By Portugal team
This article is published on: 21st August 2025
Making the move to Portugal can be an exciting journey, but have you thought about the best way to fund your new life and make your money last?
If you are considering the best ways of investing your personal funds or pension investments, here are some planning tips to ensure you do not run out of money.
If you have not already made the move to Portugal, then taking advice early gives you the opportunity to take advantage of the pre-planning opportunities in your current country of residence and post-move planning you can enjoy when you become a Portuguese tax resident. This can put you in a much more favourable financial position and avoid any unexpected taxes.
The first step is to have a good awareness of your likely investment time horizon – we find that clients generally have a pessimistic view, thinking in years rather than the more likely scenario of decades.
According to the UK’s Office for National Statistics a female aged 65 now has an average life expectancy of 88 and a 25% chance of living to 94 years old. A time horizon of over two decades leads to a completely different investment strategy than a portfolio that exists for only several years.
Risk is a subjective issue and there are many definitions of what risk actually is. The confusion surrounding risk tends to stem from a misunderstanding between risk and volatility. One view is that risk is permanent loss of capital, whereas volatility is the degree to which values move up and down.
As a rule, we find that most consider shares as “risky” and cash in the bank as “safe”. But if we define risk as the probability of permanent capital loss, would these definitions hold up?
We know that cash in the bank is likely to reduce in real terms because of inflation i.e. you will lose money over time, whereas investment in high quality company shares have demonstrated that, over the medium to long term, they protect you from inflation. In that case, would shares not be defined as lower risk and cash as higher risk?
What is considered “sensible” is based on two factors: 1. likely investment returns based on your risk tolerance and 2. your objectives for the funds as a whole and whether you are comfortable gradually “eating into” your original investment capital.
As an example, if you invest €1m and are achieving a return of 5% and taking €50,000 (5%) income, then your original investment amount will remain constant.
Some clients may worry about depleting their original investment but this isn’t necessarily a bad thing if it is done in a controlled way. Continuing our example above, assuming the same investment growth rate of 5% but you want to take €70,000 (7%) income each year, then your capital will decrease by 2% each year – although your original investment is reducing, it is very controlled and a 2% each year reduction will still provide you with 50 years of funds.
Based on the above, if cash isn’t an appropriate long-term investment, how do you put together an investment portfolio that protects you over the longer term?
This comes down to investing in the right mix of shares, bonds, cash, property and commodities etc. and the different blend of these investments will be determined by your situation and objectives; it is personal to each individual and family.
In the context of choosing the right investment mix, be aware of the concept of lifestyling. This is an automated switch process that is designed to move clients out of what are considered more risky assets into lower risk assets as retirement or an income date approaches.
This process is flawed on two levels. Firstly, as explored above, there is a question mark over what is considered risky and secondly, the time frame over which the investment is active. Many may find their whole portfolio has been moved into bonds/cash when they may have another two or three decades for the funds to last.
Many investors will retain a portfolio based on their home country e.g. those from the UK will retain a UK based portfolio which will tend to be biased to UK based shares and bonds.
This may not be the best approach going forward based on two issues, 1. the policy will invariably be sterling denominated leading to unnecessary currency conversions and exchange rate risk based on the sterling/euro rate and 2. the UK market has historically lagged other international markets resulting in underperformance for investors – to illustrate this, over the last 10 years, the UK market has grown by 98.68% whereas the world index has grown by 176.21% and the US market by a staggering 258.18%.
Minimising the tax “drag” on investment returns plays a huge role in your overall financial success.
A large part of controlling tax is how you structure your investment and pensions at outset. You are able to invest directly or through the use of structures such as pensions, companies, trusts and bonds. The most appropriate structure will vary according to each family’s position and objectives.
The level of fees paid for advice, investment and pensions structures can also have a dramatic effect on your long-term position. Ensure you have a clear understanding of fees and that they are explicitly stated.
DIY in financial terms can be disastrous, especially when considering the complexity of cross border tax, investment, pension and currency issues. Take advice from the right people: ensure you are seeking Chartered level advice from a well-regulated and established firm.
With over 35 years’ experience, Debrah Broadfield and Mark Quinn are Tax Advisers and Chartered Financial Planners specialising in cross-border advice for expatriates. Contact us at: +351 289 355 316 or portugal@spectrum-ifa.com.
By Barry Davys
This article is published on: 19th August 2025
Husband 60, wife 60, married, with two children who are financially independent and living in the UK
a) Completed a full financial review of present financial standing
b) Undertook a cash-flow forecast to establish if widow’s pension was sufficient, how to pay inheritance tax on first death and how long their money would last
c) Consolidated pensions to improve tax efficiency, improve widow’s pension and manage in line with their other assets
d) Built investment strategy to improve return on their investments and cash
e) Clarified how inheritance tax applies in Spain and UK and gave an estimate of tax due
f) Built an inheritance tax strategy, including provision for sufficient funds to pay tax in Spain on first death
g) Minimised Spanish tax paperwork and liaised with Spanish tax adviser
h) Produced a family inheritance tax strategy document so whole family knew the strategy without disclosing amounts held by the parents
i) Wrote to UK HMRC to obtain confirmation that the family home in Spain would qualify for the Main Residence Nil Rate Band
j) Identified UK inheritance tax saving on a UK life assurance policy
k) Carried out regular reviews over 12 years (so far) to update investment and inheritance tax strategies and to adapt to legislative changes
If you are resident in Spain, or are planning to move here, and would like to receive information on tax-efficient investing, pension transfers, investment planning or general financial planning, you can contact me on: barry.davys@spectrum-ifa.com or direct on 0034 645 257 525 – The Spectrum IFA Group (Spain)
By Portugal team
This article is published on: 6th August 2025
As more UK residents explore the prospect of relocating abroad, particularly to attractive European destinations such as Portugal, there is increasing awareness of the financial implications of expatriation.
While the UK does not impose a formal “exit tax” on individuals leaving or moving assets out (pensions being an exception), there are costs on departure in the form of the loss of certain reliefs and exemptions. Understanding these nuances and early planning is critical to minimise any costs and maximise the planning opportunities.
This article focuses on British individuals relocating to Portugal under its standard tax residency rules as the new tax incentive IFICI regime offers separate incentives and planning complexities.
So what do you need to be aware of when leaving the UK?
The foremost consideration is ensuring that you do not inadvertently fall back into the UK tax system. This can happen simply by spending too many days in the UK. Depending on individual circumstances and the number of ties you maintain with the UK, this allowance may be as few as 16 days or as many as 182 days per tax year.
To give you the certainty of knowing where you tax obligations arise, it is important that you understand the day count allowance that applies to you and your family (based on the UK’s Statutory Residence Test) and keep detailed records of time spent in the UK and abroad.
Private Residence Relief (PRR)
UK residents can generally sell their main home without incurring capital gains tax due to PRR. However, once tax residency shifts to Portugal, this exemption no longer applies.
Portugal taxes gains on property sales regardless of whether the property is a main residence. Therefore, the timing of property disposals becomes crucial and could have a significant tax impact.
Business Asset Disposal Relief (BADR)
Formerly known as Entrepreneurs’ Relief, BADR allows UK residents to sell qualifying business assets at a reduced capital gains tax rate of 14%. However, this relief is not available once you become tax resident in Portugal as it is residence of the shareholder that determines the tax treatment, not the location of the business.
Under the UK-Portugal double taxation treaty, Portugal has taxing rights over such gains, where the rates start at 28%. Nevertheless, with appropriate structuring, these gains can be reduced—and in certain cases, eliminated entirely.
Pension Commencement Lump Sum
The so-called “25% tax-free cash” is a UK tax incentive and other countries, including Portugal, do not recognise the concept of this allowance. As a result, any amount withdrawn would be taxed as income in Portugal.
Historically, prudent planning would be to retain as much as possible within pension schemes as they are not (currently) subject to inheritance tax. However, two major developments have affected this planning:
1. Inheritance Tax (IHT) on Pensions: From April 2027, UK pension schemes will fall within the scope of UK IHT.
2. Residency-Based UK IHT: From April 2025, UK IHT will be assessed based on residency. Individuals who have been non-UK tax residents for 10 out of the previous 20 years will escape UK IHT—except for UK situs assets, including pension schemes left in the UK after April 2027.
As a result of the erosion of the tax benefits of pensions, more and more are looking to deplete their pension schemes, particularly if they hold Non-Habitual Resident status in Portugal.
Overseas Pension Transfer Charge
This point is slightly different to the others discussed above, as it doesn’t apply when the individual leaves the UK, rather it is when the pension scheme leaves the UK.
Since October 2024, transferring a UK pension to a Qualifying Recognised Overseas Pension Scheme (QROPS) may incur a 25% tax charge.
Whilst this will stop the majority of pension transfers taking place, some have decided to accept the 25% exit tax charge in order to save their beneficiaries from the 40% IHT charge to be implemented from April 2027, as discussed above.
Pension Contributions After Departure
UK tax relief on pension contributions is only available to UK residents. However, former residents may contribute up to £3,600 gross annually for up to five tax years post-departure.
EIS and SEIS Reliefs
Tax advantages associated with the Enterprise Investment Scheme (EIS) and Seed Enterprise Investment Scheme (SEIS) are similarly lost upon changing tax residence. Furthermore, if an EIS/SEIS holder ceases UK residency within the three-year qualifying period, gains previously deferred may trigger an immediate tax liability.
• Company residency risks: A sole director managing a UK company from Portugal could render the company Portuguese tax resident, triggering double taxation.
• Permanent establishment issues: Continued business activity from Portugal could create a “permanent establishment,” bringing local corporate tax exposure.
• Temporary Non-Resident Rule: Under this anti-avoidance rule, those returning to the UK within five years of departure may face tax on capital gains and income realised during their non-resident period.
The Prospect of a UK Wealth Tax
Recent discussions have reignited debate over the potential introduction of a wealth tax in the UK. While no formal proposals have been tabled, policymakers and think tanks are increasingly considering wealth taxation as a mechanism to address fiscal imbalances and fund public services.
Should such a tax be introduced, it could significantly alter the financial planning calculus for high-net-worth individuals contemplating emigration. Although the UK has historically avoided a net wealth tax, a shift in political direction could see assets—particularly those held in the UK—subject to new assessments.
This development, coupled with changes to inheritance tax and pension treatment, is leading many to explore pre-emptive planning, including asset restructuring, offshore trusts, and in some cases, accelerated departures. For those considering relocation to jurisdictions like Portugal, which offers comparatively benign treatment of foreign income and gains, the window to act may narrow.
In the current environment, tax-efficient emigration from the UK is not as simple as buying a one-way ticket. The erosion of traditional tax reliefs, the complexity of cross-border rules, and the looming spectre of wealth taxation, demand early and strategic planning. Whether mitigating capital gains, managing pensions, or avoiding permanent establishment risks, proactive advice is essential.
As always, individuals should seek bespoke advice based on their circumstances and monitor regulatory developments closely—both in the UK and Portugal.
By Matthew Green
This article is published on: 5th August 2025
When Richard and Anne relocated from the UK to Spain’s sunny Valencia region to enjoy their retirement, they brought €100,000 in savings. They weren’t looking for high returns — just a safe place to grow their nest egg and potentially draw a small income if needed.
Richard chose to keep the money in a Spanish bank account. It felt safe, accessible, and earned a seemingly decent 5% per year. But what he didn’t realise was how Spain’s tax system was quietly eroding his returns — and how his family could face significant complications if he passed away.
Each year, Richard earned 5% interest. However, Spain taxed those annual gains at 26%, meaning he was only compounding on what was left after tax.
(Note: While 5% is well above typical long-term interest rates, this figure is used to highlight the negative impact of tax on compounding.)
Effective annual growth: Just 3.7% (after tax)
Value after 20 years: €202,269
What it cost him: Thousands in lost growth potential
What looked like a safe, straightforward approach turned out to be far less efficient than it could have been.
A friend introduced Richard to a financial adviser, who explained the numerous benefits of Spanish tax-compliant bonds — fully legal investment vehicles often underused by expats. These structures allow investments to grow tax-free until funds are withdrawn.
Richard invested the same €100,000 into a compliant bond, again earning 5% annually. But unlike the bank account, no tax was deducted each year, allowing the full amount to compound uninterrupted.
After 20 years:
Bond value: €265,330
Tax due on gain (€165,330): €42,986
Net amount after tax: €222,344 — €20,075 more than the bank account
Compound Growth Comparison (No Withdrawals)
The graph shows how the tax-compliant bond (orange dashed line) outperforms the bank account (solid line) over time, thanks to tax deferral. Even after paying tax at the end, the bond delivers a much higher return.
Suppose Richard withdrew €5,000 annually to help cover living expenses. Here’s what happened:
From the bank account:
Withdrawals were fully taxed each year, and interest was also taxed annually. The account balance declined steadily, and the effects of compounding were weakened.
From the tax-compliant bond:
Withdrawals triggered tax only on the gains within each €5,000. The rest, drawn from his original capital, was untaxed or lightly taxed. Meanwhile, the remaining funds continued to grow tax-free.
Growth Comparison with Withdrawals
Even with yearly withdrawals, the bond preserved capital efficiently and delivered stronger long-term growth compared to a taxed bank account.
One of the most overlooked parts of financial planning in Spain is inheritance tax and transfer of wealth to beneficiaries.
Because we take a holistic approach, we’d ensure Richard’s bond was correctly structured so that:
What if he’d kept the money in the bank?
His heirs would have faced a slow, costly probate process in Spain, potential succession taxes, and possibly long delays — all during an already emotional time.
If you’re an expat living in the Valencia region, with savings in Spanish or foreign bank accounts, you may be unknowingly exposed to:
By moving your savings into a Spanish tax-compliant bond, you could:
✓ Maximize long-term growth through tax deferral
✓ Withdraw income more efficiently
✓ Avoid Spanish probate
✓ Protect your family from unnecessary taxes
I help expats across the Valencia region make their money work smarter within Spanish tax rules — always with a view to your entire financial picture, including what happens after you’re gone.
By Matthew Green
This article is published on: 2nd August 2025
Meet the Johnsons—David, Sarah, and their two children. Five years ago, they moved from the United States to Valencia, seeking a slower pace of life and the Mediterranean lifestyle. They assumed managing their finances abroad would be straightforward. With healthy savings and US-based pensions, what could go wrong?
Quite a bit, as it turned out.
They quickly discovered that managing finances abroad wasn’t just about currency exchange or opening a local bank account. As US citizens, they still had to comply with complex IRS reporting rules—rules they didn’t fully understand. After several failed attempts to find the right financial adviser, they realised they needed expert help.
When they first arrived in Spain, David and Sarah were confident.
David had worked as an engineer, Sarah in finance.
They’d spent years building their nest egg. But early optimism gave way to confusion as the financial realities of expat life set in.
1. US Investments and Pensions
They held retirement accounts in the US—401(k)s, IRAs, and a share portfolio in a brokerage account. These accounts were in good shape, but they couldn’t find anyone in Spain who understood how to manage them in light of their new residency.
2. Currency Exchange Issues
Their income and savings were in dollars, but their daily expenses were in euros. Each transfer to their Spanish account brought unpredictable exchange rates, affecting their monthly budget.
3. IRS Reporting Headaches
They knew they still had to report their global income to the IRS, but the process was far from clear. Forms like the FBAR (Foreign Bank Account Report) and Form 8938 (for foreign financial assets) came with serious consequences for mistakes—but no one could give them reliable guidance.
After a year of frustration, the Johnsons were introduced to Matt Green, a financial adviser with The Spectrum IFA Group, who specialises in helping expats in Spain.
A Comprehensive Understanding of US-Based Assets
With access to SEC authorised investment experts, Matt arranged a review all of their US accounts—401(k)s, IRAs, and investments—and explained how they could be managed efficiently from Spain. He helped them:
Clarity on US Tax Reporting
One of the Johnsons’ biggest challenges was compliance with US tax laws. Matt walked them through:
Matt’s guidance replaced confusion with confidence. The Johnsons finally understood their obligations and had a plan to stay fully compliant.
Creating a Reliable Income Stream
The Johnsons wanted a stable monthly income. Matt advised them on converting their retirement assets into a predictable, tax-efficient income stream. He structured a drawdown strategy that:
Estate Planning Made Simple
The Johnsons also wanted to protect their children’s inheritance. With their sons still living in the US, they worried about how cross-border laws might affect their estate. Matt provided guidance on:
Thanks to Matt’s help, the Johnsons no longer feel overwhelmed.
Instead, they have a clear, tailored financial plan… and a trusted adviser by their side.
1. Clarity and Confidence
They now understand exactly how their investments work in both countries. Their monthly income is reliable, their savings are structured efficiently, and currency worries are gone.
2. IRS Compliance Without the Stress
Tax return season used to bring anxiety. Now, with Matt’s support, they’re on top of all IRS requirements. FBAR, Form 8938, and FATCA are no longer mysteries—they’re just part of an organised financial routine.
3. A Future They Can Enjoy
With their finances in order, the Johnsons are enjoying the life they envisioned—traveling, spending time with family, and making the most of their time in Spain without the cloud of financial uncertainty.
The Johnsons’ story is one of many. Managing US-based assets, navigating foreign tax laws, and ensuring compliance with IRS rules can be overwhelming for American expats.
That’s where Matt Green and The Spectrum IFA Group come in. Their expertise and network of professional contacts bridge the gap between US and Spanish financial systems, giving expats the confidence to manage their wealth effectively, stay compliant, and plan for the future.
From investment strategy to tax reporting and estate planning, Matt’s holistic approach ensures that you can enjoy your life abroad—without worrying about what’s happening back home.
Are you a US citizen living in Spain and unsure how to manage your finances across borders?
Contact Matt Green at The Spectrum IFA Group for a free consultation. Whether you’re struggling with IRS reporting, retirement planning, or protecting your family’s legacy, Matt can help you turn financial confusion into clarity—just like he did for the Johnsons.
By Matthew Green
This article is published on: 31st July 2025
New Country, New Challenges
Meet John, a British expatriate who moved to sunny Valencia five years ago to enjoy a relaxed retirement on the Spanish coast. While his new life brought exciting experiences and opportunities, John soon realised that managing finances in a foreign country was more complex than he had anticipated.
Back in the UK, John had a firm grasp of his financial situation. But once in Spain, the rules changed – international taxes, currency exchange, and estate planning added unexpected layers of complication. That’s when John understood the value of having local, professional financial guidance.
At first, John felt secure in his retirement. He had a pension, savings, and years of experience managing his finances.
But living abroad came with hidden obstacles:
After hearing positive feedback from fellow expats, John sought help. That’s when he met Matt Green from The Spectrum IFA Group—a specialist in helping expatriates manage their finances in Spain.
From their first meeting, John felt at ease. Matt listened carefully to his concerns, goals, and vision for the future. What followed was a personalised, strategic plan to bring John financial clarity and peace of mind.
Tailored Financial Planning
Rather than offering one-size-fits-all advice, Matt conducted a full review of John’s financial situation—both in the UK and Spain. He then crafted a plan tailored to John’s needs, covering income, taxes, and long-term goals.
Creating a Reliable Monthly Income
One of John’s top priorities was ensuring a stable monthly income despite currency volatility. Matt proposed a tax-efficient income drawdown strategy that converted John’s savings into a predictable monthly income—while minimising taxes and avoiding unnecessary risk.
Optimizing Taxes
Matt helped John take full advantage of the UK–Spain tax treaty, structuring his pension withdrawals in a way that reduced his tax burden in Spain.
Planning for His Family’s Future
John wanted his two sons in the UK to inherit without complications. With Matt’s guidance, he learned how Spanish inheritance laws worked and how to structure his estate accordingly. Together, they used tools such as locally compliant investment bonds and beneficiary nominations to ensure a seamless transfer of wealth.
The result? A comprehensive succession plan that reflected John’s wishes while protecting his sons from legal hassles and unexpected taxes.
With Matt’s ongoing guidance, John now enjoys financial stability and confidence.
Conclusion: The Power of Professional Advice
John’s story shows the true value of working with a financial adviser—especially as an expat. Matt Green didn’t just help John manage his money; he gave him confidence, clarity, and security.
What sets Matt apart is his holistic approach. He combines deep expertise in international finance and tax with access to a network of specialists when needed, ensuring that every angle of your financial life is covered.
If you’re living in Valencia—or anywhere in Spain—and want to secure a reliable income while protecting your family’s future, partnering with an expert like Matt can make all the difference.
Ready to take control of your financial future?
Whether it’s creating a tax-efficient income, navigating international tax rules, or planning your estate – Matt Green at The Spectrum IFA Group is here to help.
Contact Matt today to schedule a free consultation and begin your journey to financial peace of mind – just like John did.
By Portugal team
This article is published on: 23rd July 2025
Here is what you need to know
If you are approaching the end of your 10-year Non-Habitual Residence (NHR) status in Portugal, it is important to understand the financial transition ahead.
Without careful planning, you could face significantly higher tax liabilities but with careful planning and maybe some strategic financial adjustments, you can protect your wealth and future lifestyle.
Why NHR has been so attractive?
Portugal’s NHR regime offers a valuable 10-year window of tax advantages. Under this status:
It is a powerful incentive for expatriates relocating to Portugal but one with a clear expiry date.
What NHR does not cover
NHR is not a blanket exemption for everything:
The cost of doing nothing
Once your NHR period ends, you will be subject to Portugal’s standard tax rules:
Without pre-emptive action, these changes could substantially erode your investment returns and retirement income.
Planning options before and after NHR
With considered planning you can mitigate the impact of the end of NHR:
Even if your NHR has already expired, or if you are a standard resident, planning is key to improving your tax position and ultimately, the money in your pocket. The first step is to look at what you have and where it is based. Can you change how you hold your assets or move them into another jurisdiction?
Structuring for tax efficiency
Whilst the prospect of paying up to 48% on income (excluding solidarity taxes) and 28% capital gains tax is unpleasant, it is possible to rearrange your finances over time to reduce this tax burden.
Final Thoughts
Effective, early planning makes all the difference. Whether your NHR is nearing expiry, or you have already transitioned to standard residency, reviewing your assets, their location and tax treatment is crucial — and the sooner you act, the more options you will have.
By Portugal team
This article is published on: 21st July 2025
We are often asked how to become a Portuguese tax resident, but of equal importance is understanding how to exit the UK tax system cleanly and efficiently, and this is governed by the UK Statutory Residence Test (SRT).
Introduced in 2013, the legislation sets limits on how much time you can spend in the UK without triggering UK tax obligations and it is relevant in two main ways:
1. Capping time in the UK to avoid falling into the UK tax net for income and capital gains tax.
2. Determining UK Inheritance Tax (IHT) liability, especially following changes announced in the October 2024 UK Budget i.e. a move away from domicile to a residency based test.
Interaction with NHR / IFICI
Limiting your time in the UK is particularly important if you wish to take advantage of the reduced tax regimes such as Non-Habitual Residence (NHR) or the new IFICI regime in Portugal, as you must be tax resident in Portugal to benefit.
For example, if you are taking large lump sums from a pension under NHR, you want to ensure you are tax resident in Portugal to benefit from the 0% or 10% rate. If you trigger UK residency rules, then you could discover that your pension income is instead taxable in the UK at 20%, 40% or 45% in the UK.
The complexity of tax residency
Becoming a tax resident in Portugal whilst simultaneously leaving the UK tax net behind can be complex due to several factors:
• The UK tax year runs from 6 April to 5 April, whereas Portugal’s tax year aligns with the calendar year (1 January to 31 December).
• UK tax residency can be triggered by spending as few as 16 days in the UK, depending on your ties, while Portugal generally applies a 183-day rule.
• UK tax residency is assessed on a fiscal year basis, whereas Portugal assesses tax residency over a rolling 12-month period.
It is important to review your tax residency every year as it can change from year to year depending on where you have spent your time.
The SRT – Three tests within a test
The Statutory Residence Test (SRT) consists of three sub-tests that must be applied in order:
The rules and definitions around these tests are detailed in hundreds of pages of UK legislation and are beyond the scope of an article, but we find most individuals do not meet the criteria for the first two tests and therefore fall into the Sufficient Ties Test.
The Sufficient Ties test means that the more ties and connections you have to the UK, the less time you can spend there before triggering UK tax residency. Ties in this context include (but are not limited to) available accommodation, work, minor children or a spouse/civil partner in the UK.
The result is that everyone is given a day allowance which can be between 16 and 182 days – this is contrary to the popular belief that there is a standard 90-day allowance. Each person is assessed individually under the test meaning married couples can have different day account allowances.
0% Inheritance Tax and the SRT?
From 6 April 2025, the UK will replace the concept of domicile with a residence-based system for inheritance tax purposes, and this is assessed using the SRT.
Individuals who have been non-UK resident for at least 10 out of the last 20 years at the time of death, will only be subject to UK IHT on their UK situ assets e.g. property, investments, pensions (from 2027) and cash left with institutions in the UK. Any assets held overseas will be IHT exempt exposing a very advantageous opportunity to mitigate or remove a UK IHT liability by moving assets outside of the UK.
…But how will the tax man know?
Some believe it is difficult for HMRC to track their time, but there are two important points to consider:
1. If you are challenged the burden of proof lies with you, not HMRC. Additionally, you will be dead, so it is up to your executors to try and prove where you were resident in the last 20 years.
2. HMRC’s ‘Connect’ system uses data from various sources, including banks, the UK Border Agency, flight records, the Land Registry, online platforms and even social media, to identify potential tax evasion.
The advice is therefore to keep an accurate record of times spent in each jurisdiction to which you are linked, ensuring you are limiting your time to the appropriate day allowance.
Additional points to consider
UK source income
Certain UK-derived income, such as rental income and civil service pensions, remain taxable in the UK regardless of your residency status.
Five-year anti-avoidance rule
If you leave the UK and become non-resident, you must remain non-resident for more than five full tax years to avoid UK tax on certain income or gains realised during your absence. Otherwise, these may be taxed upon your return to the UK.
Clarifying definitions
Be aware that terms like “accommodation” and “home,” or “work” and “employment,” have different definitions in UK and Portuguese tax contexts. If you are considered resident in both countries, tie-breaker clauses in the UK-Portugal Double Taxation Agreement will determine your tax residency, and these clauses differ from the Sufficient Ties Test used in the SRT.
In conclusion, navigating UK departure and Portuguese entry correctly is essential to avoid unnecessary taxation and compliance issues. While the SRT may appear straightforward, the details are intricate—particularly under the new IHT rules, so professional and personalised advice should always be sought.
By Matthew Green
This article is published on: 19th July 2025
Have you ever hesitated over a property purchase due to the long-term commitment of taking on a mortgage? What if your investments could do the heavy lifting for you?
Let’s take a simple example. Imagine you want to buy a property valued at €400,000 but would prefer not to use your cash savings for the purchase. With a 30% deposit, you secure a mortgage of €280,000 over 20 years at a fixed interest rate of 3.5%. This results in monthly repayments of approximately €1,206.
You then invest a lump sum of €450,000 into a tax-efficient, Spanish compliant investment bond. Assuming an average long-term annual return of 5%, the investment could generate €22,500 in gross income per year.
After taxes, and recognising the tax-efficiency of the Spanish compliant bond, this income is sufficient to cover the monthly mortgage payments. This strategy allows you to keep your capital invested, potentially growing over time, while the income pays the mortgage. Essentially, your investments are working for you—generating returns that fund your property purchase without depleting your savings.
Moreover, using investments in this way can be part of a broader wealth planning strategy.
Some investment bonds offer valuable estate planning advantages, allowing for seamless transfer to beneficiaries, often with no or low tax exposure.
Of course, investment returns are not guaranteed, and it’s essential to regularly review your portfolio to ensure it aligns with your goals and risk tolerance.
Working with an experienced financial adviser can help structure the right investment and drawdown strategy.
Using an investment to pay your mortgage isn’t just possible— with careful planning it can be a workable solution for preserving capital, generating income, and building long-term financial security, all while enjoying your new home.
By Susan Worthington
This article is published on: 13th July 2025
Effective Estate Planning for British Expatriates in the Balearic Islands: A Brief Guide
Estate planning is a critical consideration for British expatriates living in the Balearic Islands. With assets potentially spread across the UK and Spain, and legal frameworks differing between jurisdictions, effective planning ensures that your wealth is passed on efficiently and according to your wishes. Here are the key points to consider:
Planning ahead is essential to safeguard your estate and reduce the likelihood of disputes or unnecessary tax liabilities. British expats in Spain often have assets in both countries, so your plan should address how these will be managed and distributed. Consideration should be given to residence status, the location of assets, and whether your heirs live in the UK, Spain, or elsewhere.
Wills. To streamline the probate process and ensure clarity in both jurisdictions, dual wills can be highly beneficial. This means having one will to cover your UK assets and another for your Spanish holdings. These wills must be carefully drafted to avoid legal conflicts or revocation—coordination between legal professionals in both countries is vital. A Spanish will must comply with local formalities and should reference the UK will, and vice versa.
Assets such as pensions, life insurance policies, and investment accounts may pass outside of a will, depending on the beneficiary nominations made. It’s crucial to regularly review and update these to ensure they align with your broader estate plan. Failing to do so can lead to unintended outcomes, especially if personal circumstances (like marriage or divorce) change.
Spanish Succession Law Spain operates a system of forced heirship, where a significant portion of an estate must go to specific relatives (typically children). However, EU Regulation 650/2012 (Brussels IV) allows foreign nationals residing in Spain to opt for the succession law of their country of nationality. This election must be clearly stated in your Spanish will. Without it, Spanish law may apply by default, potentially overriding your intentions.
UK Inheritance Tax (IHT) Even if you are a long-term resident of Spain, and recognising the recent favourable changes to UK inheritance tax (IHT) rules for many expatriates, you may still face IHT on both UK and non-UK based assets. Careful planning can ensure this exposure is removed entirely. At the same time, Spanish succession tax may also apply based on the location of assets or the residency of beneficiaries. This creates a risk of double taxation. However, tax treaties and relief provisions mitigate these liabilities if utilised effectively.
Solutions. There are several tools and strategies that can enhance estate planning efficiency, including the use of trusts, life insurance policies for tax mitigation, and gifting strategies. Spanish-compliant investment bonds, for instance, may provide tax deferral benefits and simplify succession. The suitability of these solutions depends on personal circumstances and goals.
Professional Advice. Given the complexity of cross-border estate planning, expert guidance is not just helpful—it’s essential. A qualified financial adviser and a solicitor familiar with both UK and Spanish succession laws can ensure your plan is both compliant and effective. Coordinated advice prevents legal conflicts and optimises outcomes for your heirs.
In summary, British expatriates in the Balearics must take a proactive, coordinated approach to estate planning. By understanding the interplay between UK and Spanish law and seeking tailored advice, you can protect your legacy and ensure your wishes are respected.
