Inheritance Tax Shake-Up Spurs Surge in Brits Eyeing Portugal for Wealth Protection
A dramatic shake-up in UK inheritance tax (IHT) rules is fuelling a fresh wave of interest from British families seeking tax-friendly alternatives abroad, most notably, Portugal.
From April 2027, unspent pension pots will no longer escape IHT. Instead, under new measures announced by Chancellor Rachel Reeves, these funds will be considered part of a deceased’s estate. The result? Potential tax bills of up to 40%, followed by income tax on what’s left.
That’s a huge shift from the current structure, where families pay no inheritance tax on inherited pensions—only income tax if the benefactor was over 75.
It’s a move that could raise an estimated £1 billion annually by the end of the decade. But it may also send high-net-worth Britons packing.
Paul Stannard, chairman of Portugal Pathways, explains why: “Making pension pots subject to IHT means everyone should review how they are currently using their pension.”
And he’s not wrong. Experts say the reforms are already prompting families to explore overseas residency as a tool for wealth protection—Portugal, in particular, is rising fast on that list.
The appeal? Low taxes. High quality of life. And a strategic legal edge.
Under the new IHT framework due in April 2025, global assets will fall under UK IHT if the deceased had UK tax residency for at least 10 of the previous 20 tax years. But here’s the escape hatch: those who’ve lived outside the UK for a full 10 of those 20 years may avoid IHT on overseas assets altogether.
That includes property, savings, and investments. For savvy expats, the opportunity is clear.
David Vacani, founder of Beacon Global Wealth Management, noted: “This is a significant relief for expats who plan their financial and property portfolios wisely.
“By keeping your assets outside the UK, you can ensure they remain free from the heavy burden of UK IHT. When combined with the benefits of Portuguese residency, this offers significant planning opportunities.”
Add Portugal’s ongoing tax perks into the mix, and the case strengthens.
Though its famous Non-Habitual Residency (NHR) regime has closed to new applicants, the government rolled out a successor in 2025: the “Tax Incentive for Scientific Research and Innovation,” or NHR 2.0.
Aimed at entrepreneurs and skilled professionals, this new scheme offers a flat 20% tax on Portuguese income—and 0% on passive income like dividends and royalties from abroad.
Stannard is clear on the implications: “Exploring international residency, particularly in jurisdictions like Portugal, can be a crucial part of a comprehensive wealth management strategy.
This strategy ensures expats can fully capitalise on the latest tax rules while avoiding unnecessary liabilities.”
For many, Portugal remains the complete package. Good weather. Political stability. A cost of living that beats the UK. And, of course, a system designed to keep more wealth in your pocket.
“Portugal has consistently attracted high-net-worth individuals (HNWIs) who seek to benefit from its economic and political environment, as well as its climate and culture,” Stannard added.
“There are some excellent opportunities for investment and tax using the old NHR tax regime or the new NHR 2.0, but also Portugal’s Golden Visa alternative investment funds, which have no tax on any upside for foreign investors.”
Meanwhile, the UK’s HMRC confirmed that responsibility for handling pension-related IHT will fall squarely on personal representatives or executors. That could mean extra pressure and paperwork for already grieving families.
Portugal Pathways is currently helping Britons navigate this new tax landscape, offering advice on wealth strategies, residency, and relocation under the new regime.
As UK tax laws tighten, those with foresight are already looking elsewhere. For many, Portugal may just be the perfect escape.
