By now, the Italian flat tax regime for High Net Worth individuals has been running since 2017 but has probably seen more of an uptake in recent years. It has become more interesting for many HNW individuals to establish residency in Italy, even if you have business interests elsewhere and also when the flat tax rate has increased from €100000 in 2017 to €200,000 and from the 1st Jan 2026 increased to €300,000.
The Italian flat tax regime for HNW and the UK pension opportunity
By Gareth Horsfall
This article is published on: 7th September 2026
It is commonly thought that once accepted onto this tax regime that there is little financial planning to be done and you can largely leave your financial affairs untouched. This might well be the case, but it leaves a hugely unexplored financial planning opportunity by most advisers and accountants alike – liberation from UK pensions.
In the case of a UK pension (or most other country pensions), if you remain a resident in Italy after the end of the 15 years period, and you are over the age at which you can access your UK pension then any lump sums and / or income drawdowns from this pension will likely be subject to your progressive marginal income tax rates.
A lot depends on where you might be resident at the time of taking your retirement scheme benefits, but in most European countries, for example, the income from your UK pension will be taxed in Italy at the following rates: 23% rising to 35% and 43%)
On the other hand, if you were to generate income from a portfolio of assets or a highly tax efficient Investment Bond, you would only be charged capital gains and / or non-earned income tax (26% flat rate in Italy) on the assets and not on the whole income drawdown.
Therefore, if it were possible to convert your UK pension pot into a standard investment portfolio you could potentially free yourself of future income tax liabilities.
The good news is that it is possible with careful planning. Firstly, you would need to consider your future residency arrangements when taking benefits from the pension pot and assuming you are already above the UK pension access age (55 or 57 from 6th April 2028), then you could encash your UK pension and invest the proceeds in an investment portfolio, and in the process have created a much more tax efficient future income stream for yourself.
If you are on the HNW flat tax regime, you have established residency outside the UK and therefore under the double taxation treaty between the UK and Italy you only need to pay tax on UK pension income in your country of residence.
However, any encashment should be exercised with caution.
As a result of establishing residency outside the UK, the UK government will automatically apply a progressive emergency tax code to your encashment (20%, 40% and 45%) and assuming the UK pension pot is of sizeable value then this could mean an equally sizeable HMRC tax bill.
But, because you can prove residency outside the UK, you are covered by the UK /Italy double taxation treaty, and any tax will be refunded by HMRC on request of an NT (non-taxable) code.
However, there is a way to avoid paying tax to HMRC altogether, with a little careful planning.
If you think that might be of interest to you, please feel free to get in touch on
gareth.horsfall@spectrum-ifa.com or message me on +39 333 649 2356