The UK’s recent Budget announcement is being described as a game-changer for expats.

Chancellor Rachel Reeves has introduced sweeping tax reforms targeting capital gains, inheritance, and pensions, and abolished the long-standing non-dom status, setting off alarm bells for UK nationals worldwide, as well as for other nationalities with assets in Britain.

These changes could reshape the landscape for British expats, including those in Portugal, who now face new financial challenges in maintaining ties with the UK.

Jake McLaughlin, Executive Director of deVere Portugal, notes that the repercussions for British expats in Portugal are potentially profound. “This Budget sends a message that the UK government is focusing on revenue, even if it means driving wealth, investment and talent out of Britain,” he explains.

“Many British nationals in Portugal are now reassessing their financial links with the UK, from pensions to property holdings, as these new tax measures hit closer to home.”

For expats who have held on to property, pensions, or other UK-based investments, the Budget introduces higher levies on capital gains, inheritance, and pensions that could dramatically impact long-term financial planning.

Traditionally, many expats have relied on the stability of UK pension rules, which allowed them to pass on retirement savings to their heirs tax-free. However, with the introduction of Inheritance Tax (IHT) on pensions from 2027, that lifeline may be at risk.

“Expats in Portugal, many of whom have carefully structured their finances around these longstanding rules, are understandably alarmed by this sudden shift,” McLaughlin says. “Pensions were often seen as a safe and reliable means to transfer wealth, but these changes threaten to undo years of planning and disciplined saving.”

He advises individuals and families to take proactive measures to secure their wealth. “This isn’t the time for a wait-and-see approach,” he warns.

“The new tax landscape calls for a fresh look at financial planning. Reviewing your portfolio with a financial advisor is essential to ensure tax efficiency and to explore options that might protect you against future changes.”

The abolition of non-dom status was another blow, as it removes one of the key incentives that have attracted international wealth to the UK for decades.

The regime allowed non-doms to avoid UK tax on foreign income, providing a significant benefit to those with overseas assets. McLaughlin warns that this move could lead many to rethink their ties to the UK altogether.

“Many British expats in Portugal may question the benefits of maintaining UK assets or tax residency,” he observes. “We’re already seeing interest from expats looking to shift their wealth or income streams entirely out of the UK, as other countries—Portugal included—continue to offer more stable tax environments.”

The UK’s focus on higher taxes for capital gains and employer National Insurance Contributions (NIC) is likely to push even more individuals and businesses to explore alternative residency options.

McLaughlin notes that countries like Portugal are well-positioned to benefit from this potential exodus. “Portugal has become a haven for those seeking a more favourable tax regime,” he explains.

“With these new UK policies, we’re seeing a growing number of inquiries from British expats about consolidating their wealth here, where they can benefit from the NHR regime and avoid some of the harsher tax measures now in place in the UK.”

For British business owners and entrepreneurs living in Portugal, the increased NIC is particularly concerning. This “jobs tax” could discourage hiring and investment, both in the UK and abroad, leading to potential cutbacks in British-owned businesses with international operations. Expats who still employ UK-based staff or have business interests back home are likely to feel the pinch.

“Rising employer NIC creates a difficult environment for British business owners abroad who still have ties to the UK,” McLaughlin points out. “The impact will be felt across the board, from hiring to wages, which could drive more business owners to set up fully abroad.”

With the UK Budget reshaping the rules on pensions, capital gains, and non-dom status, expats in Portugal are being advised to consult with a trusted financial advisor to mitigate potential tax exposure. McLaughlin underscores that timely action is essential to safeguarding wealth under the new regime.

“This is not just about making minor adjustments. Expats in Portugal need to review their financial plans now, with a long-term perspective,” he says. “From rebalancing portfolios to exploring tax-efficient investment vehicles, there are strategies available that can help you manage the impact of these changes.”

The deVere Executive Director also notes that expats should prepare for further unpredictability. The abrupt policy shifts in the UK indicate a potential trend towards more aggressive taxation in the coming years, especially as the government seeks new revenue streams. McLaughlin advises expats to consider diversifying their asset base and income sources to reduce reliance on the UK.

“The UK Budget may just be the start of a longer trend of tax hikes,” he warns. “You need to be ready to make strategic decisions that protect your financial future.”

To better understand how Labour's new budget could impact your UK assets while living in Portugal, take our free quiz: Discover How Labour's New Budget Will Affect Your UK Assets. It's a quick and insightful way to assess your exposure and explore tailored strategies to protect your wealth.

You can contact Jake with any questions here: jake.mclaughlin@devere-portugal.pt or the deVere Portugal Office +351 22 110 9071 or book a meeting with him here https://calendly.com/jake-mclaughlin/review