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).
UK Statutory Residence Test
By Portugal team
This article is published on: 21st July 2025
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:
- Automatic Overseas Test
- Automatic UK Resident Test
- Sufficient Ties Test
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.