United Kingdom vs Panama: Tax Comparison
United Kingdom residents earning $400k face ~43.3% effective tax. Moving to Panama (0% foreign income) could save you $173,149 per year.
Best for: freelancers, entrepreneurs, and retirees seeking territorial taxation (0% on foreign income) with US dollar convenience and easy residency
Tax Savings at Every Income Level
Side-by-side comparison of annual tax paid in United Kingdom vs Panama (all amounts in USD).
| Annual Income | United Kingdom Tax | Panama Tax | Annual Savings |
|---|---|---|---|
| $100,000 | $28,698 (28.7%) | $0 (0%) | +$28,698 |
| $150,000 | $54,498 (36.3%) | $0 (0%) | +$54,498 |
| $200,000 | $79,149 (39.6%) | $0 (0%) | +$79,149 |
| $300,000 | $126,149 (42%) | $0 (0%) | +$126,149 |
| $400,000 | $173,149 (43.3%) | $0 (0%) | +$173,149 |
Side-by-Side Comparison
| Category | United Kingdom | Panama |
|---|---|---|
| Tax System | Progressive | 0% foreign income |
| Effective Rate ($400k) | 43.3% | 0% |
| Capital Gains Tax | Yes | None |
| Monthly CoL (mid-tier) | $4,200 | $2,500 |
| Min Residency Stay | — | No minimum |
| Visa Complexity | — | 3/10 |
| English Literacy | — | 5/10 |
Why People Move from United Kingdom to Panama
At $400,000 annual income, United Kingdom residents pay approximately $173,149 in taxes. Relocating to Panama reduces this to $0, a saving of $173,149 per year.
Cost of living is also lower: Panama costs approximately $2,500/month compared to $4,200/month in London, saving an additional $20,400 per year.
English accessibility in Panama is moderate (5/10). Learning the local language (Spanish) will improve your experience.
Leaving United Kingdom: What to Know
Tax Departure Rules for United Kingdom
The UK does not impose a formal departure tax, but you must pass the Statutory Residence Test (SRT) to become a non-resident. Failing to meet the SRT criteria means HMRC may still consider you UK tax resident, even if you live abroad. You typically need to spend fewer than 16 days in the UK if you were resident for all of the previous 3 years, or fewer than 46 days if you have no significant ties.
Capital gains considerations: UK capital gains tax can still apply to UK property disposals even as a non-resident. The NRCGT rules require non-residents to file a return within 60 days of selling UK property.
Practical steps when leaving: Notify HMRC using form P85, close or restructure UK property lettings, and ensure your PAYE tax code is updated. Split-year treatment may apply in the year you leave.
Living and Working in Panama
Panama Tax System
Panama's territorial tax system means only Panama-sourced income is taxable. All foreign-sourced income — including remote work for foreign clients — is completely exempt from Panamanian tax.
Lifestyle in Panama
Panama offers a unique Latin American lifestyle with modern infrastructure, the Panama Canal Zone, and a growing expat community. Panama City is a regional financial hub with excellent connectivity to North and South America.
Getting started: The Friendly Nations Visa is available to citizens of ~50 countries and makes residency straightforward. You'll need a Panamanian bank account with $5,000+ deposit and a clean criminal record. The Pensionado Visa offers additional benefits for retirees.
Net financial benefit: After accounting for both tax savings ($173,149/yr) and cost of living differences (+$20,400/yr), relocating from United Kingdom to Panama produces a net annual benefit of approximately $193,549 at $400,000 income.
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Frequently Asked Questions
How much tax would I save moving from United Kingdom to Panama?
At a $400,000 USD annual income, moving from United Kingdom to Panama could save approximately $173k per year in taxes. United Kingdom has an effective tax rate of ~43.3% at this income level, while Panama charges 0% foreign income. Actual savings depend on your income type, deductions, and residency status.
What is the tax rate in Panama?
Panama operates a territorial tax system. Only Panama-sourced income is taxable (progressive rates 0–25%). All foreign-sourced income, including remote work for foreign clients, is fully exempt.
What is the cost of living in Panama compared to United Kingdom?
A mid-tier lifestyle in Panama costs approximately $2,500/month, compared to $4,200/month in London. That's $1,700 cheaper per month, or $20,400 savings per year.
Do I need a visa to live in Panama?
Friendly Nations Visa makes residency accessible for citizens of ~50 countries. Pensionado Visa for retirees is one of the world's best. No minimum stay requirement for maintaining residency. Tax residency triggered by 183+ days.
What are the steps to leave United Kingdom for tax purposes?
Notify HMRC using form P85, close or restructure UK property lettings, and ensure your PAYE tax code is updated. Split-year treatment may apply in the year you leave. You can make voluntary Class 2 National Insurance contributions while abroad to protect your State Pension entitlement — this is one of the cheapest pension benefits available globally.
What happens to my United Kingdom pension if I move to Panama?
UK pensions (both State Pension and private) can be paid overseas. The State Pension is only uprated annually in countries with a reciprocal social security agreement — otherwise it freezes at the rate when you leave.
Will I pay capital gains tax when leaving United Kingdom?
UK capital gains tax can still apply to UK property disposals even as a non-resident. The NRCGT rules require non-residents to file a return within 60 days of selling UK property. The UK does not impose a formal departure tax, but you must pass the Statutory Residence Test (SRT) to become a non-resident. Failing to meet the SRT criteria means HMRC may still consider you UK tax resident, even if you live abroad. You typically need to spend fewer than 16 days in the UK if you were resident for all of the previous 3 years, or fewer than 46 days if you have no significant ties.
How do I set up banking in Panama as an expat from United Kingdom?
Panama uses the US dollar, eliminating currency risk. Banistmo, Banco General, and Global Bank are the main retail banks. Account opening requires residency status.
Who is the United Kingdom to Panama move best suited for?
This relocation route is ideal for freelancers, entrepreneurs, and retirees seeking territorial taxation (0% on foreign income) with US dollar convenience and easy residency. At a $400,000 annual income, the tax savings alone amount to $173,149 per year compared to staying in United Kingdom.