Inheritance Tax UK and Portugal

If you're researching UK inheritance tax rules because you're weighing up a move abroad, the starting point is what changed on 6 April 2025. HMRC replaced the UK's domicile-based inheritance tax (IHT) system with a residence-based one.

Under the new rules, you're treated as a "long-term resident" once you've been a UK tax resident for at least 10 of the previous 20 tax years, and your non-UK assets stay within scope of UK IHT until you fall below that threshold. Assets physically located in the UK, such as UK property, remain within the scope of UK IHT regardless of where you live.

More than 48,000 British nationals live in Portugal, per AIMA's latest figures, and many are weighing exactly this question.

This page brings together what Portugal Pathways has published on UK inheritance tax and Portugal's own inheritance and gift tax rules into a single reference, replacing five earlier posts that covered overlapping ground.

How UK inheritance tax changed in 2025

Before 6 April 2025, UK IHT exposure was governed by domicile, not residence. Long-term UK residents who were not UK-domiciled could, in some circumstances, keep non-UK assets outside the scope of UK IHT under the old rules. That system has ended.

Under the current rules:

The test is residence, not domicile. Once you've been a UK tax resident for 10 or more of the last 20 tax years, you're treated as a long-term resident for IHT purposes and taxed on your worldwide estate.
Falling below the 10-year threshold takes your non-UK assets outside UK IHT. This is a cumulative test, not a single-year snapshot. Years already spent as a non-UK tax resident count toward it, so you're correspondingly closer to the threshold if you're partway through than if you were starting from zero.
UK-situated assets stay in scope regardless of residence. Property, UK-based investments, and other UK-situs assets remain subject to UK IHT even after you become a long-term non-resident.
A "tail" period applies after you leave. As a former long-term UK resident, you remain within the scope of UK IHT on your worldwide assets for a period after you leave, rather than the exposure ending the day you depart. This tail is not a single fixed figure: it scales with how long you were UK resident beforehand, running from a minimum of around three years up to a maximum of ten, unchanged as of Baker McKenzie's March 2026 Spring Statement update.

Are UK pensions included in inheritance tax?

Most unused pension funds and death benefits are due to be brought within the scope of UK inheritance tax from April 2027, potentially taxed at up to 40% as part of your estate. HMRC first announced this change at the Autumn Budget 2024 and confirmed the detail in a July 2025 consultation response. This has not yet taken effect.

Reviewing cross-border estate planning with a UK pension pot now means weighing this change alongside the residence-based rules above, not treating it in isolation. Confirm your own position with a regulated UK pension or tax adviser before acting, since implementation details can still be adjusted before the change takes effect.

How Portugal taxes inheritance and gifts

Portugal does not levy a tax called "inheritance tax." Instead, it applies Stamp Duty (Imposto de Selo) to the gratuitous transfer of Portuguese-situated assets, whether by inheritance or lifetime gift.

Spouses, children, grandchildren, and parents are exempt from the 10% general rate. Spouses, civil partners, descendants, and ascendants pay no Stamp Duty on non-property assets they inherit or receive as a gift, regardless of value.
Other beneficiaries pay 10% on non-property assets. Anyone outside that immediate family group pays 10% Stamp Duty on the asset's value when receiving a gift or inheritance.
Property carries a separate 0.8% charge that applies to everyone. Where the transfer includes Portuguese real estate, an additional 0.8% Stamp Duty applies to the property's value. This is a distinct charge from the 10% general rate, and it isn't waived even if you're a spouse, descendant, or ascendant. The family exemption applies to the 10% rate only, not to this property-specific charge.

This is a materially different structure from the UK's inheritance tax regime, and it's one reason Portugal comes up regularly if you're weighing cross-border succession planning. It isn't, on its own, a reason to relocate (see below on why living in Portugal doesn't by itself change your UK IHT exposure).

Does living in Portugal reduce your UK inheritance tax exposure?

Not automatically. This is one of the highest-risk points of confusion in this area, so it's worth stating plainly: holding a Portuguese Golden Visa, or otherwise having the right to live in Portugal, doesn't by itself make you a long-term non-UK-resident for IHT purposes. Your tax residency is a separate, factual question determined under UK and Portuguese tax law and your actual circumstances, including day-count and ties tests, not by which visa or residency permit you hold.

To reduce your UK inheritance tax exposure, what matters is ceasing UK tax residence and remaining a non-UK tax resident for long enough to fall below the 10-of-20-years threshold described above. Search interest in how to avoid IHT UK by relocating typically centres on exactly this mechanism: it's a question of your sustained non-UK tax residence, not of any single visa, investment, or Portuguese tax status.

Portugal Pathways provides introductions to licensed cross-border tax advisers rather than regulated tax advice. Confirm your own UK and Portuguese tax residency status individually with a regulated professional before making relocation or estate-planning decisions.

Golden Visa and residency options for UK families

Portugal's Golden Visa is a residency-by-investment programme most commonly accessed through a subscription of at least €500,000 into a CMVM-regulated investment fund, alongside certain business investment and cultural donation routes. It requires an average of approximately seven days of physical presence in Portugal per year, which makes it a mobility and residency-optionality tool rather than a route requiring full-time relocation.

For succession planning weighed alongside residency options, the Golden Visa is worth understanding on its own terms: a flexible route to Portuguese and EU residency rights, subject to discretionary approval by AIMA, Portugal's immigration authority. It is not a tax-planning instrument in itself, and property purchase has not qualified as a route since the end of 2023.

NHR and IFICI: Portugal's tax incentive regimes

Non-Habitual Residency (NHR) closed to new applicants on 31 December 2023; existing holders continue their individual 10-year term. IFICI (also known as NHR 2.0) is the current incentivised tax regime, offering a flat 20% rate on qualifying Portuguese-sourced income and, for eligible routes, exemption on most foreign-sourced income for 10 years, subject to annual eligibility.

For NHR status nearing the end of its 10-year term, see planning for the end of NHR.

Two points here are frequently oversimplified elsewhere:

IFICI does not exempt pension income. Pension income is taxed under Portugal's standard progressive rules regardless of your IFICI status. The treatment of a specific occupational or state pension depends on its classification and the applicable double-tax treaty, and should be assessed individually with a regulated tax adviser.
IFICI is an income tax regime, not an inheritance tax shield. It sits alongside, not instead of, the UK residence-based IHT rules described above. Reducing your UK inheritance tax exposure depends on your UK tax residence history; IFICI affects your Portuguese income tax treatment during Portuguese tax residency.

What to review if you're reassessing succession planning

Structures such as Self-Invested Personal Pensions (SIPPs), Qualifying Non-UK Pension Schemes (QNUPS), and offshore trusts are among the tools worth reviewing as part of cross-border succession planning following the 2025 reforms.

Whether any of these are appropriate for you depends entirely on your individual circumstances, and each requires advice from an authorised UK or cross-border adviser rather than general guidance. Portugal Pathways' Tax and Financial Planning service introduces clients to the licensed professionals who can assess this.

In practical terms, that typically means working through:

Establishing your UK tax residence history: documenting time spent as a UK resident against the 10-of-20-years test.
Locating your assets by jurisdiction, since UK-situs assets remain in scope of UK IHT regardless of your residence.
Preparing a Portuguese will where relevant, addressing how Portuguese forced-heirship rules (which reserve a fixed portion of an estate for a spouse, children, or parents regardless of what the will says) interact with your UK estate.
Checking your UK pension arrangements against the pension changes due from April 2027.
Taking advice from cross-border, regulated tax and legal professionals rather than relying on generic guidance, since your individual circumstances change the analysis.

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FAQs

Do I still pay UK inheritance tax if I live in Portugal?

Possibly, depending on your UK tax residence history. UK-situated assets remain within the scope of UK IHT regardless of where you live. Your non-UK assets fall outside UK IHT once you've been a non-UK tax resident for enough of the last 20 tax years to fall below the 10-year threshold, subject to the "tail" period described above.

Will I pay Portuguese tax if I inherit assets in Portugal?

Portugal applies Stamp Duty rather than inheritance tax to gratuitous transfers of Portuguese assets: 10% on non-property assets if you fall outside the immediate family, with a full exemption on that 10% if you're a spouse, descendant, or ascendant. A separate 0.8% Stamp Duty applies to any transfer of Portuguese real estate, and this property-specific charge applies to you regardless of your relationship to the person you're inheriting from.

How long do I need to live outside the UK to reduce my inheritance tax exposure?

UK IHT on worldwide assets applies to "long-term residents", people who've spent at least 10 of the past 20 tax years as UK tax residents. Falling below that threshold, and remaining a non-UK tax resident, is what removes your non-UK assets from scope, subject to the tail period after you leave.

Does a Portuguese Golden Visa reduce my UK inheritance tax?

Not by itself. Your Golden Visa residency status is separate from your UK and Portuguese tax residency. What determines your UK IHT exposure is your UK tax residence history, assessed under UK tax law, not which Portuguese residency route you hold.

Will my UK pension be subject to inheritance tax?

Most unused pension funds and death benefits are due to be brought within the scope of UK inheritance tax from April 2027, at rates of up to 40%. This has not yet taken effect; confirm the current position with a regulated adviser before making decisions based on it.

Disclaimer

Portugal Pathways provides general information and introductions and does not offer regulated investment, tax, legal or immigration advice. Residency approval is discretionary and subject to AIMA review and applicable Portuguese law. Tax residency is determined separately from immigration residency according to Portuguese tax law and individual circumstances. The value of luxury new homes and qualifying investments may rise or fall; past performance is not a reliable indicator of future results. Where investment routes for the Golden Visa are referenced, investments are offered by independent, regulated fund managers; capital is at risk. Qualifying routes, investment thresholds and physical presence requirements are subject to Portuguese legislation and may change.

Arrange a private consultation with Portugal Pathways to discuss your circumstances.

UK Inheritance Tax and Portugal: What Changed, and What It Means for British Families