Portugal and Pensions

Malthusian

jamesd wrote: »

The requirement is tax residence, not citizenship.

Nobody mentioned citizenship. If you live long enough in Portugal to become officially tax resident, and crucially plan on staying there long enough to avoid the "temporary non-residence" rules which could result in your pension withdrawal becoming taxable if you return to the UK, I call that being Portugese.

If you just want to spend those five years living in an English enclave and speaking no Portugese beyond "oy, Pedro, una cerveza pour favour", Portugal is a free country and that's your right as a Portugese.

I call it "being Portugese" because it emphasises that swanning off to Portugal for the winter, or staying there a couple of years, drawing your pension and then returning to the UK, doesn't cut it.

ratechaser wrote: »

But as I mentioned, I've only just scratched the surface of this one, no idea if it would be seen as aggressive tax avoidance if the day after I gained resident status, I pull out a million quid tax free and then move back to England!

That's not tax avoidance of any kind. You wouldn't have done anything to avoid the tax bill you incurred under the temporary non-residence rules.

nigelbb

Deleted_User wrote: »

France - you pay social security costs on pension income. However you can choose to split your income between a couple - calculate tax on both and then add back together (works nicely when one couple earns most of the money).

You don't pay social charges (8-9%) if on a UK state pension with an S1. As noted income is split between a couple & then taxed separately especially good if one partner has a high income & the other has low/none. Pensioners get an additional 10% reduction in taxable income i.e. if your income is £50K you are taxed on £45K

You can withdraw your entire pension pot in one go & it's taxed at 7.5% (I'm not sure if you can have multiple pension pots & cash in one each year & still only pay 7.5%).

In general couples especially pensioners on even quite substantial incomes will be better off tax-wise in France than they would be in the UK.

ratechaser

Malthusian wrote: »

That's not tax avoidance of any kind. You wouldn't have done anything to avoid the tax bill you incurred under the temporary non-residence rules.

Helpful, thanks... so basically live in Portugal for at least 5 years, no issues with using it as a base for all the other travelling I want to do in retirement, just don't spend too long in the UK during that time (presumably there is a threshold number of days per year above which HMRC would see you as having 'returned'?)

And yes, I'd certainly be aiming for a bit of cultural integration along the way

jamesd

ratechaser wrote: »

Helpful, thanks... so basically live in Portugal for at least 5 years, no issues with using it as a base for all the other travelling I want to do in retirement, just don't spend too long in the UK during that time (presumably there is a threshold number of days per year above which HMRC would see you as having 'returned'?)

It doesn't have to be in Portugal beyond the last Portugese tax year in which you take the money. Anywhere that doesn't cause you to become tax resident in the UK will do. More than half a tax year in the UK is one thing to avoid.

jamesd

Malthusian wrote: »

Nobody mentioned citizenship. If you live long enough in Portugal to become officially tax resident, and crucially plan on staying there long enough to avoid the "temporary non-residence" rules which could result in your pension withdrawal becoming taxable if you return to the UK, I call that being Portugese.

The minimum requirement is enough of one tax year for both countries to be tax resident in Portugal. After that you can live anywhere but the UK until the time limit expires. Ireland, Canada or the US or many Caribbean islands are among possibilities. And a lot of time in the UK is possible of course.

A few years ago I mentioned it to a couple who were planning to buy a boat and sail around the Med.

[Deleted User]

Coming back to Cyprus, I think you can be tax resident in 60 days rather than 183, so for digital nomads.. it’s very very attractive (check my facts)

cfw1994

Deleted_User wrote: »

Coming back to Cyprus, I think you can be tax resident in 60 days rather than 183, so for digital nomads.. it’s very very attractive (check my facts)

Thanks for this and the previous post: very much food for thought!!

So: do these possible moves impact the effect of the LTA?
Eg, if one moved to Portugal (for a min 183 days) or Cyprus (for potentially less!), can one withdraw lumps from a pot of (for example) £1.5m *without* incurring the additional tax on the bit over the LTA?

& if one did this for (say) 3-5 years, & the pot is below LTA, *if* one returned, then no extra tax here?

To class as “living” abroad, can one still rent? I assume so (but also assume it would make sense to purchase somewhere, ideally).
Also assume there is no problem retaining a UK home through this.

A lot of possibilities (& totally agree the move should never just be about tax, in case this post suggests otherwise!).

How many here actually do this, I wonder?

jamesd

cfw1994 wrote: »

So: do these possible moves impact the effect of the LTA?... Also assume there is no problem retaining a UK home through this.... How many here actually do this, I wonder?

Not the main LTA as far as I know but naturally if you withdraw all of the crystallised pot before you're 75 the value in the no longer existing pot won't be higher.

The home can matter for the statutory residence test and for domicile, notably if it's available to you instead of let to tenants.

I was considering doing it to release the money to qualify for a wealthy investor visa in a third country. Reside in Portugal, take the money and move on to the planned destination. A bit like the boat couple. Life intervened and I'm now using VCTs to withdraw at the full basic rate band each year until, if ever, I expect to be able to withdraw the remainder within my personal allowance.

DairyQueen

Being UK domiciled is much more difficult to shed than UK tax residence. Domicile matters for IHT.

bostonerimus

The tax strategy is good as long as you become a Portuguese tax resident.. the tax treaty will not be changed by Brexit, but everything else is up for grabs. So Will Portugal allow U.K. pensioners in on Retirememt Visas and if so will they get healthcare without a reciprocal agreement from the U.K.? They might well charge very high fees to keep out the "rif raff" or require them to pay for healthcare.