Interactive Investor

How UK investment tax compares with these five holiday hotspots

1st August 2023 08:56

by Craig Rickman from interactive investor

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We visit a handful of Mediterranean countries loved by British holidaymakers to find out how they tax investors.

Holiday icons for Europe 600

Summer holiday season is now in full swing with Brits jetting off across the Continent (and in some cases further afield) in search of sun loungers and pina coladas.

If you’re fortunate enough to afford a trip abroad this summer, the break will feel well deserved. It’s not been an easy year, particularly for our finances. Inflation remains stubbornly high, mortgage and rent costs are soaring, and we’ve been hit with the harshest UK tax burden since the 1950s.

This means we’re all now paying a bit more tax, and investors are no exception. Cuts to the capital gains tax (CGT) and the dividend tax allowances introduced in April - with further reductions due next year - are thinning the returns of investments held outside of tax wrappers.

Being the curious bunch that we are, and given the time of year, we wanted to discover how the UK tax system stacks up against five of our most popular European holiday destinations. Are UK investors better or worse off than our Mediterranean counterparts?

But before we explore the tax regimes in France, Greece, Italy, Spain and Turkey, let’s remind ourselves how UK investors are taxed on gains and dividends.

UK CGT and dividend tax

You may be liable for CGT if you sell, gift or transfer an asset, such as shares, and make a profit. For investors, the rates are 10% for basic-rate taxpayers and 20% if you pay higher-rate tax.

In the current tax year, everyone can make £6,000 on the sales of assets and not pay CGT, although this figure will fall to £3,000 from 6 April 2024.

Dividend tax is charged on receipt of UK dividends once they exceed your annual exemption. This year the exemption is £1,000 but will halve to £500 next April.

If you receive dividend payments that exceed £1,000, the amount of tax you pay depends on your marginal rate of tax. If you’re a basic-rate taxpayer, HMRC will take 8.75%, while those in the higher-rate and additional-rate brackets pay 33.75% and 39.35%, respectively.

So, how does the UK tax system compare with top holiday destinations?

As you might imagine, there is no uniform approach across Europe when taxing investment gains and dividends. In fact, none of the countries we have examined tax investors in the same way. Most are hugely disparate.

For the sake of simplicity, I have assumed that the investor is both resident and domiciled in the country in question.


France recently laid out plans to increase the state pension age by two years, which was less than well received. And the country’s tax system for investors is unlikely to win any popularity contests either.

Any investment gains are classed as investment income and charged at a flat rate of 30% - 50% higher than the UK’s top rate of CGT.

The French government aims to keep things simple here, as dividends are also deemed investment income with the same 30% flat rate applying. However, if the gain is particularly large, investors might pay an extra 3% or 4% - although this is still lower than the UK’s top rate of dividend tax.


With more than 6,000 islands and inlets (although only 227 are inhabited) Greece is a popular choice for UK holidaymakers. And its tax system for investors is attractive, too.

CGT is charged at a flat rate of 15%. And while there is a 2% transfer duty to factor in, it’s 3 percentage points lower than the UK’s top rate of tax for investment gains.

At a flat rate of 5%, the country’s dividend tax is even more generous. It’s a fraction of the UK’s top rate of 39.35%.


Brits flock to all corners of Italy every year to soak up its scenic landscape and refined cuisine.

When it comes to the country’s tax system for investors, much like France, its government favours the simple approach.

Whether the shareholdings are qualifying or non-qualifying, a flat rate of 26% applies to both capital gains and dividends.

In terms of CGT, this is far less favourable than what UK investors might pay. However, if your annual taxable income exceeds £50,271, your dividend tax bill would be lower in Italy.

Italy cityscape 600


Spain is the most popular summer holiday destination for Brits, welcoming millions of visitors from these shores every year.

With regards to its tax regime, both capital gains and dividends are taxed as savings income and are applied progressively from 19% to 28%.

You pay 19% for the first €6,000 of income, 21% between €6,000 and €50,000, 23% on earnings between €50,000 and €200,000, 27% between €200,000 and €300,000, and 28% on anything above.

This means that whether the amount of dividend tax you pay is more or less than a UK investment portfolio depends on your level of income. Simply put, the Spanish system is more favourable if you’re a big earner.


In the first nine months of 2022, Turkey attracted a record 2.8 million British visitors.

Some 34,000 Britons have put down roots there, and investors who have made the switch might enjoy lower tax bills than their UK counterparts.

A withholding tax of 10% is charged on capital gains from the sale of investments. However, this could be waived if you invest in companies on the Istanbul Stock Exchange.

For dividends, half the gross amount received is exempt from tax. If the remaining half, when added to other income, exceeds 150,000 Turkish Lira (which is roughly £4,300), a withholding tax of 10% is charged.

Top CGT and dividend rates for investments


Top rate of CGT

Top rate of dividend tax



















Source: PwC

How to protect your portfolio from CGT and dividend tax

While UK CGT might compare favourably to some of our European neighbours, no one wants to see up to 20% wiped off their hard-earned investment growth.

Meanwhile, the top rate of dividend tax in the UK is the third highest in the world – sheltering your portfolio here can really make a difference to your financial future.

A simple way to avoid both CGT and dividend tax is to use your annual ISA allowance, which at £20,000 offers plenty of scope, especially if you invest the maximum every year.

Self-invested personal pensions (SIPPs) are a further option. Once again, any capital gains and dividends are tax-free, plus you can get upfront income tax relief of up to 45%. However, with a SIPP you need to be happy to tie your money up until age 55 (rising to 57 from 2028) as this is the earliest you can access it under pension rules.

For any investments you hold outside of tax wrappers, it’s important to make the most of your annual CGT and dividend exemptions. These allowances may be stingier than in previous years, but using them effectively can still help keep HMRC at bay. For the current tax year, the allowances are £6,000 and £1,000 for CGT and dividend tax, respectively. You must also be aware that they are either use it or lose it – you can’t roll them over to future tax years.

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

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