Change and Scrutiny of Income, Property and Pensions
Subscribe to our newsletter for weekly expatriate news, views & analysis.
ProACT Sam considers the implications of tax exchange of information on Inheritance, Income & Social Insurance Taxes.
The October 2025 UK Budget was a horror show for tax raising short and long term as the UK government reverts yet again to a policy of tax, borrow and spend money. The trouble is no government has money, they spend money raised from tax payers. If a government wants to spend more than they have to find new ways of raising taxes.
NEW TAXES ON YOU & YOURS
In 1964 the UK government introduced tax on capital gains for the first time. It was decided that people were profiting by investing their taxed income earnings so chose to add a new tax on the capital gains and profits of investments and property. This was followed to the grave by introducing a capital tax on death called inheritance tax - the UK has the 3rd highest inheritance tax rate in the world at 40% - Cyprus doesn't tax inheritances.
Two changes in the budget will accelerate the increase in capital gains taxes in the coming years.
Firstly Inheritance Tax IHT rules are shifting to a residence basis of assessment, which offers a way out for UK expats but also serves to tie them in for sure for longer - up to 20 years after leaving the UK.
Secondly the tax free savings used to create capital rich pension funds is being added to IHT calculations. Previously a pension fund could have been left to the family tax free, now it is to be included in IHT assessment on death before widow and family can benefit.
The significance is a £1500 per month pension comes from a fund that uses the IHT personal allowance up.
Suddenly lots more people will be liable to pay some IHT tax on their death.
Only long term Will, Trust and Estate planning with ProACT Know How allows expats to protect their family on your death from IHT.
GOVERNMENT IN THE KNOW
Some UK expats have got away with IHT in the past because the tax man doesn't know and a IHT tax return is not submitted to the UK on death.
Along come the OECD running International Tax Law and overseeing an ever tighter exchange of information by investment, bank, pension, property and tax agencies.
Cyprus is transitioning from paper-based and disconnected government services to online and connected government services for income tax, VAT, social insurance, property, estates and healthcare. In Cyprus tax clearance is required for sure when property is transferred or sold or if someone dies.
This creates a tax footprint that is linked using technology, tax numbers and ID /passport numbers.
The records of each tax agent of property, investment, tax, bank, salary and VAT are ultimately all joined up through to your country of tax residence, and your country of origin and nationality.
In 2025 there is also an additional scrutiny in Cyprus on social insurance registrations due to a push for tax residents to pay health tax on all worldwide income, including dividends, interest, earned, and rental income. For employees and self-employed individuals in Cyprus, health tax is paid with social insurance. New reporting requirements by employers from January 2025 will bring more income and employee benefits under tax scrutiny.
Active Trusts in 2025 must now also tax report each year under new Cyprus rules.
While Cyprus only wants to claim its Health tax on worldwide earnings, the additional employee and tax reporting adds information into the tax system in Cyprus that is then exchanged to your home countries.
ProACT ProTECTION
To ensure your employees, business, property and investments are properly reported, to declare the correct return, but also plan to avoid higher taxes across border or on inheritance taxes death, Only long term Will, Trust and Estate planning with ProACT Know How allows expats to protect their family on your death from IHT.