If you’re a UK national living in Portugal, your estate planning requires careful review to ensure it aligns with Portuguese law and your family’s needs. Arrangements made under the UK system may not provide the same outcomes once you are resident in Portugal.
While many people devote time to retirement planning, fewer consider what happens to their wealth afterwards. Taking a strategic approach to estate planning can help provide clarity, reduce administrative burdens for loved ones, and ensure your legacy is passed on in a way that reflects your wishes.
Who Will Receive Your Assets?
In the UK, you generally have freedom to choose how your estate is distributed (with limited exceptions in Scotland). Portugal, however, operates a forced heirship regime, which automatically allocates a significant portion of your estate to your spouse and direct descendants. This usually applies to at least half of your worldwide estate.
For UK nationals, the EU Succession Regulation (Brussels IV) may provide flexibility by allowing you to elect for UK law to govern your estate. This election must be made in your will, and professional advice is essential to confirm whether it is the right option for your circumstances. By default, Portuguese succession law applies.
When and How Will Your Legacy Be Passed On?
Inheritance can be a lengthy and costly process in both Portugal and the UK, particularly where assets exist in both jurisdictions. Probate delays are common, which can create stress for beneficiaries.
Some investment arrangements allow you to name beneficiaries directly, enabling funds to transfer without probate. This can reduce complexity and provide heirs with faster access to resources.
You may also wish to structure your assets so that heirs only receive their inheritance at a suitable age or under certain conditions. Portuguese-compliant solutions exist that can provide you with tax-efficient benefits during your lifetime while also shaping the way your legacy is received.
Who Pays Tax on Your Estate?
Unlike the UK, where inheritance tax is generally deducted from the estate before assets are distributed, in Portugal the liability falls on the beneficiary.
Portugal applies stamp duty rather than a traditional inheritance tax.
- Spouses, children, and direct ascendants are exempt.
- Other beneficiaries (such as siblings, unmarried partners, or stepchildren) may be liable for 10% tax, but only on Portuguese-situated assets such as real estate, shares, or vehicles.
As inherited assets cannot change hands until tax is paid, beneficiaries may face challenges meeting the six-month payment deadline on higher-value inheritances.
Will UK Inheritance Tax Apply?
From April 2025, UK inheritance tax (IHT) rules moved from a domicile-based system to one linked to long-term residence. This aims to provide more certainty for expatriates but may still create liabilities depending on your history of UK residency.
- Once you leave the UK, you remain liable for IHT on your worldwide assets for a minimum of three years, and up to ten years, depending on how many of the previous 20 years you were UK-resident.
- If you return to the UK and live there for at least 10 of the last 20 years, you become liable for IHT on your worldwide assets again.
- UK-situated assets always remain within the scope of UK inheritance tax.
- From April 2027, this will also include most UK pension funds.
(Correct as of 2025; subject to future changes in legislation.)
Balancing Your Needs and Your Heirs’
While you may wish to protect your heirs from unnecessary taxation, it’s also important that your wealth supports your own retirement objectives. The challenge is to ensure your capital works for you during your lifetime while also being positioned to pass on efficiently in future.
Portuguese-compliant structures may provide tax advantages both for you now and for your heirs later, but suitability depends on individual circumstances.
Why Cross-Border Advice Matters
Estate planning becomes more complex when two tax regimes interact. UK expatriates in Portugal need to consider:
- Portuguese succession law and stamp duty.
- UK inheritance tax, especially under the new residence rules.
- Ownership structures for property and investments.
- Pension rules in both jurisdictions.
Working with a cross-border specialist can help ensure your arrangements are compliant, tax-efficient, and tailored to your family’s needs.
Important Information
This communication is for informational purposes only and does not constitute investment or tax advice. The information is based on our understanding of current laws and practices, which may change. Any statements concerning taxation depend on individual circumstances. You should always seek personalised advice from a regulated adviser before making financial decisions.
This communication is for informational purposes only and is not intended to constitute, and should not be construed as, investment advice, investment recommendations or investment research. You should seek advice from a professional adviser before embarking on any financial planning activity. Whilst every effort has been made to ensure the information contained in this communication is correct, we are not responsible for any errors or omissions.
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