Financial Planning for British Citizens Moving to Portugal
Get expert guidance to protect your wealth and optimise your tax position before you relocate from the UK to Portugal. There are a number of reasons why you should involve an appropriately qualified professional and it could save you many thousands of pounds.
Strategic Planning
Why Plan Ahead?
Avoid being taxed twice on the same income or investment growth
This requires some attention and inevitable time and patience. An NT tax code needs to be obtained for each pension for example.
Structure your assets efficiently for Portugal
UK tax rules only apply to the UK! Structures or wrappers such as ISAs and SIPPs are viewed somewhat differently by all other countries including Portugal. ISA’s become transparent and income from them is subject to tax. A potential tax-free commencement lump sum from a pension is not tax free in the eyes of the Portuguese tax authority.
Optimise your financial assets when moving to Portugal
Consider accessing any pension tax free allowances whilst being UK tax resident. They are not tax free elsewhere. ISA’s need consideration.
Avoid financial mistakes
As the UK is no-longer part of the EU, it is now more important than ever to take appropriate action with regard to your financial assets. Apathy can contribute to costly mistakes.
Pay less tax on your UK pension in Portugal than in the UK
Depending on the exact make-up and size of your pensions it may be possible to pay a reduced level of tax on your pension income compared to the UK. The default taxation rate is at the prevailing marginal rates of income tax, see the following link for more information: https://taxsummaries.pwc.com/portugal/individual/taxes-on-personal-income
Find out why Portugal remains a top destination for British retirees
Making some changes in terms of the location and way in which your financial assets are managed can mean that you pay very low, single digit tax rates on income for life, meaning Portugal remains a very attractive location for retirement and those with a passive income source.
Trusted by Experience
Our Expertise
You will benefit from boutique experience and deal directly with a Chartered Senior Adviser who is both UK qualified and fully understand the Portuguese tax system.
Not only has our Senior Adviser been through the process themselves, they have built up a reliable and trusted network of professional partners and operated with an award winning Adviser’s network and a member of FEIFA, the Federation of European Independent Financial Advisers, which ensures a high level of professional conduct.
Tailored Advisory
How We Can Help
During an initial, complementary meeting it will be explained in detail exactly how we will be able to help you and on what fee basis.
Personal Financial Planning
Retirement planning
Investment strategy development
Wealth preservation
Tax optimisation
Estate planning guidance
Investment Advisory
Portfolio diversification strategies
Market analysis and insights
Long-term wealth-building plans
Risk-adjusted investment solutions
Client Success Story
Client Success Story
Mr & Mrs Jones lived and worked all of their lives in Surrey, UK. They recently both retired and their children have completed university and established their careers. They have holidayed in Portugal several times in the past and for a number of reasons they very much want to make the country their permanent home.
The Challenge
They faced significant income tax payments on their pension income, a large capital gains bill on their ISAs and were interested to mitigate UK Inheritance tax as much as possible.
The Solution
They engaged Ingenium Financial early on in the decision making process. Straight forward, high value advice was provided and an initial strategy was developed with an associated time line based on various stages of the move.
The Outcome
Planning ahead eliminated surprises and potentially costly mistakes. It has also saved several thousand pounds in initial taxes and having a fluid and cyclical plan will undoubtedly save many more thousands of Euros in the future.
“Phil was easy to speak to and understood our situation very well, he gave us useful practical information as well as more formal, written financial advice. We feel prepared for our future in Portugal”.
How To Mitigate UK Inheritance Tax By Moving to Portugal
Zero Inheritance Tax
There is no inheritance tax as such in Portugal. The UK has now also abandoned its historically overbearing ability to tax UK citizens on the basis of domicile, which was difficult to jettison.
The situation now is that spending a full 10 years outside the UK means that all assets that are based outside the UK are not subject to IHT evaluation. However, assets that remain in the UK do remain subject to UK IHT assessment. The answer is obviously to move what you can out to below any applicable allowances. Our Senior Adviser can offer expertise in these areas.
Although Portugal does not levy inheritance tax is does so on the basis of transfers to a spouse or direct descendants being free of fiscal encumbrance. If you might wish to break from this forced heirship regime you need to clearly state this in a will. In the drawing-up of that will it must be stated as to the country laws you wish to be adopted for the estate dispersal.
Frequently Asked Questions
Some examples of questions you may have are as follows when seeking to engage with an appropriate Financial Adviser
Frequently Asked Questions
Financial planning for British citizens
How are you legally authorised to give financial advice to a resident of Portugal, and can my current UK adviser simply keep managing my portfolio?
Since Brexit, UK advisers lost their passporting rights to operate within the EU. Your UK adviser cannot legally manage your money once you move unless they have a distinct EU entity. Our firm is fully licensed in the EU and full details of such as usually presented in detail upon an initial complementary consultation.
Are you an independent, fee-based adviser, or do you receive commissions from the investment products you recommend?
We operate on a transparent, fee-only or fee-based model. We do not accept hidden, commission-based payments from product providers, which are surprisingly still common especially with regard to fund selection. We charge an initial planning fee and a clearly defined ongoing annual management fee (typically around 1% of assets under management), providing a complete breakdown of all underlying fund costs and exit fees before any document is signed.
How should I organise my existing savings and investments if I am seriously considering a move to Portugal
You should either of the following strategies with regard to UK ISAs; cash them out completely or restructure (aka re-base them, to reduce future capital gains) or keep them if there is a chance you may return to the UK one day, Ingenium Financial are able to professional manage UK Isa once moved to an appropriate provider platform.
How will my UK workplace and private pensions be taxed in Portugal, and should I consider a QROPS or an International SIPP?
Under the UK-Portugal Double Taxation Agreement (DTA), your private pensions are taxed only in Portugal but you must take steps to obtain an NT Code from the HMRC for each pension in payment. (No-Tax at source).
You are unlikely to qualify for the latest NHR tax incentives, therefore your pensions face progressive or marginal tax rates, which operate like the UK income tax bands.
Will my existing UK will be suitable for Portuguese forced heirship laws, and how will my estate be taxed?
Your UK will does not automatically bypass Portuguese forced heirship rules, which your estate to go to your spouse and then children. Your will should be drafted taking into consideration EU Regulation 650/2012, which allows you to nominate the law of your nationality (UK law for example) to govern your estate.
You must plan to mitigate your UK IHT exposure over time.
I plan to rent out an existing UK property and live off the rental income, how will this be taxed when I am a resident of Portugal?
This strategy is certainly a very popular strategy to create a reliable, somewhat inflationary proof income. The short answer is that the UK will retain primary taxing rights and let us say you may pay zero (as you retain the UK personal allowance) but you may pay tax to Portugal which sees the income as taxable and has much smaller tax allowances.
You also need to bear in mind that your costs as a Landlord may increase due to the need to perhaps employ a full-service letting management, utilising contractors for repairs and renovations.