When reading the international news - and the British press in particular – it often feels as though scarcely a day goes by without another feature profiling a country that might tempt wealthy individuals away from an increasingly high-tax regime at home. UK Chancellor Rachel Reeves’ most recent Budget has reinforced this sentiment. For countless affluent families, the main topic of conversation around the Christmas dinner table is likely to centre on (a) whether to consider leaving the UK and (b) if so, where to go?

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As we all know, however, simply leaving one’s home country, whatever the motivation, and settling elsewhere is rarely as straightforward as it sounds. The warning that “the grass is not always greener on the other side” is well-founded. For more than twenty years, Gibraltar has offered an attractive tax status colloquially known as “Cat 2” - named after the Qualifying (Category 2) Individuals Rules 2004. Given Gibraltar’s British heritage, it is unsurprising that increasing numbers of UK residents as well as those living elsewhere are considering the move now. They are attracted by Gibraltar’s well-known advantages as highlighted by Acquarius in previous Insights. These include not only the favourable tax regime but also the climate, the ease of doing business and the reassuring degree of “Britishness” including, of course, the language.

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But none of this comes without compromise. Gibraltar’s 2022 census estimated its resident population at just shy of 38,000, not including approximately 15,000 cross-border workers who commute daily. Anyone who has visited Gibraltar will appreciate that it is not a large place. At just under three square miles (seven km²), it is one of the most densely populated territories in the world. Consequently, most residents live in apartments or townhouses; there is simply no space for sprawling homes or estates on the Rock. 

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Over recent years, we have seen a significant rise in enquiries regarding Gibraltar residency. Brexit, global instability and increasing tax burdens in Britain and across the EU account for a large part of this trend, Moreover, the forthcoming UK-EU Treaty on Gibraltar’s future will do away with frontier checks. This should make living in Gibraltar even more appealing, whether as a Cat 2 or Higher Executive Possessing Specialist Skills (HEPSS) individual or as an incoming resident. 

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As a result of this surge in demand there are a couple of important dynamics for those considering Gibraltar as a relocation destination to understand. Within his latest budget, the Chief Minister announced the formation of a new committee on immigration chaired by Sir Joe Bassano. The committee will consist of various experts, and industry specialists and look to review and modernise Gibraltar’s immigration rules to ensure sustainability and compatibility with the new treaty. 

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Coupled with this, a supplemental Gazette was published on 6^th October, temporarily suspending residency applications. 

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The effect of this suspension has had wide and varying interpretation, but importantly, there is a discretionary carve out for applications that are in the economic interest of Gibraltar.  High quality Cat 2 applicants and relocations for the purpose of furthering business in Gibraltar including genuine employment, will, generally, be considered to meet these interest requirements.  

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We therefore encourage anyone looking at relocating under Cat 2 or Gibraltar businesses looking to relocate individuals whether qualifying for HEPSS or not to speak to Acquarius to ensure an understanding of the latest position.

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The specific rules governing Cat 2 status are part of this government review. Although nothing has yet been announced, amendments are likely. Currently, applicants must demonstrate a minimum net worth of £2 million, have approved accommodation in Gibraltar, whether rented or purchased and comprehensive medical cover. At present, there is no minimum annual stay requirement; in theory, a Cat 2 individual need not spend any time in Gibraltar. Once approved, the status caps annual income tax on worldwide income to the first £118,000, resulting in a liability of between £37,000 and £42,380 at current rates – regardless of total income. Combined with the absence of capital gains tax and inheritance tax, this makes Cat 2 a hugely attractive proposition. 

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We do not yet know the extent of any forthcoming changes, but it is reasonable to expect an increase in the minimum net worth threshold. There may also be adjustments to the current “days spent in Gibraltar” provisions, though it would be unwise to speculate further. 

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Whatever the “fine print”, I am confident that Gibraltar will continue to stand out as an excellent residency option for high-net-worth individuals. 

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In previous articles, we have outlined the compelling case for Gibraltar as a place to live. Its appeal arises from a combination of advantages. These include an English-speaking Mediterranean lifestyle, an excellent education system and low crime rate. 

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These should be considered against the wider global trend in which an increasing number of individuals are reassessing their residency options. Gibraltar has much to offer, but of course residency is not citizenship. Certain countries continue to offer “citizenship by investment” programmes, described by some commentators as “passports for sale.” These schemes have attracted considerable negative press, particularly certain less scrupulous examples; thus, it should come as no surprise that Gibraltar takes no part in them. 

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If you or your clients are considering a move away from home whether for tax reasons, lifestyle, climate, or the flexibility afforded by remote working, now is an opportune time to consider Gibraltar. Please feel free to speak to us, without any obligation, for further details including our latest guidance on when residency applications are likely to resume. Gibraltar is unlikely to disappoint; indeed, you may find it exceeds your expectations.