Moving overseas, either to take advantage of remote working possibilities or to enjoy retirement, is a decision a number of our clients have taken in recent years. Portugal has frequently been the destination of choice, not least because of the significant tax advantages on offer. Ryecroft Glenton works with professional contacts in Portugal to provide rounded tax advice in both jurisdictions.
If you are considering moving abroad, it is important to understand what advice can be provided by Ryecroft Glenton and what advice should be provided by a Portuguese expert. This article identifies the potential tax-related benefits of moving to Portugal and explains the UK advice and services we can provide, to ensure that you continue to satisfy UK tax compliance requirements and maintain a non-UK tax resident status.
The Portuguese Non-Habitual Residence Tax Regime
New Portuguese residents who meet the required criteria and successfully apply to become part of the Non-Habitual Residence tax regime (‘NHR’) have the opportunity to enjoy a decade of generous tax breaks. The headline potential tax benefits are as follows:
- Tax-free dividends from UK companies – these escape tax in Portugal under the NHR as they are taxable in the UK. In practice, however, special “disregarded income” rules can eliminate UK tax liability for those resident overseas. As a result, Portuguese residents often pay no tax in either country on dividends paid by UK companies.
- Tax on UK pensions – the majority of UK pensions paid to a UK citizen living in Portugal will be taxable only in Portugal at a rate of 10%.
Tax on employment income – employment and self-employment income can be liable to a special 20% flat rate if derived from specified high value-added activities of scientific, artistic or technical character performed in Portugal.
Ryecroft Glenton is able to introduce you to Portuguese contacts who can assist with applying for the NHR and provide bespoke advice on the opportunity for you to take advantage of the regime given your specific circumstances.
After becoming non-UK resident, the amount of time an individual can spend in the UK without being deemed to be UK resident, and therefore taxable in the UK, depends on a number of factors. UK tax legislation known as the UK Statutory Residence Test (‘SRT’) sets out the rules for deciding an individual’s residence status. Ryecroft Glenton can provide an analysis of how the SRT applies to your specific circumstances and advise you on the amount of time you can spend in the UK after you become resident abroad.
Time spent is the UK in a specific tax year is a key point to consider when assessing an individual’s residence status for that year. However, other factors often also influence an assessment of residence status, such as the number of days when you work in the UK, UK resident family members, the availability of accommodation in the UK and time spent in the UK in previous tax years.
The majority of clients who move abroad have the intention to continue to spend some time in the UK every year. The amount of time they can spend in the UK without becoming resident is something of a ‘moving target’ from one year to the next. Ryecroft Glenton provides on-going advice to non-UK resident clients and regularly assesses the potential effect of changes in their travel intentions and changes in UK tax legislation.
UK Sources Of Income After Becoming Non-UK Resident
On-going UK tax obligations exist for many non-UK resident clients, including:
- UK rental property – many individuals choose to rent out their UK home when moving overseas for a period. Regardless of changes in an individual’s residence status, UK rental profits continue to be taxable in the UK. As adviser to non-UK resident clients, it is typically necessary for Ryecroft Glenton to file non-resident landlord forms with HMRC and file annual tax returns to report taxable profits.
- UK registered limited company – an overseas resident individual can continue to own a UK company and profits of that company will continue to be taxable in the UK. However, thought must be given to the potential impact of a change in a director’s residence status on the residence status of the company. In some circumstances, the UK company may become liable to corporation tax in the tax jurisdiction in which the director now lives.
If you are considering a move overseas and wish to discuss your UK tax position, please contact Gordon Wilkinson of Ryecroft Glenton at email@example.com