Many British expatriates living in Portugal continue to hold the same savings and investments they had in the UK, even if they are living there long-term. While this is understandable, it is advisable to review your assets to establish if you are holding them in the most tax-efficient way for Portugal.
It is worth weighing up your current tax liabilities against what you could pay if you moved assets out of the UK and structured them strategically to suit the Portuguese tax regime.
Premium Bonds and ISAs
You may feel sentimental about Premium Bonds you’ve owned for decades, but once you are a resident of Portugal, the winnings stop being tax-free. They are taxable there, and if you are lucky enough to win one of the larger prizes, the Portuguese tax authorities will benefit, too.
Likewise, ISA interest and dividends become subject to Portuguese taxation (and non-UK residents cannot make new ISA deposits).
Investment income for Portuguese residents is taxed at a flat rate of 28%, but you can opt to pay tax at the scale rates if that proves more beneficial. In this case, the income is added to your other income for the year and taxed at rates ranging from 13% for income up to €8,059 to 48% for income over €83,696 (2025 rates).
UK bank interest
Although bank interest in the UK is tax-free under a certain threshold for UK residents, it is taxable for Portuguese residents – either as investment income at 28% or at the scale income tax rates.
Those with non-habitual residence status can continue to receive UK bank interest tax-free until their 10-year NHR term ends. The same applies to UK dividends but not to UK shares.
OEICs and unit trusts
UK investments such as unit trusts and open-ended investment company (OEIC) funds can offer tax relief and other advantages while you are in the UK.
However, once a resident of Portugal, investments such as these attract the flat 28% tax rate and Portuguese capital gains tax when sold.
UK property and rental income
If you sell a UK property as a Portugal tax resident, the gains will be assessed for tax in both countries. Where tax is paid twice, the double tax treaty ensures a credit can be given, although you will pay the larger amount.
In Portugal, only 50% of the gain is taxable. It is combined with your other qualifying worldwide annual income, and your total earnings are taxed at the income tax rates. The re-investment reliefs available on the sale of a main home are unlikely to apply since the property is not in your country of residence.
If you have NHR status, you will not need to pay tax on the sale of UK real estate. This is, therefore, a good opportunity to dispose of foreign property before your NHR term ends.
Any rental income earned from a UK property is taxable in both the UK and Portugal. You can offset the UK tax paid against the Portuguese tax on the same income. In Portugal, the net rental income is subject to a flat rate of 28%, though you can opt for the scale income tax rates.
Exploring tax-efficient investment structures in Portugal
There are highly tax-efficient opportunities available to residents of Portugal.
Many expatriates benefit from holding capital in a structure similar to an offshore life assurance policy or bond that acts as an investment wrapper to a conventional portfolio. No tax is payable on the underlying investment income until a withdrawal is made. Even then, only a proportion of the profit is taxable in Portugal and the effective rate of tax drops over time. Arrangements available in Portugal also tend to work much more efficiently than UK bonds, which often generate unwelcome problems for expatriates.
For the best results, speak to Blevins Franks. We can guide you on both UK and Portuguese taxation, the interaction between them and tax planning opportunities.
You can download our free Portugal Tax Guide now.
It’s not all about tax
There are other compelling reasons to review how your savings and investments are structured. You need to ensure they meet your income and currency requirements, as well as your objectives, time horizon, and risk tolerance. Unfortunately, many people hold portfolios that do not work as hard as they can and are no longer suitable for them.
Be aware too that, post Brexit, UK-based advisers cannot use the EU passporting system to provide regulated financial services to EU residents. They are also unlikely to have the deep understanding of the Portuguese regime necessary to provide the most tax-efficient financial planning solutions.
With opportunities to enjoy extremely favourable tax treatment on your capital investments in Portugal, restructuring UK assets can prove profitable, so take time to explore your options.
Blevins Franks has been helping clients relocating to and living in Portugal for 50 years. Our locally based advisers will be able to guide you through the entire process and provide you with tax-efficient options for your assets.
Contact us today.
