The Italian "7% regime" is the single most generous deal currently available to a foreign retiree in Europe. A British pensioner who moves to the right small town in southern Italy can pay a flat 7% — not 20%, not 40%, just 7% — on their entire UK pension and on every other foreign-source income they earn, for up to ten consecutive tax years. This article walks through exactly how it works, who qualifies, and what the move actually looks like for a UK buyer.
What the 7% regime actually is
Italy introduced Art. 24-ter of the TUIR (Testo Unico delle Imposte sui Redditi) in late 2018 to fight depopulation in southern villages. The rule is straightforward: a foreign pensioner who transfers their tax residence to a qualifying small southern-Italian municipality can opt to pay a flat 7% substitute tax on all foreign-source income — pension, rental, dividends, capital gains — for the year of transfer plus the nine following tax years.
Italian-source income is taxed under ordinary Italian rules. The 7% is not a credit or a relief — it replaces the entire ordinary income-tax assessment on the foreign income covered by the option.
Who counts as a "pensioner" for Art. 24-ter
The category is broader than the UK term suggests. You qualify if you receive any of the following from a public or private foreign source:
- 01UK state pension
- 02A defined-benefit or defined-contribution occupational pension (LGPS, NHS pension, USS, private DB scheme, etc.)
- 03A personal pension or SIPP drawdown
- 04A foreign social-security-equivalent payment (Social Security from the US, AOW from the Netherlands, etc.)
- 05Annuities paid by a foreign insurer
Crucially, you do not need to be of UK state-pension age. If you are 55 and already drawing a private pension or an early-retirement income from a UK fund, you qualify. The regime is about the source of the income, not the recipient’s age.
Step 1 — Confirm the five-year clean slate
You must not have been an Italian tax resident at any point in the five tax years preceding the year of transfer. For most UK applicants this is automatic; for anyone who lived in Italy in the past, the five-year clock is the first thing to check.
Step 2 — Pick a qualifying municipality
The town you move to has to do two things: sit in one of the eight eligible regions, and have a resident population of 30,000 or fewer. The eight regions are:
- 01Puglia — Valle d’Itria, Salento, Gargano
- 02Campania — most of the Amalfi Coast, the Cilento, inland Sannio
- 03Calabria — Tyrrhenian and Ionian coasts
- 04Abruzzo — mountain borghi and Adriatic
- 05Molise — Appennines and a short Adriatic coast
- 06Basilicata — Matera province and the Tyrrhenian sliver
- 07Sicilia — virtually the entire island under the threshold
- 08Sardegna — virtually the entire island under the threshold
The population test is done at the comune level, not at the frazione or hamlet level. A frazione of a larger town does not qualify if the larger comune sits above 30,000 — this is the single most common eligibility mistake a buyer can make.
Step 3 — Buy or rent, then register residency
Buying is not required to claim the regime — a long-term rental works for the residency test. But almost every UK retiree who takes Art. 24-ter buys, because the alternative is paying ten years of rent into someone else’s asset. Once you have an address in the comune, you register residency with the local Anagrafe and apply for the Italian fiscal code (codice fiscale) if you do not already have one.
A post-Brexit UK national also needs an elective-residence visa (visto per residenza elettiva) before moving. The visa is granted on proof of stable foreign income — your pension paperwork is what carries the application — and is renewable annually before converting to long-term EU residence after five years.
Step 4 — File the option with the Agenzia delle Entrate
The opt-in happens on your first Italian tax return (Modello Redditi PF), filed in the year following the year of transfer. You tick the Art. 24-ter box, attach the listed evidence, and your commercialista files. The option locks in retroactively to the year of transfer and runs for the next nine years unless you revoke it.
Step 5 — Pay 7%, in a single annual lump
The 7% is paid in a single yearly assessment by 30 June of the following tax year, alongside the ordinary return. There is no withholding-at-source mechanism on the foreign income — it is self-assessed and self-paid through the F24 form.
Step 6 — Use the UK–Italy treaty to clear the UK side
Under the UK–Italy double-taxation treaty (1988, amended), the country of residence has the primary right to tax most pension income — once you are Italian-resident, HMRC will release UK tax on private pensions on receipt of an Italy/Individual form bearing an Italian Agenzia delle Entrate stamp. UK state pension and certain government-service pensions follow slightly different treaty articles; your commercialista will run those through the treaty wording.
The 7% is the headline. The town and the timing are where the deal is actually won or lost.
How long the regime really lasts
Ten tax years, including the year of transfer. After year ten the regime ends and you are taxed under ordinary Italian rules — which, for most UK pensioners, still works out competitively because the bulk of the wealth-building years happened under the 7% cap. The regime is non-renewable for the same individual; you cannot reset by moving away and coming back.
A short word on who advises whom
This site is informational. The 7% option is filed by an Italian commercialista; the UK-side treaty paperwork is handled either by that commercialista or by a UK tax adviser; the property purchase is run by an Italian notaio. The broker’s job — what I do — is making sure the town and the property you end up with are the right ones, and that nothing about either invalidates the regime on the eligibility side. Reach out if you want to map your specific situation against the rule.
