I am a British national making aliyah this year. Is my Israeli salary really tax free?

For decades the Israeli deal for immigrants was the reverse of this. Section 14 of the Income Tax Ordinance exempted your foreign income for ten years, while every shekel you earned working in Israel was taxable from the first day at rates climbing to 47% before surtax. Legislation passed on 31 March 2026, carried in the Economic Efficiency Law and published in Sefer HaHukim 3511, turns that around for a single narrow cohort, and the window closes at the end of this calendar year.

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Detailed Answer

Eligibility is defined by two things: what you are and when you arrive. The relief runs to a new Israeli resident and to a veteran returning resident, meaning someone who was outside Israel for more than ten consecutive years, and the person must become an Israeli resident between 5 November 2025 and the end of 2026. The exemption then applies to Israeli-source earned income, which is to say employment salary and the business income of a self-employed person, across a five-year run from 2026 to 2030. The ceilings decline over the period: NIS 1,000,000 in each of 2026 and 2027, NIS 600,000 in 2028, NIS 350,000 in 2029 and NIS 150,000 in 2030. Income above the ceiling in any year is taxed normally at the ordinary progressive rates, so the relief is a slice off the bottom rather than a switch. Two exclusions do most of the work in practice. Passive income is outside the scheme entirely, so Israeli dividends, interest and rental income are taxed as they always were, and a salary paid by a relative is capped far lower, at NIS 140,000 a year, which closes the obvious route of incorporating a family company and paying yourself out of it. Nothing here disturbs Section 14: a 2026 oleh can hold the foreign-income exemption and this Israeli-income exemption at the same time, which is an unusually generous combination and the reason the government limited it to one year of arrivals.

The British side of this needs separate thought, because Israeli exemption is not the same thing as no tax anywhere. Your UK tax residence ends by reference to the UK statutory residence test rather than by reference to your teudat oleh, and in the tax year of departure a UK charge can survive on income arising before the split. Under the UK-Israel Convention as amended by the Protocol signed on 17 January 2019 and in force since 28 October 2019, employment income is in principle taxable where the work is physically performed, so once you are working in Israel as an Israeli resident that income belongs to Israel to tax, and the new exemption then removes the Israeli charge on it up to the ceiling. What the exemption cannot do is relieve a UK liability that has not yet ended, and a person who keeps a UK employer, works remotely from Israel for part of the year, or retains a UK home has a genuinely mixed position that should be settled before the first payroll rather than after. One more consequence is easy to miss. Anyone who becomes an Israeli resident on or after 1 January 2026 has also lost the old reporting exemption, because Amendment No. 272 deleted Section 134B, so this cohort enjoys the most generous tax package Israel has ever offered new arrivals and simultaneously carries the fullest disclosure duty; our answer on reporting foreign assets to the Israel Tax Authority after aliyah in 2026 sets out what that filing involves. Practically, someone still abroad who intends to take this relief should treat the residency date as the single most important item in the move, because arriving on 3 January 2027 puts you outside the scheme entirely.

In Practice: The exemption on Israeli earned income was enacted on 31 March 2026 within the Economic Efficiency Law, published in Sefer HaHukim 3511, and reaches new immigrants and veteran returning residents who become Israeli residents between 5 November 2025 and 31 December 2026. Ceilings are NIS 1,000,000 for 2026 and 2027, NIS 600,000 for 2028, NIS 350,000 for 2029 and NIS 150,000 for 2030, with a reduced cap of NIS 140,000 a year where the employer is a relative. Passive income is excluded and remains taxable by the Israel Tax Authority in the ordinary way, and the Section 14 ten-year exemption on foreign income continues alongside it.

When to Consult a Lawyer

• Your residency date is anywhere near the end of 2026. The scheme turns on becoming an Israeli resident within the window, which is a substantive test about your centre of life rather than a stamp in a document, and being a few weeks out costs the entire five years of relief.
• You will be paid by a company connected to your family. The NIS 140,000 relative cap is drawn widely, and the difference between a genuine arm's-length employer and a related one is where these files are won or lost.
• You are keeping a UK employer, UK property or a UK home while living in Israel. The Convention allocates the taxing rights, but the split-year mechanics and any surviving UK charge have to be worked out with both systems in view, not just the Israeli one.

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Speak With an Israeli Attorney

We fix the residency date that qualifies you, structure the Israeli employment or self-employed file so the exemption applies to the whole of the intended income, and coordinate the position with your UK adviser before the first payslip.

Contact us for a confidential initial consultation.