New year is a good time to check your tax, savings, pension and estate planning are on track to meet your family’s needs in 2018 and beyond.
The new year is a good time to reflect on the previous 12 months and look ahead to what the coming year may bring. This should always include a review of your financial planning to ensure it is up-to-date and on track to protect your family’s long-term wealth.
The biggest current concern for many British expatriates is Brexit uncertainty. Reassuringly, 2017 ended with news that residency rights and benefits will be maintained for Britons resident in the EU before Brexit. So if you already have permanent residence status in Portugal, your right to remain is secure and you can continue receiving the same access to healthcare and other benefits as you do today.
But if you are planning to move to Portugal in the future or have not yet registered as tax resident, the clock is ticking. Consider securing permanent residency before the Brexit cut-off date – scheduled for March 2019 – as it is unclear what the rules will be beyond this.
Brexit will not affect Britons’ ability to apply for and enjoy significant tax advantages through Portugal’s non-habitual residency (NHR) scheme. To be eligible, however, you need to meet Portuguese residency rules, so it will be much easier to apply now as an EU citizen.
Regular tax reviews can ensure your investments and wealth are arranged in the most suitable way to limit your liabilities – wherever you have financial interests – while meeting your obligations.
Today, it is more important than ever to get it right as the new ‘automatic exchange of information’ regime is well underway. Over 50 countries – including Portugal and the UK – are already sharing data on residents’ overseas income and assets, with another 50 joining them this year. This means your local tax office will receive financial information about you without having to even ask for it. Remember, in extreme cases tax evasion can result in prosecution, even if it unintentional.
Cross-border tax planning is complex, so take specialist advice to achieve peace of mind and potentially secure significant tax savings.
See more about tax planning in Portugal
In November 2017, the UK interest rate increased for the first time in over ten years. Although minor – lifting to just 0.5% from 0.25% – many banks have failed to pass this on to savers. Even where they have, cash savings are not keeping pace with rising living costs. December saw UK inflation reach a near six-year high of 3.1%, meaning many savers are earning a negative real rate of return. British expatriates have the added concern of exchange currency risk in what is currently a highly volatile time for Sterling.
Successful investing is about having a strategy specifically based around your personal circumstances, time horizon, needs, aims and risk tolerance. You should ensure you have adequate diversification to avoid over-exposure to any given asset type, country, sector or company. Using investment structures that allow multi-currency flexibility can help minimise exchange rate risk.
In any case, remember to review your portfolio annually to take market developments into account and address any changes in your circumstances.
See more about investment management for expatriates
Today’s pension landscape offers more choices than ever. Spend time to weigh up all your options, as well as the tax implications in Portugal and the UK, to establish the best course of action for you. Note that pension scams are common and increasingly sophisticated, so make sure you take regulated advice to protect your retirement savings and do what is right for your personal circumstances and aims.
It is important to review your estate planning when living in Portugal, as both succession law and tax work very differently to the UK.
Did you know, for example, that Portugal’s ‘forced heirship’ rules could automatically pass half your worldwide estate to your direct family, whatever your intentions? You can specify in your Will for the EU regulation ‘Brussels IV’ to apply relevant British law to your estate instead, but take care to understand your options and any tax implications.
Your estate plan should be set up to achieve your wishes in the most tax-efficient way possible. If you remain UK domiciled – as many expatriates are – you continue to be liable for UK inheritance tax, so you should plan to reduce this liability for your heirs. Speaking of heirs, do not forget to take into account any new additions to your family this year!
Whether it is investments, tax or pension planning, take personalised advice to establish the most suitable approach for you. Spending a little time on a financial health-check now can provide peace of mind that you and your family are in the best financial position to enjoy a prosperous 2018 and beyond.
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All information in this article is based on Blevins Franks’ understanding of legislation and taxation practice at the time of writing; this may change in the future. It should not be construed as providing personalised taxation, investment or pension advice. You should take advice for your circumstances.