Major UK Inheritance Tax Reforms Prompt British Families to Consider Relocation to Portugal

The UK government is poised to introduce sweeping tax reforms that could significantly affect affluent Brits and high-net-worth families and positively impact UK expats in Portugal in terms of inheritance tax (IHT).

These changes, set to take effect from 6 April 2025, focus on the abolition of non-domiciled (non-dom) status and notable changes to IHT.

The new reforms mark a shift from a domicile-based taxation system to a residence-based one. The abolition of non-dom status means that the remittance basis of taxation, which allowed non-doms to pay UK tax only on UK income and gains, will no longer be available.

Instead, individuals who have not been UK residents for more than 10 out of the last 20 tax years will be exempt from tax on their worldwide income and gains.

Additionally, inheritance tax (IHT) will be reformed. UK expats who have been out of the UK for more than 10 out of the last 20 tax years will no longer be liable for IHT on their global assets.

These measures are expected to increase tax liabilities for people who live in the UK, leading some families to reconsider their long-term residency plans as they are better off as overseas residents under these new proposals. 10,800 millionaires are forecast to leave the UK due to this change, according to New World Wealth (NWW).

As British families evaluate the financial impact of the new UK tax landscape, Portugal emerges as an increasingly attractive destination, along with the cost of living, rich culture, and 300 days of sunshine.

Alongside this, Portugal does not impose taxes on inherited assets or gifts, unlike the UK.

This absence of inheritance and gift tax is a significant draw for families seeking to protect their wealth for future generations.

Chris Marson, CEO of Beacon Global Wealth Management, said:

“Many of our private clients have already relocated to Portugal and other locations for life and tax reasons, some of which have already been outside the UK for five or six years and as long as they remain healthy, they are only four or five years away from being completely outside of UK inheritance tax.

“Currently, some of our UK families have to now face the fact that their pensions are also going to be included in inheritance tax and, in many circumstances, the UK tax office will become the main beneficiary of their estate when you add in capital gains and the inheritance tax.”

Portugal’s Tax Incentive for Scientific Research and Innovation (IFICI), also known as the NHR 2.0 tax regime, also offers substantial advantages.

Under this tax regime, new residents can benefit from 0% tax on foreign income for 10 years (including capital gains and dividends), alongside a flat 20% income tax rate for certain qualifying professions.

These provisions are particularly appealing to skilled professionals and entrepreneurs looking to optimise their taxes.

Another attractive feature is Portugal’s Golden Visa programme. This residency-by-investment programme allows non-EU citizens to gain Portuguese residency through various investment routes, adding an extra layer of appeal for those seeking both residency and favourable tax conditions.

Steve Philp, Director of Portugal Pathways, reports a noticeable rise in interest from UK residents exploring relocation options.

“We’ve observed a significant uptick in inquiries from UK families considering Portugal as their new home,” Philp shares. “Portugal’s tax benefits, coupled with its high quality of life and the uncertainty surrounding the UK’s tax reforms, make it a prime destination.”

Philp also underscores the advantages of Portugal’s new IFICI (NHR 2.0) tax regime. “The NHR 2.0 regime provides a decade of substantial tax benefits, which is particularly appealing to entrepreneurs, highly skilled professionals, and those looking to optimise their tax liabilities.”

The trend is clear: more British families are exploring Portugal as a long-term residency option.

The combination of Portugal’s absence of inheritance and gift taxes, the IFICI (NHR 2.0) tax regime, and the residency opportunities afforded by the Golden Visa programme has created a compelling case for relocation.

Victor Andrews, a UK expat who recently sold all of his assets in the UK and moved his family to the Algarve, said:

“We decided to apply for the Golden Visa and have taken our whole family out of the UK, including our dependent children, as we could not live with ourselves if, after selling our business and investing in our pension for 30 years, most of it was lost to UK tax instead of our offspring.”

For those concerned about the UK’s inheritance tax reforms, Portugal offers an alternative with a more favourable financial outlook and an enviable lifestyle.

Whether it’s the tax advantages, the opportunity to secure Golden Visa residency by investment, or the promise of sunnier days and great food, Portugal continues to solidify its place as a top destination in Europe.

If you’re considering a move, seeking professional advice tailored to your circumstances is crucial to fully understand the benefits and ensure a smooth transition. Portugal could be the fresh start many UK families are searching for.

Portugal Pathways is holding a webinar about health and wealth on April 15 2025. This is an opportunity to hear from experts about the implications of these changes. Register here

Alternatively, contact Portugal Pathways directly and speak to one of our experts.

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About Portugal Pathways

Portugal Pathways has supported hundreds of Golden Visa residency-by-investment applications and provides expert guidance through its professional supply chain network on luxury property, wealth management, and tax optimisation, including post-NHR tax regime planning, as well as private healthcare, IFICI tax incentive applications, money transfers and bespoke relocation solutions to enhance life and investments in Portugal.

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Disclaimer: The information on the Portugal Pathways and Portugal Investment Owners Club (P Club for short) websites and in email communications is for general informational purposes only and should not be construed as legal, tax, or financial advice. You should consult and check with a qualified professional advisor before relying on any information provided on this website or in email communications. As it relates to investments in Golden Visas or other wealth management solutions offered by regulated and professional advisors, it is important to note that past performance is no guarantee of future returns. Private equities can be highly illiquid and come with risk and should always be under professional independent advice.

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