Tax Planning for Leaving the UK: Minimising the Cost of Departure

As more UK tax residents explore relocating abroad, particularly to attractive European destinations such as Portugal, understanding the tax implications of expatriation is essential. INLIS Consulting explains how to plan effectively and reduce unnecessary costs when leaving the UK.

Relocating from the UK is a life-changing decision, often motivated by lifestyle, work opportunities, or retirement goals. Portugal, with its sunny climate and favourable tax incentives, has become one of the top destinations for British expatriates. However, leaving the UK without careful tax planning can lead to unexpected costs.

At INLIS Consulting, we work with UK nationals relocating to Portugal, helping them navigate the complex rules on UK tax residency, pensions, capital gains, and double taxation agreements. By planning, you can avoid common traps and make your move as tax-efficient as possible.

Avoid falling back into the UK tax net

The biggest risk when leaving the UK is unintentionally triggering UK tax residency again. Under the Statutory Residence Test (SRT), the number of days you spend in the UK, combined with your personal and economic ties, determines your tax position.

• For some, as few as 16 days can trigger UK tax residency.

• For others, the allowance extends to 182 days per tax year.

Keeping clear records of travel dates and understanding your residence status is essential to avoid double taxation when relocating to Portugal.

Key UK tax reliefs lost on departure

1. Private Residence Relief (PRR)

In the UK, you can usually sell your main home without capital gains tax thanks to PRR. In Portugal, however, all property sales are taxable, regardless of whether the home is your main residence. The timing of any property disposal before moving can therefore have a major financial impact.

2. Business Asset Disposal Relief (BADR)

BADR, formerly known as Entrepreneurs’ Relief, reduces the UK capital gains tax rate to 10% on qualifying business disposals. Once you become a Portuguese tax resident, this relief no longer applies, and Portugal may tax these gains at rates starting from 28%.

3. Pension Commencement Lump Sum

The UK allows a 25% tax-free lump sum from pensions. Portugal does not recognise this rule; any withdrawals are taxed as income. With UK changes from April 2027 bringing pensions into the scope of inheritance tax (IHT), careful planning is required to protect your retirement assets.

4. Overseas Pension Transfers (QROPS)

Since October 2024, transferring pensions abroad may trigger a 25% exit tax charge. Some expats accept this in order to reduce future 40% IHT charges.

5. EIS and SEIS Reliefs

UK tax incentives for investors are lost once residency changes. Worse, if you leave the UK during the three-year qualifying period, previously deferred gains may be clawed back.

Other planning points

• Company residency risk: Managing a UK company from Portugal may create Portuguese tax residency for the business.

• Permanent establishment: Running a business activity from Portugal may create a taxable presence there.

• Temporary Non-Resident Rule: Returning to the UK within five years can trigger tax on gains realised while abroad.

The rising prospect of a UK wealth tax

With discussions about a UK wealth tax resurfacing, many high-net-worth individuals are exploring relocation sooner rather than later. Portugal, while phasing out its famous Non-Habitual Resident (NHR) regime, still provides competitive tax treatment under the new IFICI regime.

Planning ahead with professional advice from firms like INLIS Consulting can help protect wealth and optimise cross-border tax positioning.

Final Thoughts

Leaving the UK is not just about booking flights—it’s about strategic financial planning. From property and pensions to potential wealth taxes, the risks of poor planning are high.

By working with INLIS Consulting, UK expats moving to Portugal can structure their relocation to minimise costs, protect their wealth, and secure peace of mind.

📌 INLIS Consulting helps British expats plan their move to Portugal with tailored advice on UK tax departure rules, Portuguese tax residency, and cross-border structuring.