How the 2024 UK Budget Impacts British Expats and Property Investors in Portugal

November 9, 2024

The 2024 UK Budget, presented by Chancellor Rachel Reeves, introduced a series of significant tax reforms aimed at rebuilding the economy, supporting working citizens, and addressing the needs of public services. For British citizens living abroad or planning to relocate to places like Portugal, this budget includes some critical changes that will impact inheritance tax, capital gains, and pensions. Here’s what you need to know, with insights on how to navigate these updates if you’re considering investing in Portugal.

Key UK Budget 2024 Reforms: How They Affect British Expats in Portugal

1. Pension Reforms and Inheritance Tax Implications

Triple Lock Continuation: The government has committed to maintaining the State Pension Triple Lock, increasing pensions by 4.1% in 2025-26. This is welcome news for retirees counting on UK state pensions while living abroad.
Inheritance Tax on Pension Funds: Starting from April 2027, most unused pension funds will be included in inheritance tax calculations, impacting the total value of estates. This change affects British expats who may have pensions in the UK, particularly for those with UK-registered pensions and QNUPS (but currently excludes QROPS).

Immo Lusitania Insight: For retirees moving to Portugal, it’s crucial to consider how these inheritance tax changes might impact their estate planning, especially when purchasing real estate as part of their investment.

2. Overseas Transfer Charge Expansion

The Overseas Transfer Charge (OTC), a 25% tax on pension transfers to QROPS, has been expanded to include all transfers within the European Economic Area (EEA) and Gibraltar. This change aims to prevent double tax-free allowances but affects many expats considering QROPS in the EU.

Immo Lusitania Insight: For those looking to invest in property in Portugal and transfer pensions abroad, understanding the tax implications is key. Real estate in Portugal remains an attractive investment to diversify retirement portfolios and hedge against changes in pension taxation.

Moving to Portugal? New Domicile and Inheritance Tax Rules to Know

3. Changes to Domicile and Tax Residency

Residence-Based Tax System: Beginning in April 2025, the UK will implement a residence-based tax system. For expats moving from the UK to Portugal, there will be a four-year tax relief on foreign income and gains, making the transition period easier for new arrivals.

Tip for Buyers: With the potential for reduced foreign income taxes in the first four years, relocating to Portugal has added financial benefits. Immo Lusitania offers guidance on housing options, from new builds and flats to villas and chalets.

4. Inheritance Tax Based on Residence

The UK will now tax non-UK assets for long-term residents based on residence status rather than domicile. For British expats in Portugal, this shift means non-UK assets, including real estate, may be subject to UK inheritance tax if they retain close ties to the UK.

Immo Lusitania Insight: For those looking to secure a villa or plot in Portugal, it’s essential to understand how this could impact their estate planning. Portugal’s inheritance tax laws are generally favorable compared to the UK, making it a prime destination for property investment.

Capital Gains Tax (CGT) and Property Investments

5. Increased CGT Rates for Non-Real Estate Assets

Starting from October 2024, capital gains tax for non-real estate assets will increase to 18% and 24%, while rates for real estate remain the same. However, investors and expats with business or share-based assets will see increased CGT implications.

Immo Lusitania Insight: Portugal’s property market offers competitive tax rates, and with various new builds for sale in top locations like the Algarve and Lisbon, British investors can benefit from diversifying their investments into real estate to minimize CGT liabilities.

Key Budget Takeaways for Property Buyers and Expats

6. Stamp Duty Surcharge on Additional Properties

The UK has increased the Stamp Duty Land Tax surcharge on additional residential properties to 5% above standard rates. For British investors planning on keeping UK properties while investing in Portugal, this could impact the overall cost of property ownership in both countries.

Immo Lusitania Insight: Portugal’s lower property tax rates offer a substantial benefit to those looking to invest in luxury villas or flats. Portugal’s real estate market remains highly attractive due to the absence of steep transaction surcharges like those in the UK.

7. Revised Business and Agricultural Property Relief

Starting from 2026, relief rates for business and agricultural property in the UK will be capped, reducing the benefits of owning such properties for estate planning. This shift may prompt investors to seek tax-friendly alternatives abroad, including in Portugal.

Investment Tip: Portugal offers diverse investment options, from plots ideal for vineyard or olive grove developments to chalets in scenic areas like the Alentejo, which offer both lifestyle and investment benefits without the heavy tax implications found in the UK.

Why Invest in Portugal Real Estate?

8. High-Quality Lifestyle and Affordable Living Costs

Portugal’s quality of life is unmatched, combining a relaxed lifestyle with affordable living expenses. With beautiful weather, scenic beaches, and a welcoming community, Portugal is a haven for those looking to live comfortably without breaking the bank.

9. Range of Property Types and New Builds

Portugal offers a broad spectrum of properties to suit all preferences, including new builds, apartments, townhouses, and villas. With developments across popular regions, investors have a wealth of options to match their needs.

Immo Lusitania: Whether you’re looking for a family house in Lisbon or a holiday apartment by the beach, Immo Lusitania connects buyers with ideal properties that cater to both lifestyle and investment goals.

10. Strong Rental Market and Investment Potential

The Portuguese rental market is booming, especially in major tourist destinations. With steady growth in demand, Portugal offers solid rental yields, making it ideal for those seeking to generate rental income.

Real Estate Specialists: Immo Lusitania specializes in finding luxury villas, beachfront flats, and new developments tailored to British investors’ needs. If you’re looking for a safe, profitable investment, Portugal offers unparalleled opportunities. Let Immo Lusitania guide you to your dream property in Portugal.

Ready to Make the Move? Immo Lusitania Can Help!

For British expats and investors affected by the recent UK budget changes, Portugal’s real estate market provides a stable and attractive alternative. From new builds in the Algarve to plots on the Silver Coast, Immo Lusitania has a property portfolio designed to meet a variety of needs and budgets.

Contact Immo Lusitania today to explore the exciting real estate opportunities awaiting you in Portugal. Our team of experts is here to assist with every step, making your transition smooth and helping you make the most of Portugal’s property market.