Moving from the UK to Portugal is an exciting step, but in a landscape of constant legislative changes, an “exit strategy” is just as important as the arrival plan. With the 2024 Autumn Budget and reforms planned for 2025, the British government has introduced profound changes affecting expats and high-net-worth individuals.
At FA ACCOUNTING, we closely monitor these transitions to ensure your move is financially efficient. Below, explore the essential points to minimise tax costs when leaving the UK.
1. The End of the “Non-Dom” Regime and the New Era of Residency
From 6 April 2025, the concept of “domicile” will no longer be the determining factor in the UK tax system, replaced by a system based purely on tax residency.
- Implication: Those who benefited from non-dom status will be taxed on their worldwide income and gains after four years of UK residency.
- Opportunity: If you are planning to leave before this date, it is crucial to review your foreign asset structure to avoid unexpected charges.
2. Anticipating Capital Gains Tax (CGT)
The UK has been adjusting CGT rates. For those leaving, losing resident status can mean losing important exemptions:
- Private Residence Relief (PRR): As a UK resident, the sale of your primary home is usually tax-exempt. However, once you become a tax resident in Portugal, this sale could be taxed in Portugal if not planned correctly (e.g., through reinvestment).
- Strategy: Evaluating asset sales or “crystallising” gains while still under the UK tax regime (or vice versa) can save thousands of euros in taxes.
3. The Pension Challenge: The 25% “Lump Sum”
One of the greatest advantages of the UK system is the possibility of withdrawing a 25% tax-free pension lump sum.
- The Risk: This benefit is a UK domestic rule. If you make this withdrawal after becoming a tax resident in Portugal, the Portuguese Tax Authority may tax this amount as pension income, with rates reaching up to 48% (unless covered by special regimes like NHR/IFICI).
- FA Advice: Consider making strategic withdrawals before formalising your change of residency.
4. Inheritance Tax (IHT)
The British government is transitioning to a residency-based IHT model.
The Tax “Tail”: Even after leaving the UK, you may remain subject to IHT on your worldwide assets for a period of up to 10 years (the “10-year tail”). It is essential to structure your estate and consider insurance or planned gifting to protect your heirs.
5. Portugal as a Destination: The New Tax Incentive (IFICI)
Portugal remains a top destination, now with the new IFICI (Scientific Research and Innovation Tax Incentive) regime, successor to the NHR. This regime offers:
- A flat rate of 20% on employment income from qualified activities.
- Exemptions on various types of foreign-source income.
How FA ACCOUNTING can help?
Leaving one jurisdiction and entering another requires rigorous technical analysis to avoid double taxation and ensure compliance in both countries (such as filing Annex J in Portugal).
At FA ACCOUNTING, we assist with:
- Residency status analysis (Statutory Residence Test).
- Optimisation of asset and pension transitions.
- Alignment with new Portuguese tax regimes (IFICI / NHR 2.0).
Prepare your move with precision. Contact FA ACCOUNTING for a personalized consultation.
Disclaimer: This article is for informational purposes only and does not replace professional advice tailored to your specific case.