Moving to Andorra from the UK: Tax, the 5-Year Rule and the Practicalities

The UK has no formal exit tax, so a British person moving to Andorra does not crystallise capital gains on departure. The trap is the temporary non-residence rule: if you were UK resident for 4 of the last 7 years and return within 5 complete tax years, gains you realised while abroad are taxed in the year you return. Plan to be out for at least five full tax years. UK residential property stays within UK CGT even for non-residents.

The upside

Andorra caps personal income tax at 10% and has no capital gains tax on most disposals, no wealth tax and no inheritance tax. Against a UK top rate of 45% (plus dividend and CGT rates), and UK inheritance tax at 40%, the difference for a higher earner or someone with a substantial estate is large. Post-Brexit, Andorra’s position outside the EU matters less to a British mover than it would to an EU citizen — you were already dealing with third-country rules.

No exit tax — but the 5-year rule

Unlike the Netherlands, France or Germany, the UK does not tax unrealised gains when you leave. However, the temporary non-residence rule catches people who leave and come back too soon:

• If you were UK tax resident for at least 4 of the 7 tax years before you left, and
• you return to the UK within 5 complete tax years,
• then gains (and certain income, such as large dividends) you realised while non-resident are taxed in the UK in the year you return — as if you had never left.

The planning point is simple: if you sell a business, crystallise a portfolio, or take big dividends after moving to Andorra, stay out of the UK for five full tax years or the saving can be clawed back.

What stays taxable in the UK

• UK residential property. Non-residents pay UK CGT on gains on UK residential (and, since 2019, commercial) property. Selling the family home in Britain after you move still has a UK tax dimension.
• UK-source income such as rental income and certain pensions remains within UK tax, subject to the double-tax treaty position.
• Inheritance tax and domicile. The UK moved from a domicile test to a residence-based inheritance-tax system in April 2025. Broadly, once you have been non-UK resident long enough, your non-UK assets fall out of UK inheritance tax — but the tail is several years and the rules are new. Get advice on your specific position.

The split year and the Statutory Residence Test

Your UK residence status is decided by the Statutory Residence Test (days in the UK, ties, work). The year you leave can often be split so you are taxed as a UK resident only up to your departure date and as a non-resident afterwards — but you must genuinely leave: a home in Andorra, family and economic life there, and limited UK days.

ISAs and pensions

• ISAs keep their tax-free status inside the UK but you cannot add to them once non-resident, and Andorra does not recognise the ISA wrapper — income and gains inside it may be taxable in Andorra.
• UK pensions can usually be left in place; how withdrawals are taxed depends on the treaty. Do not rush a transfer — take advice.

The Andorran side

You will take one of the standard routes — active residency through an Andorran company if you will keep working, or passive residency if you will live off capital. Budget the non-refundable €50,000 AFA contribution, and the day requirements (183 active, 90 passive). To get the tax benefit you must be genuinely Andorran tax resident, not just holding a card.

Frequently asked questions

Does the UK have an exit tax when you move to Andorra?

No. The UK does not tax unrealised gains on departure. But the temporary non-residence rule can tax gains you realise while abroad if you return to the UK within five complete tax years.

How long do I need to stay out of the UK?

At least five complete UK tax years if you want gains realised while non-resident to stay outside UK tax.

Will I still pay UK tax on my house sale?

Gains on UK residential property remain within UK capital gains tax even for non-residents.

Is moving from the UK to Andorra worth it?

For a higher earner or someone with a large estate, the recurring saving on income, capital gains and inheritance tax is substantial — provided you genuinely relocate and respect the five-year rule.