https://www.blevinsfranks.com/financial-planning-for-portugal/
Key points to consider as we enter the New Year.
By Stephen Rankine, Private Client Manager, Blevins Franks.
The New Year often inspires reflection and goal setting in areas like health, happiness, lifestyle, and finances. As we enter 2025, have you reviewed your financial plan?
Now is an ideal time to ensure your tax strategy, investments, pensions and estate planning are aligned with your long-term goals, and designed to safeguard your family’s financial well-being.
This year, make it a priority to assess whether your financial plan is on track to meet your objectives and provide the lasting financial security you need.
Post NHR planning.
Although Portugal’s Non-Habitual Residence (NHR) regime is no longer open to new applicants, existing NHR holders continue to benefit from its tax advantages until the end of their 10-year term. After this period, residents become subject to Portuguese taxation on their worldwide income and gains. To optimise your tax position, it’s advisable to make the most of your NHR benefits and strategically restructure your assets now to minimise your post-NHR tax liabilities.
Once your NHR term has concluded, your worldwide income and gains will be fully taxable under Portuguese law if you remain a resident. Income tax in Portugal is applied on a progressive scale, which in 2025 starts at 13% for income up to €8,059 and rises across nine bands to 48% for income exceeding €83,696.
Investment income, including interest, is taxed at a flat rate of 28%, although you can choose to apply the progressive scale rates. However, if assets are held in jurisdictions listed on Portugal’s ‘tax haven’ blacklist, the tax rate increases to 35%.
For property sales made after NHR status ends, 50% of the capital gain is taxable in Portugal at the progressive income tax rates. However, exemptions may apply to the sale of your primary residence, provided it is located in Portugal and certain conditions are met regarding the use of the proceeds.
Reviewing the structure of savings and investments.
One common and potentially costly mistake expatriates make is assuming that tax-efficient strategies in their home country will remain effective in Portugal.
When relocating, it’s essential to reassess your financial planning to ensure your portfolio is well-diversified and optimised for your new circumstances. Consult a locally based adviser with expertise in the Portuguese tax system and its interaction with UK tax rules. They can help you identify tax-efficient strategies tailored to protect and grow your assets and wealth.
Your UK pension in Portugal.
If you are a resident of Portugal with a UK pension, it’s essential to review your pension arrangements to ensure they align with your current and future circumstances.
Pensions, like individuals, can benefit from adapting to new environments. Regularly reassessing your objectives may involve adjusting your investment profile, reevaluating your risk tolerance, or implementing a strategy that better reflects your overall financial situation.
For Portuguese residents, there may also be appealing tax options available for those considering encashing their pension, offering benefits comparable to those provided under the Non-Habitual Residence (NHR) regime.
Estate planning in Portugal.
Estate planning should not be left as the final step in your financial strategy. The way you hold assets can significantly impact how they are distributed upon your death and the amount of tax your beneficiaries may have to pay. It’s important to address this early in your planning process.
Portuguese succession tax rules differ from UK inheritance tax rules, so a clear understanding of these regulations is essential to develop an effective plan.
UK nationals may utilise the EU regulation ‘Brussels IV’ to apply the inheritance laws of their native country to their estate. However, it’s crucial to research and evaluate whether this option aligns with your specific circumstances and objectives.
A professional review for a complete financial plan.
Each family’s situation is unique, and your financial planning should be tailored to your specific needs and goals. A comprehensive wealth management strategy ensures all elements work seamlessly together to provide long-term financial security and fulfil your intentions for your heirs.
To gain peace of mind, it’s essential to ensure that all aspects of your financial plan are thoroughly considered, particularly the complexities of Portuguese taxation. Professional advice can help you avoid unintended consequences from interconnected financial decisions. Seek guidance from a locally based cross-border wealth management specialist for the most effective and personalised solutions.
Tax rates, scope and reliefs may change. Any statements concerning taxation are based upon our understanding of current taxation laws and practices which are subject to change. Tax information has been summarised; individuals should seek personalised advice.
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