How Much Will It Cost Me to Retire in the United Kingdom?

Numerous European countries are among the world’s most attractive retirement destinations, and the United Kingdom (U.K.) is no exception. With its rustic villages, historic landmarks and lower cost of living, the U.K. can offer retirees the exact right amount of relaxation, excitement, and access to other European countries. Although the UK government recently closed its retirement visa program, it’s still possible to retire in the UK through other visa types. Here’s how to do so and how to weigh the financial implications of retiring outside the United States.

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How Much Does It Cost to Retire in the United Kingdom?

From lush countryside to bustling cities, the United Kingdom offers both tranquility and adventure to retirees. Whether you find rustic villages or a cultural center like Edinburgh more appealing, you’ll generally enjoy lower costs for travel, food, and housing than in the U.K.

According to cost of living data aggregator Numbeo, the cost of living in the UK is 15.3% lower than the U.S. on average. In addition, rent is nearly 35% cheaper. That said, costs vary around the country. For example, you can live in the town of Bangor for a fraction of the cost of living in London.

In terms of dollars, a retired couple can expect to spend about $1,500 for monthly living expenses, not including the price of housing. Depending on where you live, a one-bedroom apartment will roughly cost between $840 and $1,1o0 per month. Therefore, your budget should be around $2,500 a month, but your location will influence your food and housing costs. Furthermore, trips and excursions would incur additional expenses.

Of course, if you have a budget far exceeding $2,500, retiring in the U.K. provides you with an excellent home base for vacationing in other European nations. A monthly income of $5,000 or more would potentially allow you to maintain your home in the U.K. while eating tapas in Barcelona or wandering the streets of Rome.

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Housing and Food

As stated above, a typical one-bedroom apartment in the U.K. costs between $840 and $1,100 per month, according to Numbeo. However, if you want more space for storage or hosting visitors, a three-bedroom apartment costs more. Specifically, you’ll pay between $1,470 and $1,950 on average. These costs range widely, with a three-bedroom apartment costing almost $2,800 in Oxford. Similarly, food costs vary by region. For example, a meal for two in Aberdeen costs an average of $63.92, while the same meal would cost $88.22 in Bath.

You can compare London to New York for another perspective on costs. Numbeo estimates that rent costs one-third less in London. For example, a one-bedroom apartment in the U.K.’s capital costs about 2,480 per month, while a one-bedroom rents for around $3,800 in New York City.

Likewise, the average dinner for two costs $85.02 at a mid-range restaurant in London, 15% less than a meal in The Big Apple. Overall, Numbeo reports consumer prices being about 25% cheaper in London. Therefore, retiring in a U.K. metropolis will likely be less expensive than in the biggest cities in the U.S.

Getting an Initial Retirement Visa for the United Kingdom

The U.K. recently closed its retirement visa program, meaning retirees don’t have a straightforward way to get into the country. Fortunately, the U.K.’s other visa avenues are still open. So, retired couples can apply for work, ancestry or family visas. These visas have varying costs and requirements.

For example, the work visa involves committing to work for several years, with specific visas for doctors and religious ministers. You also can qualify for a visa through other types of work, such as skilled labor or business investment.

On the other hand, you can qualify for an ancestry or family visa by proving a family tie to a citizen of the U.K. Ancestry visas are granted to those with a parent or grandparent from the U.K., while a family visa means you have a spouse, fiancée, civil partner, child or parent who is a U.K. citizen.

So, retiring in the U.K. is more challenging than a country like Thailand, which has straightforward income requirements. To retire in England, Scotland, Wales or Northern Ireland, you generally have two options: commit to investing in a business or working for five years, or prove a family tie to a U.K. citizen. If you choose the former option, you could move to the U.K. five years before you intend to fully retire to make your last five years of work count toward your retirement plans.

Next Steps on Your Visa

If you secure a work, family or ancestry visa, you’ll need to live in the country for five years. Upon hitting this milestone, you can apply for permanent settlement status, granting you indefinite leave to remain (ILR) in the UK. Similarly, if you obtained a retirement visa before the U.K. shuttered its policy, you can also acquire ILR after living in the country for five years.

Healthcare in the United Kingdom

The U.K. has a nationalized healthcare system, meaning most healthcare expenses come from taxes. As a result, accessing healthcare is inexpensive, but you might wait longer to get in for a procedure, especially if it’s elective. On the other hand, as an industrialized country, the U.K. has excellent health outcomes and cost control.

Plus, unlike Medicare, the U.K.’s National Health Service (NHS) has no age requirements. Therefore, you can retire in the U.K. at any age and have health insurance, guaranteed. That said, certain forms of care, such as diabetes treatments and hip replacements, are more accessible in the U.S.

Taxes in the United Kingdom

You will generally pay taxes on your retirement income if you live in the U.K. However, like the U.S., the U.K. grants several tax deductions called “allowances” like self-employment and marriage. Below, find the U.K.’s tax rates by income level, converted from pounds to dollars:

Income Level (Band) Taxable Income Tax Rate Personal Allowance $0-$15,095 0% Basic Rate $15,101-$60,371 20% Higher Rate $60,371-$150,285 40% Additional Rate Over $150,285 45% Reasons You May Not Want to Retire in the United Kingdom

As the table above displays, taxes might be a reason to avoid retiring in the U.K. For example, you’d pay ordinary income taxes of 12% in the U.S. with an income of $65,000 if you are married and filing jointly. On the other hand, this income level would incur a 40% tax rate in the U.K. Plus, the US government will likely tax your pensions and Social Security income regardless of where you settle down.

Likewise, transferring your retirement accounts to the U.K. and converting them to pounds can incur additional fees. As a result, your retirement accounts likely don’t represent an apples-to-apples comparison in pounds. It’s wise to consult a financial advisor about the financial implications of retiring in the U.K. with your unique circumstances.

Lastly, retiring in the U.K. now requires you to work if you don’t have a close relative or spouse with citizenship. This dynamic complicates retirement plans, as you’ll have to work for five years before applying for indefinite leave to remain to secure your place in the U.K.

The Bottom Line

Your retirement goal to reside in the U.K. during your golden years is achievable, despite the U.K. government tightening its visa regulations. If you’re willing to work for five years or you have a relative with U.K. citizenship, you can qualify for a visa to get into the country. With a lower cost of living, historic sites and an extensive coastline, it’s an excellent place to enjoy your golden years.

However, if you have a chronic health condition, you may experience worse health outcomes than in the U.S. In addition, the U.K. levies higher income taxes, decreasing your ability to afford city living and travel. All that said, the U.K. is an English-speaking, industrialized country with plenty of attractions, activities and quiet corners. It’s best to discuss your retirement plans with a financial advisor to see if living in the U.K. is viable for you.

Tips for Retiring in the United Kingdom

• Retiring at home or abroad requires sufficient income. A financial advisor can help you create or modify a financial plan, optimally manage assets and navigate your unique tax situation. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.

• Retiring modestly in the UK could cost about $2,500 per month. The average Social Security distribution for a newly retired 65-year-old is around that amount. To see how far your benefit could take you, try our Social Security calculator.

Photo credit: ©iStock.com/CHUNYIP WONG, ©iStock.com/dave_valler, ©iStock.com/HerbySussex

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