MDKNIGHT50

Hi,

I'm a newbie and thinking of retiring to Portugal or at least spending half the year there through autumn/winter. I've been reading about the NHR scheme. So it allows you to draw down your UK pension pot say over 10 years tax free. This seems to good to be true to me and a 'free lunch'. From what I read the UK state pension is taxed at source which isn't a great deal compared to my pension pot. So what are the drawbacks of this tax free scheme? Would it get re taxed if I move back to the UK after the ten years although I'd be thinking of buying a permanent place in the Algarve and retiring between that place and my place in the UK.

Thanks

Martin

Red Eric

Just to correct the one error I can spot for sure in there, if you are tax resident in Portugal your UK state pension is taxable in Portugal. Whether it would actually be taxed depends on whether it is above the lowest taxable income threshold.

As to the rest, my understanding is that yes, your other pension drawdowns would be exempt from UK tax, since you would no longer be resident in the UK and yes NHR would give you an exemption on paying tax on that* (and the state pension) for the 10 year period.

That is contingent on you actually being tax resident in Portugal, though.

* Gleaned from sources such as this : How to take your UK pension pot overseas-and not be hit by a big tax bill

(and with the standard caveats that I am not a tax lawyer and can't vouch 100% that pension pot drawdowns will be treated in exactly the same fashion as "normal" foreign-sourced pension income)

MDKNIGHT50

Thanks Eric. So if you're drawing down your pension pot over a 10 year cycle tax free then does it taxed retrospectievly if you move back to the uk permanently? Although the idea is not to do that and buy a place in the south and split our time between the two countries.

Red Eric

I'm sorry but I've reached the limit of my knowledge on the subject.

In terms of "free lunches", yes, there is definitely scope under NHR for eligible residents to bring in unlimited qualifying income from abroad and avoid paying tax either in the source country or in Portugal. I can't vouch for whether pension pot drawdowns count for this (lump sums probably not being viewed purely and simply as income) and I don't know what the rules are about releasing it tax free from the UK or what happens should you return there subsequently.

If potentially considerable sums are at stake in the form of tax exemptions, it would probably be worth your while paying a comparatively small sum for professional advice, although maybe someone on here with first-hand experience of NHR, particularly under this circumstance, might care to comment.

MDKNIGHT50

Thanks Eric. I'll see if any more useful comments appear but yes I'll be taking proper paid advice in due course.

liveaboard

You can often have a sit down with Denis Swing Green at Eurofinesco at no charge. He's a real expert in this stuff, and after getting to grips with your particulars he'll be able to answer you.
They hope you'll be so impressed that you'll then hire them to do your paperwork.
But you have to be in Portugal to do that.

Things do change though; the NHR scheme is controversial and might be scrapped at any time.
And if you don't hustle, Brexit could actually happen and ruin your chance of residency.