If you live in Portugal but retain UK assets, it’s essential to keep up with UK tax reforms. Understand the changes taking effect this year, and plan now for the measures scheduled for the coming years. Reviewing your tax and wealth strategy early can help protect your assets – and your family – from avoidable tax exposure.
UK income tax thresholds and rates
The income tax personal allowance and thresholds are frozen until April 2031. The personal allowance remains £12,570. It is tapered by £1 for every £2 of income above £100,000 until reduced to nil.
The income tax thresholds and tax rates for non-savings non-dividend income are unchanged for England, Wales and Northern Ireland taxpayers:
Up to £37,700: 20%
£37,701 to £125,140: 40%
Over £125,140: 45%
In Scotland, the lowest thresholds have increased a little.
Dividend and savings income
The basic and upper rates of tax on dividend income increased by 2 percentage points from April 6. It is now 10.75% for basic rate taxpayers and 35.75% for higher rate. The additional rate remains 39.35%.
A similar tax increase on savings income will take effect next year, when rates will rise to 22%, 42% and 47%.
The allowances for personal savings remain unchanged, as does the £500 dividend allowance.
Capital gains tax
There are no changes to the capital gains tax rates and allowance. Basic rate taxpayers pay 18% on both residential property and other assets, while higher and additional rate taxpayers pay 24%. Trustees and executors also pay 24%.
The capital gains tax-free allowance is £3,000 per annum for individuals and £1,500 for trusts.
However, for those claiming Business Asset Disposal Relief (BADR) or Investors’ Relief (IR), capital gains tax has increased from 14% to 18% from April 6.
Pension allowances 2026/27
- Money purchase annual allowance minimum: £10,000
- Annual allowance: £60,000
- Lump sum allowance: £268,275
- Lump sum and death benefit allowance: £1,073,100
- Overseas transfer allowance: £1,073,100
Inheritance tax (IHT) – new limits on tax reliefs
Inheritance tax rates and allowances are unchanged for 2026/27. The main nil-rate band has been frozen at £325,000 since 2009. If it had risen in line with inflation, it would be around £517,000 today.
For estates claiming Agricultural Property Relief (APR) and Business Property Relief (BPR), since April 6, 2026, the 100% rate of relief is restricted to the first £2.5 million of combined agricultural and business property. Values above this receive 50% relief. These individual reliefs can be transferred between spouses.
The rate of Business Property Relief on AIM-listed shares is now also limited to 50%.
Pensions and IHT – all change from April 2027
The biggest change is yet to come – and will be felt by hundreds of thousands of British families.
To date, pensions are exempt from inheritance tax. While beneficiaries may pay income tax on unused pension benefits, they are protected from IHT. But from April 2027, any unused funds and death benefits will form part of your estate for IHT purposes.
Your family could now pay substantially more inheritance tax overall than you previously anticipated. Coupled with the potential income tax applied when your heirs take the death benefits, total tax paid on inherited pensions can reach 67%.
There is less than a year to review and adjust your wealth management. Confirm how this reform will affect your heirs and explore the steps to take now to reduce the impact on your loved ones.
British expatriates are affected by this reform since UK assets are always liable for UK inheritance tax, regardless of how long you live overseas. Some expatriates are choosing to move their pension out of the UK, even if it incurs a tax charge, as the IHT saving would be worth it.
While this would not be a feasible or suitable option for many, if you have UK property and/or investments, you could dispose of them instead. This would reduce your IHT liability, and you can reinvest the proceeds more tax efficiently outside the UK and benefit from the Portuguese tax regime.
Reviewing your financial planning
Whatever your situation, we recommend you seek advice now. The countdown has begun, and adjusting your assets can be a lengthy process, especially for pensions.
Given the breadth of UK tax changes over recent years and the complexity they introduce, obtaining personalised, professional guidance is increasingly important. Understanding how the reforms apply to your situation, and how best to position your assets as a resident of Portugal, can help you avoid unnecessary tax exposure, protect your legacy, and gain valuable peace of mind.
The tax rates, scope and reliefs may change. Any statements concerning taxation are based upon our understanding of current taxation laws and practices which are subject to change. Tax information has been summarised; an individual should take personalised advice.
By Christopher Moore, Partner, Blevins Franks
