Tax benefits for new immigrants and returning residents in Israel: the ten-year exemption and the 2026 changes
Making aliyah from the UK comes with some of the most generous tax breaks anywhere. Just don't mistake "exempt" for "nothing to file": that changed on 1 January 2026.
The short version
- New immigrants (olim) and veteran returning residents (Israelis back after 10 or more years abroad) are exempt from Israeli tax on foreign income for ten years from becoming resident [4][5].
- Anyone who became an Israeli tax resident from 1 January 2026 must now report worldwide income and foreign assets, even when it's tax-free. People who became resident earlier keep the old reporting exemption for their ten years [4][5].
- A temporary law passed in March 2026 also exempts Israeli earnings up to set caps for 2026 to 2030, for those who became resident from 5 November 2025 [9].
- Olim also get extra credit points off Israeli tax on earnings for about four and a half years [3].
- On the UK side, the Statutory Residence Test still decides when HMRC lets go, and the UK–Israel treaty decides who taxes UK income [1].
Who counts as a new immigrant or returning resident
For these benefits, Israeli tax law has two main groups:
- New immigrants (olim): people who come under the Law of Return with an immigrant visa or certificate (teudat oleh).
- Veteran returning residents: Israelis who return after at least ten consecutive years as a foreign resident. The 2026 law also requires a returning resident certificate from the Ministry of Aliyah and Integration [6].
Israelis who return after a shorter spell abroad get narrower benefits. If that's you, check the Israel Tax Authority's rules for your exact number of years before you book the flights.
Both groups can also ask for an adjustment year: a year from arrival during which they ask not to be treated as Israeli residents for income tax. The request goes to the Israel Tax Authority within 90 days of arriving [2]. It can suit people winding up a UK job or business, but it changes your start date, so think it through.
The ten-year exemption on foreign income
This is the big one. For ten years from becoming resident, olim and veteran returning residents are exempt from Israeli tax on income produced or accrued outside Israel, and on gains on assets abroad [4][5]. For a Brit, that typically covers:
| UK income | Israeli tax in the ten years | UK position |
|---|---|---|
| Rent from a flat in Birmingham | Exempt | Taxable in the UK; register under the Non-Resident Landlord Scheme |
| Interest on UK savings and dividends from UK shares | Exempt | UK tax limited by the treaty and your Personal Allowance |
| Gains on UK shares and funds | Exempt | Usually not UK-taxable for non-residents, except UK property and some land-rich shares |
| UK workplace and private pensions | Exempt | Treaty says taxable only where you live (Israel) |
| UK State Pension | Exempt | Not usually taxed in the UK for non-residents |
| Salary for work done in Israel, even from a UK employer | Not exempt: it's Israeli income | Not UK-taxable once you're non-resident |
Sources: Nefesh B'Nefesh and the 1962 UK–Israel convention [4][5][7]. UK side: GOV.UK [1].
The catch on the last row matters. Work physically done in Tel Aviv is Israeli-source income, whoever pays you. A UK firm keeping you on as a remote worker doesn't make the salary "foreign" [4].
Pensions and the treaty
Article XI of the UK–Israel convention says pensions paid to a resident of one country are "taxable only in that territory" [7]. Read with the Israeli exemption, a UK private pension could end up taxed in neither country for a while, once HMRC accepts a treaty claim so your provider stops taking UK tax. But the treaty also has Article XXIA(2), which limits UK relief where the other country taxes income only by reference to what's remitted there [7], and government pensions follow their own article. A tax adviser who knows both countries can check how HMRC will treat your pension before you draw it. Never transfer a UK pension abroad to "make the most" of the exemption without regulated financial advice; see our guide to UK pensions abroad and the transfer warnings.
The end of the reporting exemption
Until 2025, olim could leave tax-exempt foreign income off their Israeli returns altogether. An amendment passed in 2024 ended that for anyone who became resident on or after 1 January 2026 [4][5]. If that's you:
- File an Israeli return each year from your first year, listing worldwide income, even if no Israeli tax is due [4].
- Report foreign assets and trusts too. The Tax Authority can also ask for a capital declaration listing what you own [4].
- Keep UK paperwork tidy: annual statements from UK banks, ISA providers and pension schemes, and your UK Self Assessment if you file one.
People who became resident before 2026 keep the old reporting exemption for their ten-year period [5]. One trap: someone who arrived in late 2025 but took the adjustment year may count as becoming resident after 1 January 2026, and so fall under the new rules [4].
The 2026 break on Israeli earnings
Israel's 2026 budget, approved in March 2026, added a temporary exemption for Israeli earnings [6]. It applies to olim and veteran returning residents who became Israeli residents from 5 November 2025 [9]. The government's own Q&A, updated on 20 October 2026, still gives the end of 2026 as the last arrival date [9]. Nefesh B'Nefesh reported in October 2026 that the window had been extended to 10 February 2027 [5], but we couldn't find that on an official page, so check the current date with the Israel Tax Authority or the Ministry of Aliyah and Integration before planning around it.
It covers income from personal exertion produced in Israel: salary, self-employment and professional fees. Rent, dividends, interest and capital gains don't count [6][8]. The exempt amounts are capped:
| Tax year | Exempt Israeli earnings, up to |
|---|---|
| 2026 | ILS 600,000 (about £139,000), pro rata for months resident |
| 2027 | ILS 1,000,000 (about £231,700) |
| 2028 | ILS 1,000,000 (about £231,700) |
| 2029 | ILS 350,000 (about £81,100) |
| 2030 | ILS 150,000 (about £34,750) |
Source: Ministry of Aliyah and Integration Q&A on the reform (updated 20 October 2026) and Gornitzky law firm summary, 27 April 2026 [9][6].
Two conditions to note. Pay from an employer who is a relative is capped at a much lower ILS 140,000 (about £32,400) a year for most of the period [8]. And if you stop being Israeli resident in 2028 or 2029 and spend fewer than 75 days in Israel in that year, the benefit is lost [6][8]. The exemption is automatic but can be declined [8]. It covers income tax only, not Bituach Leumi.
Credit points for olim
Olim also get extra credit points on top of the 2.25 every resident gets. For aliyah on or after 1 January 2022, the schedule is 1 point for the first 12 months, 3 points for the next 18, 2 points for the next 12 and 1 point for the 12 after that, four and a half years in all [3]. A point is worth roughly ILS 240 a month (about £55) in 2026, though published summaries differ slightly, so check the exact value with the Israel Tax Authority [2][3]. Points only help if you pay Israeli tax on earnings, so they matter less while the 2026 break covers your salary; standard points still apply for people arriving after the 2026 window [5].
The UK side doesn't change
None of this switches off HMRC. You leave the UK tax system under the Statutory Residence Test, with split-year treatment for the year you go and a P85 or SA109 to tell HMRC. UK rent stays UK-taxable whatever Israel exempts [1]. See the Statutory Residence Test explained and our main guide to Israeli taxes for Brits.
If you plan to come home within ten years, remember the UK's temporary non-residence rules can tax some gains and income on your return. Talk to a tax adviser who knows both countries before you cash in anything big. Plenty of olim in our community group for Brits in Israel have been through the first return and are happy to share what the accountant asked for.
Pound conversions use the Bank of England spot rate of 5 November 2026 (£1 = ILS 4.3162). Tax is general information, not advice.
Sources
- GOV.UK: Tax on your UK income if you live abroad
- PwC Worldwide Tax Summaries: Israel, residence and other tax credits (reviewed 29 June 2026)
- Nefesh B'Nefesh: Taxation in Israel, general information (updated 17 June 2026)
- Times of Israel blogs (Adam Kushner): The aliyah tax window closes in five months (27 July 2026)
- Nefesh B'Nefesh: U.S.–Israel income tax update 2026 (updated 25 October 2026)
- Gornitzky & Co.: New tax exemption for new immigrants and veteran returning residents (27 April 2026)
- GOV.UK (HMRC): 1962 UK–Israel Double Taxation Convention as amended by the 1970 and 2019 Protocols
- Ynetnews: Israel offers new immigrants 0% income tax as part of major aliyah push (27 April 2026)
- gov.il (Ministry of Aliyah and Integration): Tax Reform for New Olim, "0% Income Tax" (published 27 April 2026, updated 20 October 2026)