Estate Planning for British Expats in Portugal: How to Avoid Inheritance Tax Under the New UK Rules

Estate planning for British expats has never been more important. With sweeping reforms to the UK inheritance tax system in April 2025, British nationals living in Portugal must act now to protect their wealth and avoid unexpected tax liabilities.

As announced in the UK’s Autumn Statement 2024, from April 2025, your exposure to IHT will depend on tax residency, not domicile.

✅ If you’ve been non-UK tax resident for 10 consecutive years, only your UK-based assets will be liable to IHT.
⚠️ If you return to the UK, your worldwide estate will be liable to IHT after just 4 years of tax residency.

This is a significant change from the long-standing common law concept of domicile, which has often been unclear, subjective, and hard to shake—even after living abroad for decades.

In a further blow to expats, UK pensions will now form part of your estate for inheritance tax.

Until now, many used pensions as an estate planning tool—leaving them untouched and passing them to beneficiaries tax-free. But this exemption is being removed. Now, these pensions may be taxed at 40% upon death if your estate exceeds the threshold.

For those under Portugal’s NHR regime, drawing your pension sooner at just 10% tax and reinvesting the proceeds could now be the most tax-efficient course of action.

Portugal doesn’t have a formal inheritance tax. Instead, it levies a stamp duty (Imposto de Selo) at 10%, but only in specific cases:

• Applies to Portuguese assets only
• Spouses, children, and parents are fully exempt
• No tax on assets held abroad

Still, international estate planning requires coordination between UK and Portuguese systems—especially when it comes to investment accounts, pensions, and property.

One of the most powerful tools for British expats is the Portuguese Compliant Investment Bond, typically domiciled in Ireland.

Here’s why this is so effective:

✅ Held outside of UK and Portugal – once you’re non-UK resident for 10 years, the bond falls outside UK IHT.
✅ Irish structure – no inheritance tax on pay-out to beneficiaries.
✅ Avoids probate – the bond pays directly to your nominated beneficiaries.
✅ Not subject to Portuguese stamp duty, as it’s a non-Portuguese asset.

These bonds are now widely used by expats frustrated by the shifting UK rules and wanting a clear, tax-efficient and flexible estate planning solution.

Discover how Portuguese Compliant Bonds work →

With sweeping reforms to UK inheritance tax, pensions now caught in the IHT net, and a short re-entry period for UK residency exposure, the time to act is now.

✔ If you’ve lived abroad for 10+ years or plan to do so – your UK IHT risk can be reduced
✔ Use NHR to extract pensions at just 10% tax
✔ Reinvest proceeds in estate-efficient structures like Irish bonds
✔ Bypass probate and protect wealth for future generations

✅ Book a Free Estate Planning Review

As a cross-border financial adviser specialising in UK expats in Portugal, I help clients structure their wealth to minimise tax, simplify inheritance, and protect estates.

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Disclaimer: While care has been taken to ensure the information in this article is accurate at the time of publication, laws and regulations may change. This content should not be relied upon as a substitute for personalised professional advice. Always seek guidance based on your specific circumstances.