Road to Naples — Blog No. 3 | The UK Exit Side of the Italian Flat-Tax Election

By Dr Clifford Frank LLM(Tax) SJD HDipICA ATT

In the first two posts in this series I addressed why Italy has moved to the centre of the UK ultra-high-net-worth planning conversation in 2026, and I set out in detail the technical architecture of the Italian Article 24-bis flat-tax regime as amended by the Legge di Bilancio 2026. Those posts addressed the destination. This post addresses the journey. It is a question I am asked, in some form, by almost every prospective client who walks into 33 Cavendish Square: if I decide to make the move to Italy, how do I leave the United Kingdom cleanly, and what are the traps that I need to navigate on the way out?

The answer matters because the Italian flat-tax regime is, in cost-benefit terms, only ever as good as the UK exit that precedes it. A €300,000 annual substitute tax in Rome means very little if the individual finds themselves, two or three years later, charged to United Kingdom income tax or capital gains tax on income and gains they thought were safely outside the British tax net. The UK has a sophisticated and unforgiving set of statutory anti-avoidance rules designed precisely to catch the individual who leaves the UK, takes a foreign tax break, and then returns. To plan a move to Italy without engaging seriously with the United Kingdom’s Statutory Residence Test in Schedule 45 to the Finance Act 2013, the temporary non-residence rules in Part 4 of that Schedule, and the related provisions in the Income Tax (Earnings and Pensions) Act 2003, the Income Tax (Trading and Other Income) Act 2005 and the Taxation of Chargeable Gains Act 1992, is to plan only half of the move.

This post sets out the framework as I see it after many years of practice in this area, working through the four questions every UK leaver must answer before they board the flight to Rome or Milan. To make the technical points concrete, I have illustrated each section with a worked example using three distinct hypothetical clients (whom I shall call, prosaically, Mr A, Mr B and Mr C) with deliberately different fact patterns, so that each example stands on its own facts. The figures in those examples are illustrative only and are intended to show the order of magnitude of the issues, not to substitute for advice in any individual case.

The First Question: Am I Actually Leaving the United Kingdom for Tax Purposes?

The starting point, and one that surprises a great many clients, is that leaving the United Kingdom is a matter of statute, not of intention. An individual does not cease to be UK tax-resident simply because they have packed their belongings, terminated their lease, and bought a property in Capri. They cease to be UK tax-resident because the Statutory Residence Test, which is set out in Part 1 of Schedule 45 to the Finance Act 2013 and has applied since 6 April 2013, says they have. Everything that follows in any departure plan depends on that single statutory determination.

The Statutory Residence Test, which I shall refer to throughout as the SRT, operates through three sets of tests applied in order of priority. The automatic overseas tests come first. Paragraph 11 of Schedule 45 states that there are five such tests, but the fourth and fifth (paragraphs 15 and 16) apply only where the taxpayer dies during the relevant tax year and are variants of the second and third tests respectively. For a living UK leaver moving to Italy, the three operative tests are therefore the first (resident in one or more of the three previous tax years and fewer than sixteen days in the UK), the second (not resident in any of the three previous tax years and fewer than forty-six days in the UK), and the third (sufficient hours of overseas work, no significant break, fewer than ninety-one days in the UK and no more than thirty days of more than three hours’ UK work). If any one of these is met, the individual is automatically non-resident regardless of any other factor. The automatic UK tests come next. Paragraph 6 of Schedule 45 states that there are four such tests, but the fourth (paragraph 10) applies only on death; for a living taxpayer there are three to consider — the 183-day test, the home test in paragraph 8, and the full-time UK work test in paragraph 9. If any of them is met (and no automatic overseas test was met), the individual is automatically UK-resident. If none of those tests resolves the position, the sufficient ties test is applied, which combines a count of days spent in the United Kingdom with a count of UK ties (family, accommodation, work, ninety-day, and country) to produce a binary result.

For a UHNW individual making a deliberate departure to Italy, the most useful automatic overseas test is usually the third (paragraph 14 of Schedule 45). Where none of the automatic overseas tests is satisfied, the sufficient ties test must be navigated with care, because the ties most commonly retained by a UK leaver going to Italy — a property kept in London for visits, children at school in England, a business interest still requiring physical presence — are precisely the ties that bring the individual back into UK residence.

The practical lesson for any prospective Italian elector is this. The departure year must be planned around the SRT, not around the convenience of the Italian Anagrafe. Day counts must be tracked with precision from the day the individual claims to have left. UK ties must be reduced before departure, not on departure. A UK property cannot simply be kept available indefinitely; under paragraph 34 of Schedule 45, an accommodation tie arises where there is a place to live in the United Kingdom that is available to the individual for a continuous period of at least ninety-one days during the tax year and the individual spends at least one night there in that year (with the threshold extended to sixteen nights in the case of a close relative’s home). A UK business interest that requires regular physical presence creates a work tie. And the deeming rule in paragraph 23 applies where the individual was UK-resident in one or more of the three preceding tax years, has at least three UK ties for the year, and has more than thirty qualifying days (a “qualifying day” being one on which the individual is present in the UK at some point but not at the end of the day); each such qualifying day in excess of thirty is then treated as a full UK day. The threshold matters: only the qualifying days after the first thirty are deemed; the first thirty are disregarded for this purpose. It is the trap that most often catches the inattentive who travel through the UK regularly without staying overnight.

In all but the simplest cases, the year of departure should be projected, day by day and tie by tie, against the SRT before any irrevocable steps are taken in Italy. There is no point in registering with the Anagrafe della popolazione residente if HMRC will later determine that the individual was a UK tax resident throughout the relevant year regardless.

Worked Example 1: The Sufficient Ties Trap

To illustrate the point, take the case of a hypothetical client whom I shall call Mr A. Mr A has been UK-resident for the past twenty years and is, on the SRT classification, a “leaver” (UK-resident in one or more of the three previous tax years). He intends to move to Italy on 1 June 2026 and to elect into the Article 24-bis regime from the calendar year 2026 (he will spend at least 183 days in Italy during 2026, satisfying Article 2 TUIR). His circumstances during the United Kingdom tax year 2026/27 are as follows. He retains his Mayfair flat, which is available to him throughout the year (accommodation tie). His nineteen-year-old son remains at Imperial College London (no family tie, because the child is over eighteen; even had the son been under eighteen, the full-time UK education exception in paragraphs 32 and 33 of Schedule 45 might have prevented a family tie arising, provided the statutory conditions were met, including that the child spends fewer than 21 days in the UK outside term-time). He continues as a non-executive director of a UK PLC and attends three board meetings in London during 2026/27 (no work tie, because the work-tie threshold of 40 working days is not crossed). He was UK-resident in 2025/26 and spent more than ninety days in the United Kingdom in that year (90-day tie). And he plans to spend “around 80 days” in the United Kingdom during 2026/27, visiting his son and attending board meetings.

The analysis is as follows. None of the automatic overseas tests is satisfied: he spends more than fifteen days in the UK; he was UK-resident in the preceding three years (so the forty-six-day test does not apply); he is not working sufficient hours overseas; and the fourth and fifth tests do not arise as he does not die during the year. None of the three automatic UK tests applicable to a living taxpayer is satisfied either: fewer than 183 days, no UK home meeting the second automatic UK test (because he establishes an overseas home in Italy from June 2026 in which he spends more than thirty days), and no full-time UK work. The sufficient ties test therefore determines the position. Mr A is a leaver. He has two UK ties: the accommodation tie (Mayfair flat available, at least one night spent there) and the 90-day tie (more than ninety days in 2025/26, one of the two preceding tax years). On 80 UK days, the relevant leaver threshold (paragraph 18 and Table A in HMRC’s RFIG20520) is “46–90 days: resident if 3 ties; 91–120 days: resident if 2 ties.” Mr A is at 80 UK days with two ties, which on the leaver matrix means he is non-resident. The position is, however, alarmingly close to the line: a single additional tie tips him into UK residence for the entire 2026/27 tax year, regardless of the date on which the Italian Anagrafe records his arrival. Plausible candidates on these facts would be a family tie, if a minor child remained in the UK and the full-time UK education exception in paragraphs 32 and 33 of Schedule 45 were not satisfied, or a work tie if his UK board commitments and other UK business activities increased beyond the 40-day work-tie threshold. This is the kind of analysis that must be done in advance, not after the fact.

The Second Question: Can the Tax Year of Departure Be Split?

Where an individual is UK-resident under the SRT for the tax year of departure but ceases to be resident during the course of that year, the eight cases in Part 3 of Schedule 45 to the Finance Act 2013 may permit the tax year to be split into a UK part and an overseas part. If split-year treatment applies, the individual is taxed as a UK resident only in respect of the UK part of the year and as a non-resident in respect of the overseas part. This is, in my experience, one of the most useful and one of the least well understood features of the United Kingdom’s residence rules.

For a person leaving the United Kingdom for Italian residency, the cases that most commonly apply are Case 1 (starting full-time work overseas), Case 2 (the partner of someone in Case 1), and Case 3 (ceasing to have any home in the United Kingdom). Case 3, the conditions of which are set out in paragraph 46 of Schedule 45, is the most relevant in classical UHNW planning because it does not depend on employment. The statutory conditions are exacting. The taxpayer must have been UK-resident in the preceding tax year. The taxpayer must, at the start of the year of departure, have had at least one home in the United Kingdom but, during that year, cease to have any home in the United Kingdom and have no home in the United Kingdom for the remainder of that year. The taxpayer must spend fewer than sixteen days in the United Kingdom in the part of the year beginning with the day on which the home ceased. The taxpayer must not be resident in the United Kingdom in the next tax year. And, at the end of the six-month period beginning with the day on which the UK home ceased, the taxpayer must have a sufficient link with a country overseas — being treated, for that purpose, as having such a link if (and only if) the taxpayer has become tax-resident in that country, or has been present in that country at the end of every day in the six-month period, or has his or her only home (or all homes if more than one) in that country.

Case 3 is, however, a relief that is easy to lose. An individual who retains the London flat “for visits” and spends a single night there in week three after departure has not ceased to have a home in the United Kingdom for Case 3 purposes, and the relief falls away. The split year under Case 3 is then unavailable, and, unless another split-year case applies on the facts (for example Case 1 if the individual has started full-time work overseas, or Case 2 if the individual is a partner accompanying someone in Case 1) or the individual is non-resident for the whole tax year under the SRT, the whole tax year remains within the UK resident basis of taxation.

The interaction with the Italian regime is critical here. An individual aiming to crystallise foreign income or capital gains under the protection of Article 24-bis must take care that those events fall within the overseas part of a split year, and not within the UK part. A capital gain realised on, say, 30 May, where the individual moved to Italy on 1 June and split-year treatment applies from 1 June, will be a UK-taxable gain. A gain realised on 15 June will (subject to the technical caveats noted below) be in the overseas part and will generally be outside the United Kingdom’s charging provisions in TCGA 1992. The window between disposing of an asset and the deemed departure day is therefore the most tax-sensitive period in the entire move.

Technical Caveats Applicable to the Worked Examples

Before turning to the worked examples, four technical caveats need to be flagged, as each may displace the apparently clean conclusions that follow.

First, on the United Kingdom side, the proposition that capital gains in the overseas part of a split year are outside the UK charge is subject to important exceptions. Non-residents remain within the UK charge on direct or indirect disposals of UK land and UK property-rich assets under the rules in TCGA 1992 sections 1A and Schedule 1A, on assets used in a UK trade carried on through a branch or agency under section 10, and on disposals caught by other specific anti-avoidance provisions. The temporary non-residence rules, addressed in the next section, are themselves a free-standing override; for capital gains purposes, the rule in TCGA 1992 section 10A is principally concerned with assets held at the date of departure, but certain assets acquired during the period of temporary non-residence may also be caught where they are connected with an earlier UK-residence period, for example through no-gain/no-loss interspouse transfers, rollover relief mechanics under section 152 TCGA 1992, or other connected-party or replacement-asset rules.

Second, on the Italian side, Article 24-bis comma 1, third sentence (terzo periodo), TUIR contains a carve-out for capital gains on qualified participations (partecipazioni qualificate) realised in the first five tax periods of validity of the option, which the Agenzia delle Entrate’s Circolare n. 17/E del 23 maggio 2017 explains in detail. Such gains do not benefit from the substitute tax during that initial five-year window and are subject to ordinary Italian taxation. Whether a holding is a qualified participation depends on the tests in Article 67 TUIR (broadly, more than 2% of voting rights or 5% of capital for listed companies, or more than 20% of voting rights or 25% of capital for unlisted companies). The worked examples below proceed on the express assumption that the shares in question are not qualified participations and that the assets disposed of are not UK land, UK property-rich, or held in a UK branch or agency.

Third, the UK terminology of “temporarily non-resident” requires care. The technical statutory test in Part 4 of Schedule 45 turns on “sole UK residence” and “non-sole UK residence” — concepts that take split years and treaty residence into account — rather than the looser concept of UK residence under domestic law alone. The reader is referred to HMRC’s manual at RFIG21510 onwards for the detailed framework.

Fourth, where a foreign tax has been paid on the same gain, double tax relief may in principle be available. In the case of the Italian €300,000 substitute tax, however, credit against any UK charge that arises on return is unlikely in many cases because the substitute tax is a forfait paid annually irrespective of the gain rather than a tax computed by reference to the particular disposal. The position is fact-sensitive and must be analysed on a case-by-case basis.

Worked Example 2: The Cost of Mistiming a Disposal

To take a concrete illustration of the split-year point, suppose Mr B (different facts from Mr A) has been UK-resident for many years and holds a portfolio of unquoted non-Italian, non-UK-property-rich shares which are not a qualified participation for Italian purposes. The shares have a base cost of £2 million and a market value of £12 million. Mr B intends to move to Italy on 1 June 2026 and, in advance of departure, completes the sale of his London home on 31 May 2026 with vacant possession given on the same day. He neither owns nor rents any further UK accommodation thereafter. He spends fewer than sixteen days in the United Kingdom between 1 June 2026 and 5 April 2027 and registers with the Anagrafe in Italy on 1 June 2026, becoming Italian-resident under Article 2 TUIR for the calendar year 2026. On the assumed facts, Mr B is UK-resident for 2026/27 under the SRT before applying split-year treatment, for example because he spends sufficient UK days in that tax year and has the required number of UK ties under the leaver matrix. He then qualifies for Case 3 split-year treatment from 1 June 2026 because he ceases to have any UK home, spends fewer than 16 days in the UK thereafter, is non-UK resident in 2027/28, and establishes the required overseas link with Italy.

The question is whether to crystallise the £10 million gain on, say, 30 May 2026 (the UK part of the split year, before the home is given up) or on 15 June 2026 (the overseas part of the split year, after the home is given up).

Disposal on 30 May 2026: the disposal falls in the UK part of the split year. Mr B is taxed as a UK resident on the £10 million gain. At the prevailing rate of capital gains tax of 24% on the upper-rate slice for non-residential gains (the rate having been increased by Finance Act 2025 section 7, with effect for disposals on or after 30 October 2024), the UK liability is approximately £2.4 million.

Disposal on 15 June 2026: the disposal falls in the overseas part of the split year. Mr B is treated as non-UK-resident for that period. Subject to the four caveats above (UK land or property-rich asset rules, UK branch or agency assets, the qualified participation carve-out under Article 24-bis, and the temporary non-residence rules in the section that follows), the gain is generally outside the UK charge under TCGA 1992. On the Italian side, the gain is foreign-source and, on the assumed facts, falls within the €300,000 annual substitute tax, with no further marginal Italian charge on this gain. The UK saving of £2.4 million is the difference that careful timing buys, and demonstrates why the split-year analysis is among the most consequential pieces of work in any UK-Italy departure.

A health warning, however, is essential. The protection achieved by deferring the disposal to 15 June is conditional. If Mr B subsequently returns to the United Kingdom within the five-year temporary non-residence window and the rules apply (as I address in the next section), the gain is dragged back into UK charge in the year of return. The split-year analysis solves the problem of the year of departure; the temporary non-residence analysis solves the problem of the years that follow.

The Third Question: Are the Temporary Non-Residence Rules a Trap That Will Catch Me?

If the first two questions concern getting out of the UK tax net, the third concerns staying out. This is where the planning most often goes wrong, and where my advice is most often at variance with the optimism of clients who believe that they can take a five-year sabbatical in Italy, realise their accumulated capital gains in Rome under the Article 24-bis €300,000 cover, and then return to the United Kingdom.

The relevant provisions are in Part 4 of Schedule 45 to the Finance Act 2013, supplemented by a constellation of substantive charging provisions across the tax code. The principal provisions for present purposes are: section 10A of the Taxation of Chargeable Gains Act 1992 (capital gains accruing on assets held at the date of departure); ITTOIA 2005 sections 401C, 408A and 413A (close-company distributions and stock dividends, where the company is a close company and the individual is a material participator or an associate of such a participator); ITTOIA 2005 section 465B (chargeable event gains on life policies and capital redemption policies); ITTOIA 2005 section 832A (relevant foreign income remitted during a period of temporary non-residence); ITA 2007 section 812A (where the non-resident income-tax liability limitation is in point); and ITEPA 2003 sections 576A and 579CA (relevant withdrawals from registered pension schemes and relevant non-UK schemes over the £100,000 aggregate threshold), together with related ITEPA provisions for employment-related securities, securities options and certain employment-income lump sums.

Stripped to its essentials, the rule is as follows. An individual is “temporarily non-resident” if three conditions are met cumulatively. First, the individual had sole UK residence (broadly, UK residence under the SRT and not treated as resident in another State under a double tax treaty tie-breaker) for at least four of the seven tax years immediately preceding the year of departure. Second, the period of non-sole UK residence does not exceed five years. Third, the individual then resumes sole UK residence. Where all three conditions are met, identified categories of income and gains arising during the period of temporary non-residence are dragged into UK charge in the tax year of return. Practitioners often shorthand the second condition as “non-resident for fewer than five complete tax years”, but the better framing is the statutory “period not exceeding five years” formulation, which — depending on the timing of departure and return and the application of split-year treatment — can require the individual to remain non-resident for well over five calendar years to escape the rule. The reader is referred to HMRC’s Residence and FIG Regime Manual at RFIG21510 for the detailed framework.

The categories caught include capital gains accruing in the intervening years on assets held at the date of departure under TCGA 1992 section 10A; close-company distributions and stock dividends paid to a material participator (or an associate of such a participator) under ITTOIA 2005 sections 401C, 408A and 413A, with ITA 2007 section 812A operating where the income-tax liability limitation for non-residents is in point; chargeable event gains on life assurance, life annuity and capital redemption policies under ITTOIA 2005 section 465B; relevant foreign income remitted during a period of temporary non-residence under ITTOIA 2005 section 832A; relevant withdrawals from registered pension schemes under ITEPA 2003 section 579CA; relevant withdrawals from relevant non-UK schemes under ITEPA 2003 section 576A; and certain employment-income items including employment-related securities, securities options and specified lump sums. Each provision contains its own definition of the protected category and its own mechanics, but the architecture is consistent: if the individual returns to the United Kingdom within the five-year window, the gains and income that arose during the absence and that fall within these provisions are taxed in the year of return as if they had arisen in that year.

The legislation is express that the existence of any double taxation arrangement does not prevent the United Kingdom from charging that income or those gains. In other words, the Italy–United Kingdom Double Taxation Convention, signed at Pallanza on 21 October 1988, which would otherwise allocate taxing rights on capital gains and certain investment income to Italy under Article 13 and the relevant dividend, interest and royalty articles, is overridden by the temporary non-residence rules where the conditions for those rules are met. This treaty override is the single most important point in the entire UK exit analysis, and it is the point on which I have most often had to disabuse new clients of confident assumptions formed before they came to see me.

The practical consequence is that an Italian Article 24-bis election, even where it produces flawless Italian compliance, does not protect the individual against a United Kingdom charge on return if the individual returns within the five-year window. The Italian €300,000 substitute tax payment is fully recognised in Italy. It is not, however, generally recognised by HMRC as discharging the United Kingdom’s separate charge under section 10A TCGA 1992 or the relevant ITTOIA 2005 and ITA 2007 provisions, because the Italian charge is not a tax on the specific gain or item of income but a forfait paid annually irrespective of the underlying figures. This should not be confused with ordinary foreign tax paid on the same item of income or gain, for which double tax relief may be available; the difficulty with Article 24-bis is precisely that the substitute tax is an annual forfait, not a tax computed by reference to the specific disposal or distribution. The interaction is binary: either the period of non-residence exceeds five years (and the Italian regime, with its fifteen-year duration, is well capable of supporting that), or the individual must accept that the protection of Article 24-bis is contingent and that an early return will trigger a UK reckoning on a defined category of income and gains, with double tax relief unlikely to be available in many cases.

In practice, for a client moving from the United Kingdom to Italy under the Article 24-bis regime, the planning sequence I most commonly recommend is the following. First, ensure that the individual’s period of non-residence under the SRT exceeds five years, taking into account any split-year treatment in the year of departure or year of return. Second, structure the timing of significant disposals and the receipt of significant investment income so that, even if the individual were to return early, the temporary non-residence rules do not catch the items in question — by, where possible, completing disposals before departure (with split-year planning) or after the close of the five-year window. Third, where flexibility on the date of return is genuinely required, model the cost of an earlier return, including the United Kingdom charge that will arise, against the cost of remaining in Italy for the full five-year period. The numbers, more often than not, point firmly in the direction of patience.

Worked Example 3: Three Scenarios on Return

To illustrate the impact of the temporary non-residence rules, take the same Mr B as in Worked Example 2, holding the £10 million latent gain on the unquoted, non-qualified, non-Italian, non-UK-property-rich shares. He ceases to have sole UK residence with effect from 1 June 2026 (the date on which Case 3 split-year treatment begins, the London home having been sold on 31 May 2026 with vacant possession given on the same day). The 2026/27 tax year is a split year, with the overseas part beginning on 1 June 2026. He elects into the Article 24-bis regime in Italy from the 2026 calendar year. He had sole UK residence in each of the seven tax years preceding 2026/27 (so the four-of-seven condition for temporary non-residence is satisfied). He realises the £10 million gain in the overseas part of 2026/27. Italian tax on the gain is, on the assumed facts, fully covered by the €300,000 substitute tax. The question is what happens on return to the United Kingdom. The relevant test for these purposes is whether the period of non-sole UK residence (running from the start of the overseas part of the split year of departure to the start of the year of resumed sole UK residence, with no split year on return for simplicity in these scenarios) exceeds five years.

Scenario A: Mr B returns to the United Kingdom and resumes sole UK residence from 6 April 2029 (tax year 2029/30). The period of non-sole UK residence runs from 1 June 2026 to 5 April 2029 — approximately two years and ten months. The period does not exceed five years, so Mr B is “temporarily non-resident” within Part 4 of Schedule 45. The £10 million gain accrued in the period of temporary non-residence is dragged into UK charge in 2029/30 at 24% under TCGA 1992 section 10A, producing a UK liability of approximately £2.4 million. The €300,000 Italian substitute tax remains paid for each year of the Italian election; HMRC is unlikely to give credit for it against the UK charge in many cases, because the substitute tax is a forfait paid annually irrespective of the gain rather than a tax computed by reference to the particular disposal. The Italy–UK Double Taxation Convention does not assist on the question of charge, because the temporary non-residence legislation expressly overrides treaty arrangements; and the position on credit is fact-sensitive but generally unhelpful for the reasons just given.

Scenario B: Mr B returns to the United Kingdom and resumes sole UK residence from 6 April 2032 (tax year 2032/33). The period of non-sole UK residence runs from 1 June 2026 to 5 April 2032 — approximately five years and ten months. The period exceeds five years. The temporary non-residence rule does not apply. The £10 million gain accrued in 2026/27, in the overseas part of a split year, was outside UK charge at the time and remains outside UK charge on return (subject to the four caveats noted earlier — UK land or property-rich asset rules, UK branch or agency assets, the qualified participation exclusion, and any other specific anti-avoidance provisions that may apply on the facts). The €300,000 Italian substitute tax is the only tax paid on the gain. Total UK tax on the £10 million gain: nil.

Scenario C: Mr B returns to the United Kingdom and resumes sole UK residence from 6 April 2031 (tax year 2031/32). The period of non-sole UK residence runs from 1 June 2026 to 5 April 2031 — approximately four years and ten months. The period does not exceed five years. The temporary non-residence rule applies. The £10 million gain is dragged back into UK charge in 2031/32 at 24%, producing a UK liability of approximately £2.4 million. Assuming he ceases Italian tax residence on returning to the United Kingdom on 6 April 2031 (he having spent only the first 95 days of calendar 2031 in Italy, well below the 183-day threshold, and no other Italian residence limb being satisfied for the greater part of the year), he will have paid the €300,000 Italian substitute tax for five Italian tax years, 2026 to 2030, a cumulative €1.5 million. If, contrary to that assumption, he remains Italian tax-resident for calendar year 2031, a further €300,000 may be due. Returning one tax year early therefore costs him £2.4 million in UK tax that would have been avoided by waiting until 2032/33.

The arithmetic of patience, in this example, is stark. The line that matters is whether the period of non-sole UK residence exceeds five years; in practice, given the way the UK and Italian tax years interact, this often requires a real-world absence of well over five calendar years. The cost of one impatient year of return, in this illustration, is £2.4 million. The point of these examples is not, of course, that Mr B’s circumstances will be replicated in every case — the categories of income and gains caught, the magnitudes involved, and the strategic value of returning early will vary widely between clients. The point is that, before any flight is booked, the same calculation must be done in each individual case, and done before, not after, the disposal.

The Fourth Question: How Do the Italian and UK Sides Fit Together?

Italy treats an individual as resident under Article 2 of the Testo Unico delle Imposte sui Redditi (Decreto del Presidente della Repubblica 22 dicembre 1986, n. 917), as amended by Decreto Legislativo 27 dicembre 2023, n. 209 with effect from 1 January 2024, if for the greater part of the tax year (which in Italy is the calendar year — namely at least 183 days in an ordinary year and 184 days in a leap year, counting fractions of days for the physical-presence test) any one of four conditions is met: the individual has his or her residenza in Italy as defined by the civil code; the individual has his or her domicilio in Italy as defined for tax purposes (broadly, where personal and family relations principally develop); the individual is physically present in Italy; or the individual is registered with the Anagrafe della popolazione residente, this last condition operating as a rebuttable presumption following the 2024 reform. The four tests are alternative, not cumulative, and the Italian tax authority will treat any one of them as sufficient. The addition of the physical-presence limb by D.Lgs. 209/2023 is a material change from the position in earlier years and significantly broadens the scope of Italian residency.

The United Kingdom tax year runs from 6 April to 5 April. The Italian tax year runs from 1 January to 31 December. The mismatch is, in itself, a reason to plan the move with care, because an individual who arrives in Italy in (say) November may meet the Italian residency conditions for the calendar year only by establishing residence retrospectively (which the Anagrafe will not permit) or by accepting that Italian residency begins the following calendar year. The interaction with the SRT split-year cases must be modelled against the Italian calendar-year framework.

The Italy–United Kingdom Double Taxation Convention provides, at Article 4, a tie-breaker rule that operates where an individual would otherwise be a resident of both States. The successive tests are: permanent home, centre of vital interests, habitual abode, and nationality. Where the tie-breaker resolves residence in Italy’s favour, the United Kingdom is precluded from taxing the individual as a UK resident for that period under the substantive provisions of the Convention. Crucially, however, the tie-breaker does not displace the Statutory Residence Test for the purposes of UK domestic law: an individual treated as Italian-resident by the treaty may still be UK-resident under domestic law, and the practical consequence is that UK domestic anti-avoidance provisions (including the temporary non-residence rules, which contain their own express override of treaty arrangements) continue to apply even where the treaty would, on its face, suggest otherwise.

The increase in the Article 24-bis substitute tax from €200,000 to €300,000 (with the family-member supplement from €25,000 to €50,000), to which I have referred throughout this post, was enacted by Article 1, commi 25 and 26, of Legge 30 dicembre 2025, n. 199 (Legge di Bilancio 2026), with effect for individuals transferring tax residence to Italy on or after 1 January 2026. The increase applies to individuals who transfer their residenza civilistica (Article 43 of the Italian Civil Code) to Italy on or after 1 January 2026; those who established their habitual abode in Italy by 31 December 2025 remain on the €200,000 rate.

The interaction between the United Kingdom’s residence-based inheritance tax framework, which replaced the domicile-based system from 6 April 2025, and the Italian inheritance and gift tax exemption available to Article 24-bis electors on non-Italian assets, is a subject of considerable importance to which I shall return in a separate post. It is mentioned here only to note that, for a long-term UK resident who becomes a long-term Italian resident, the inheritance tax planning is at least as important as the income and gains analysis, and arguably more so for the older client.

Worked Example 4: The October Mover

To illustrate the calendar mismatch, take a different hypothetical client whom I shall call Mr C. Mr C plans to move to Italy on 15 October 2026, having sold his only UK home with vacant possession given on 14 October 2026. Between 6 April 2026 and 14 October 2026 he spends, say, 120 days in the United Kingdom and continues to occupy his UK home throughout that period, so that he is UK-resident for 2026/27 under the SRT before split-year treatment is considered, whether because the second automatic UK test is met on the full home-test facts — including the 91-day UK-home period and the absence of an overseas home during the relevant period, or fewer than 30 days spent in any overseas home — or because the sufficient ties test is met on the leaver matrix with multiple UK ties. After 15 October 2026, he spends fewer than 16 days in the United Kingdom. The UK tax year 2026/27 runs from 6 April 2026 to 5 April 2027. The Italian tax years involved are calendar 2026 and calendar 2027. From an Italian residency perspective, Mr C spends only seventy-eight days in Italy during 2026 (15 October to 31 December). He does not satisfy any of the Article 2 TUIR residence limbs for the greater part of calendar year 2026: he is not physically present in Italy for the required period, and on the assumed facts his residenza, domicilio and Anagrafe registration do not exist in Italy for the greater part of that year. He therefore cannot validly elect into Article 24-bis from 1 January 2026. Italian residency, and the Article 24-bis election, must begin from calendar year 2027, when he will spend the entire year in Italy and clearly satisfy Article 2 TUIR.

From a UK perspective, Case 3 of split-year treatment is potentially available with effect from 15 October 2026, provided that Mr C ceases on that date to have any home in the United Kingdom (which is satisfied on the assumed facts), spends fewer than 16 UK days between 15 October 2026 and 5 April 2027, and meets the “sufficient link” condition with Italy by the end of the six-month period beginning with the day on which he ceased to have a UK home. The UK part of 2026/27 ends on 14 October 2026; the overseas part runs from 15 October 2026 to 5 April 2027.

The window between 15 October 2026 and 31 December 2026 — approximately ten weeks — is the awkward period. Mr C is non-resident in the UK under split-year treatment (overseas part), but not yet Italian-resident under Article 2 TUIR (because he has not satisfied the day-count threshold of at least 183 days in Italy by 31 December 2026). For that ten-week window he is, in narrow technical terms, outside the residence-based charging frameworks of both the UK and Italy for the categories of income and gains in question. In narrow cases, this period may create a timing opportunity for foreign-source income or gains that are outside the UK and Italian residence-based charges, but that does not mean the income or gains are tax-free globally. Source-country taxation, withholding taxes, trust and corporate attribution rules, the UK temporary non-residence provisions on any future return to the UK, and the technical caveats earlier in this post (UK land or property-rich assets, UK branch or agency assets, qualified participations under Italian rules, and any specific anti-avoidance provisions) must all be checked before any planning is built around this window. The Article 24-bis cover does not begin until 1 January 2027.

The implication is twofold. First, this ten-week window may, in narrow technical terms, create a timing opportunity for foreign-source income or gains, but only subject to the substantial qualifications I have just set out; it is emphatically not a “tax-free window” in any global sense. Second, careful planning is required to ensure that none of the Italian residence limbs is satisfied for the greater part of calendar year 2026. In an October move, Anagrafe registration in October will not, of itself, create Italian tax residence for 2026 if the registration and other residence factors are present for fewer than 183 days, but the position must be checked against the individual’s full Italian presence, family position, home, and administrative registrations, and against the alternative limbs of Article 2 TUIR (in particular the new physical-presence limb under D.Lgs. 209/2023). The general lesson is that the Italian and UK residency clocks must be modelled together, on a calendar, before any irrevocable step is taken.

A Word on Sequencing, Information Gathering, and Practical Discipline

In my experience, the great majority of clients who arrive at the planning table for a UK-Italy move have already taken decisions, consciously or otherwise, that will significantly constrain the cleanness of the exit. They have made statements to immigration authorities. They have signed property contracts. They have transferred funds across borders in ways that create evidentiary records. They have, with the best of intentions, spoken to bankers, school admissions officers, and family members in ways that may be reconstructed by HMRC during a subsequent enquiry as evidence of intent inconsistent with the case being put forward.

The single most valuable thing a UK leaver can do is to take advice early. By “early” I mean at the point at which the move is under contemplation, not at the point at which it has been announced. By “advice” I mean integrated UK-Italy advice from a firm capable of taking responsibility for both sides of the analysis, not separate UK advice and separate Italian advice that the client is left to reconcile alone. The single most expensive thing a UK leaver can do is to assume that the Italian flat-tax regime is sufficient on its own. It is not. It is the destination. The journey is governed by the United Kingdom’s Statutory Residence Test, by Part 4 of Schedule 45 to the Finance Act 2013, by the substantive charging provisions in TCGA 1992, ITTOIA 2005 and ITEPA 2003, and by the careful sequencing of disposals, ties, and Anagrafe registrations across the boundary between two tax years that do not begin or end on the same day.

A clean exit is achievable. I have advised on many. But it requires the client and the adviser to sit together, with a calendar and a balance sheet, and to model the move in the language of the statute. There are no shortcuts in this area, and the cost of a mistake — measured in tax actually due, in HMRC enquiries, and in the years of lost peace of mind that an enquiry brings — is materially greater than the cost of doing the planning properly at the start.

Conclusion

The Italian Article 24-bis regime is one of the most attractive personal tax planning vehicles in Europe. For the right family, with the right preparation, it remains a transformative opportunity. But the Italian regime does its work only on the foreign-source income and gains of an Italian resident. It does not, and cannot, neutralise the United Kingdom’s residence-based charge on the way out, nor can it neutralise the temporary non-residence claw-back on the way back. The client who moves to Italy expecting Article 24-bis to do all the work has misunderstood the architecture.

The right framework is the one that begins with a careful SRT analysis of the year of departure, plans split-year treatment around the timing of material disposals, models the temporary non-residence position over the full five-year window following departure, and aligns the Italian Anagrafe registration and the Italian flat-tax election with the United Kingdom’s calendar. Done properly, the result is a clean break, a fifteen-year Italian planning horizon, and a UHNW family that is genuinely better off. Done carelessly, the result is a UK enquiry on return and a tax bill that the Italian €300,000 was supposed to have rendered unnecessary.

If you are considering a move to Italy under the Article 24-bis regime, or if you are advising a client who is, the United Kingdom side of the analysis is at least as important as the Italian side. I am pleased to help with both.

Vincit Veritas.

Dr Clifford Frank LLM(Tax) SJD HDipICA ATT

Senior Partner, LEXeFISCAL LLP

33 Cavendish Square, London W1G 0PW

www.lexefiscal.com | info@lexefiscal.com | +44 (0)208 092 2111

This blog post is for general information purposes only and does not constitute legal or tax advice. It should not be relied upon without seeking professional advice tailored to your specific circumstances. Tax law in both the United Kingdom and Italy is complex and subject to frequent change, and each individual’s position requires independent analysis. LEXeFISCAL LLP is regulated by the Institute of Chartered Accountants in England and Wales (ICAEW), registration no. C011006460.

© LEXeFISCAL LLP 2026. All rights reserved.

Sources and Further Reading

This appendix lists the primary statutory, regulatory and treaty sources on which the analysis in this post relies. References to United Kingdom legislation are to the version in force at the date of writing. Where Italian provisions are cited, the consolidating Testo Unico (TUIR) and the most recent amending legislation are given.

United Kingdom Primary Legislation and Treaty

The Statutory Residence Test is set out in Schedule 45 to the Finance Act 2013, the operative provisions of which include paragraph 11 (number of automatic overseas tests, of which paragraphs 15 and 16 apply only on death), paragraph 14 (third automatic overseas test), paragraph 18 (sufficient ties test for leavers, with HMRC’s Tables A and B at RFIG20520), paragraph 23 (deeming rule for qualifying days in excess of 30 for leavers with three or more UK ties), paragraphs 32 and 33 (family tie, including the full-time UK education exception for minor children), paragraph 34 (accommodation tie), paragraphs 44 to 51 (split-year cases 1 to 8, including paragraph 46 on Case 3 — ceasing to have a home in the United Kingdom), and Part 4 (anti-avoidance, including the temporary non-residence rules). The substantive charging provisions for temporary non-residents include section 10A of the Taxation of Chargeable Gains Act 1992 (capital gains accruing on assets held at the date of departure, and certain assets acquired during the period of temporary non-residence where they are connected with an earlier UK-residence period through, for example, no-gain/no-loss interspouse transfers, rollover relief mechanics under section 152 TCGA 1992, or other connected-party or replacement-asset rules); ITTOIA 2005 sections 401C, 408A and 413A (close-company distributions and stock dividends paid to a material participator or an associate of such a participator); ITTOIA 2005 section 465B (chargeable event gains on life assurance, life annuity and capital redemption policies); ITTOIA 2005 section 832A (relevant foreign income remitted during a period of temporary non-residence); ITA 2007 section 812A (limitation on the income tax liability of non-residents, with TNR effect for material participators in close companies); and ITEPA 2003 sections 576A and 579CA (relevant withdrawals from registered pension schemes and relevant non-UK schemes over the £100,000 aggregate threshold), together with related ITEPA 2003 provisions for employment-related securities, securities options and certain employment-income lump sums (including sections 394A, 554Z4A, 554Z11A and 572A). The capital gains tax rate increase referred to in Worked Example 2 was enacted by Finance Act 2025 section 7 (amending TCGA 1992 section 1H to substitute “24%” as the main higher rate for non-residential gains), with effect for disposals on or after 30 October 2024; sections 8 to 12 and Schedules 1 to 2 of the same Act make further changes to Business Asset Disposal Relief, Investors’ Relief, carried interest and personal representatives’ rates. The Convention between the Government of the United Kingdom of Great Britain and Northern Ireland and the Government of the Italian Republic for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income, signed at Pallanza on 21 October 1988, governs the allocation of taxing rights between the two States, with Article 4 (residence and tie-breaker) and Article 13 (capital gains) being of particular relevance to the analysis above. All UK primary legislation is available at www.legislation.gov.uk.

HMRC Guidance

HMRC’s published guidance on the relevant provisions is contained in the Residence and FIG Regime Manual (RFIG), which replaced and consolidates earlier material in the Residence, Domicile and Remittance Basis Manual (RDRM). Of particular relevance to this post are RFIG20500 onwards (the sufficient ties test, with RFIG20520 setting out Tables A and B for leavers and arrivers respectively), RFIG20550 and RFIG22160 (the accommodation tie), RFIG20570 (the 90-day tie), RFIG20720 (the deeming rule), RFIG21010 onwards (split-year treatment), RFIG21130 (Case 3 in detail), and RFIG21510 onwards (temporary non-residence). On temporary non-residence and capital gains, HMRC’s Helpsheet HS278 is the principal published explanation and is updated annually. On temporary non-residence and pension scheme withdrawals, HMRC’s Employment Income Manual at EIM75450 onwards sets out the operation of sections 576A and 579CA of ITEPA 2003. The Capital Gains Manual at CG26110 onwards addresses temporary non-residence under section 10A TCGA 1992 in detail. All HMRC manuals and helpsheets are available at www.gov.uk.

Italian Sources

The Italian neo-resident regime is set out in Article 24-bis of the Testo Unico delle Imposte sui Redditi (Decreto del Presidente della Repubblica 22 dicembre 1986, n. 917), introduced by Article 1, comma 152, of Legge 11 dicembre 2016, n. 232 (Legge di Bilancio 2017). The substitute tax was increased to €300,000 per annum (with €50,000 for each family member) by Article 1, commi 25 and 26, of Legge 30 dicembre 2025, n. 199 (Legge di Bilancio 2026), with effect for individuals transferring tax residence to Italy on or after 1 January 2026. Italian tax residency for individuals is governed by Article 2 of the TUIR, materially amended by Decreto Legislativo 27 dicembre 2023, n. 209 with effect from 1 January 2024 to add a physical-presence limb (presence in Italy for the greater part of the tax period — at least 183 days in an ordinary year and 184 days in a leap year, with fractions of days counted) to the existing residenza, domicilio (now redefined for tax purposes), and Anagrafe registration limbs (the last operating as a rebuttable presumption). The qualified-participation carve-out from Article 24-bis (gains on partecipazioni qualificate realised in the first five tax periods of the option remain taxable under the ordinary regime) is set out in Article 24-bis comma 1, third sentence (terzo periodo), TUIR. The principal Agenzia delle Entrate guidance on Article 24-bis is contained in Circolare n. 17/E del 23 maggio 2017 (the foundational interpretative document, including detailed explanation of the qualified-participation carve-out), the Provvedimento del Direttore dell’Agenzia delle Entrate n. 47060 dell’8 marzo 2017 (operational rules for exercising, modifying and revoking the option), Risoluzione n. 44/E dell’11 giugno 2018 (instituting the codice tributo “NRPP” for payment of the substitute tax via Modello F24), Risoluzione n. 14/E del 6 marzo 2023 (codice tributo for use on revocation), and Circolare n. 20/E del 4 novembre 2024 (operational instructions on individual and corporate tax residence following D.Lgs. 209/2023). Italian primary legislation is available at www.normattiva.it; Agenzia delle Entrate guidance is available at www.agenziaentrate.gov.it.