≡-UK Inheritance Tax Changes Spark Surge in Relocation to Portugal as Expats Seek Tax Breaks: You need to Know – Viral of Today

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Home » Portugal Travel News » UK Inheritance Tax Changes Spark Surge in Relocation to Portugal as Expats Seek Tax Breaks: You need to Know Tuesday, July 29, 2025A big development that will change inheritance tax (IHT) in the UK, the Treasury has announced that the divisive reforms to the tax on unused pension funds will go ahead from April 2027. This move could see a surge of British people wanting to relocate to tax-efficient Portugal, so their families are not left to pay the levy.In a major shake-up of IHT in the UK, the government has confirmed it will introduce deeply divisive pension tax changes to unspent pension pots from April 2027 commencing from April 2027, in the latest shake-up of IHT in the UK. This change may well see a migration of UK nationals looking to retire from a wealth tax to inheritance tax on their heirs by moving to tax-friendly Portugal.Currently, UK families can inherit unspent pension pots from deceased relatives free from inheritance tax, with only income tax due if the person passed away after the age of 75. However, the new rules, which will come into effect in 2027, will bring pensions into the fold of the estate and subject them to inheritance tax. This means that families could see their inheritance dramatically reduced, with death duties of up to 40% applied, alongside income tax on the remaining funds.This change is expected to generate around £1 billion annually for the UK government by the end of the decade. For many affluent families, however, this might trigger a reconsideration of their financial futures, with Portugal emerging as a prime destination to sidestep these hefty taxes.According to Portugal Pathways, an organization that helps affluent expatriates with investment, Golden Visa residency, cross-border tax, and property searches, the tax changes could lead more people to swap the economic uncertainty of the UK for Portugal’s year-round sunshine and favorable tax policies.Wider IHT Reforms Provide Opportunities for British ExpatsThe inheritance tax changes on pensions are part of broader reforms set to take effect from April 2025. Under these reforms, a new residence-based system will subject worldwide assets to the 40% IHT rate for individuals who have been UK tax residents for at least 10 of the last 20 tax years.This system, however, could present a substantial opportunity for British expats. If someone has been a non-resident for at least 10 years out of the last 20, their non-UK assets, including property, savings, and investments, will generally be exempt from the UK’s 40% IHT. This exemption could be particularly beneficial for individuals looking to retire or move abroad, offering a path to preserve wealth while minimizing exposure to high death duties.Portugal’s Tax Regime Offers Attractive Incentives for ExpatsPortugal has long been a favored destination for British expats due to its favorable tax regime and high quality of life. The Non-Habitual Residency (NHR) program has provided significant tax advantages, such as a flat 10% tax on pensions and 0% tax on foreign passive income, like dividends and capital gains. While the original NHR regime is no longer open to new applicants, the introduction of NHR 2.0 in 2025 is further strengthening Portugal’s appeal.The NHR 2.0 program offers tailored benefits for high-net-worth individuals, entrepreneurs, and skilled professionals. This new scheme includes a flat 20% tax rate on income sourced within Portugal, with 0% tax on foreign passive income, making it a highly attractive proposition for retirees or anyone looking to safeguard wealth in a tax-efficient manner.Cross-Border Tax and Wealth Management Essential for Long-Term PlanningNavigating these complex tax rules and ensuring proper tax compliance requires careful planning. Cross-border tax and wealth management advice is crucial, particularly for those planning a permanent relocation or long-term stay abroad. Professionals in this field can help optimize tax liabilities and ensure that expatriates are making the most of available tax incentives in Portugal.For years, Portugal’s safe, stable environment, tax advantages and lower cost of living compared with the UK have proven irresistible to high net worth individuals (HNWIs). The nation’s gentle climate, deep cultural roots and relaxed lifestyle have compounded its appeal, attracting a good number of those in pursuit of financial and personal prosperity during their retirement.With the UK tightening its inheritance tax rules, it is evident that Portugal’s popularity is only going to increase, especially among high net worth British people eager to reduce their tax liability and live in a warm and friendly place.

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