within nine months of formally exiting the UK the non-resident capital gains exemptions relief generally sticks. After nine months the exemption gets diluted. Your new home in Gibraltar will become your principal place of residence from the date of your move.
If it’s only a few months past the 9-month window this should not be a problem. However, if it’s a couple of years past the 9-month period then some of the gain would be chargeable to CGT.
There are three methods of calculating the gain arising from the sale of your property when non-resident in the UK, as follows:
The Default Method
The default method of calculating the gain arising will be to establish the uplift in the property’s value from 6 April 2015 to the date of sale, after including all deductible incidental costs of disposal, such as legal and estate agent fees.
The Straight Line Method
Alternatively, it is possible to elect to time-apportion the gain on a straight-line basis based on the original purchase cost of the property, with the relevant proportion being the gain accrued from 6 April 2015.
The Original Cost Method
It is also possible to elect to use the original cost of the property rather than its value at 5 April 2015 in arriving at the taxable gain.
From these three methods the calculation which results in the lowest tax can be selected. Importantly however when applying any of the calculations you also retain your entitlement to principal private residence relief.
It’s advisable to seek UK tax advice to ensure you eradicate or minimize any potential UK CGT liability.
If you are moving to Gibraltar you should engage the services of a UK real estate agent as soon as practically possible so you can secure a property sale whilst the CGT exemptions remain.
Moving to Gibraltar is an exciting and amazing opportunity that will change your life forever. However, the actual relocation can be an extremely challenging experience. You need to work with a local firm in Gibraltar that can handle the entire process and ensure a smooth and seamless transition to your new country of residence.
Give us a call today on Tel: +44 207 998 0570 or e-mail email@example.com to book your free, no obligation consultation.