Searching for a better life abroad after a heart attack last year, James Reynold-Payne, 49, chose the Algarve in Portugal. Besides the plentiful beaches, excellent food, widely spoken English and easy access from the UK, it was the tax breaks that appealed.
As a resident under Portugal’s non-habitual residence tax regime, much of his UK income will be tax-free for ten years. “I had no idea about this when I started looking. However, it was at least 50 per cent of my decision to move here,” he says.
With the chancellor announcing a review of capital gains tax and the recognition that tax hikes are likely to recoup some of the money spent to help the UK economy to weather coronavirus, many Britons are considering the financial benefits of a move abroad.
However, Gary Ashford, a tax partner at Harbottle & Lewis, a law firm, warns against choosing a country purely on the basis of a favourable tax regime. “A move simply for tax reasons nearly always ends in disaster,” he says. “You need to find a nice house, amenities, restaurants and schools because you and your family need to live there.”
He adds that Portugal is the most popular low-tax country for emigrating Brits, but believes that this has more to do with the lifestyle than the tax savings.
Careful consideration of what a life abroad will comprise is essential before making your mind up, says Sarah Coles, a personal finance analyst at Hargreaves Lansdown, an investment platform. “In Monaco you’re likely to have neighbours who divide their time between properties all over the world. At the other end of the spectrum are the Channel Islands, which are known for their close-knit communities, so you’ll have to be comfortable arriving as an outsider.”
House prices also vary considerably. “The trouble with moving somewhere that’s enormously desirable for the mega-wealthy is that the cost of property can be eye-watering — especially when supply is very limited,” she says, pointing to Monaco, the world’s priciest home location.
Rush the decision at your peril, Ashford cautions. In most cases you need to be out of the UK for six years if you don’t want to be considered a UK resident for tax purposes, a fact that many people learn too late. “People always regret coming back too soon. Knowing this fact might have made them stay there longer and certainly to plan properly for their return.”
We take a look at some of the most popular low-tax havens.
Tax Under Portugal’s non-habitual residence tax regime much of your foreign-derived income, such as dividends, is tax-free for the first ten years of residency. Pension income is taxed at 10 per cent and foreign employment income is taxed at a flat rate of 20 per cent.
Logistics The Algarve’s Golden Triangle, the affluent region famed for its luxury resorts and excellent beaches, has long been popular with Brits. It is a short drive from Faro airport, from which regular flights connect London and other UK cities in roughly three hours. There are several international schools, including Nobel International School, near Lagoa, Eupheus International School in Loulé, and Vilamoura International School.
Where to live In the so-called Golden Triangle, which stretches between Vilamoura and the gated golf estates of Vale do Lobo and Quinta do Lago in the south to Almancil in the northeast. A three-bedroom villa with a view of the coast will cost about €600,000 (£550,000).
To the south, nearer the coast, the golf estates and some parts of Vilamoura have the smartest and priciest homes, with neighbourhoods also peppered with the area’s best golf courses, sports clubs and beach clubs. The cheapest villas on the best private estates start at about €4 million.
For €520,000 Reynold-Payne bought a four-bedroom house near Loulé, a short drive north of Almancil, within which he has added a separate flat, where his mother lives. The large number of English people living locally has made it easy to meet friends, he says. “We’re semi-retired, although I do a little landscaping and building maintenance. It’s a massively easy social scene.”
The coronavirus pandemic has sent the market into overdrive as British buyers consider a new home abroad, with new registrations at Fine & Country up a third in the four months to July compared with 2019 (although at present travellers to Portugal must self-isolate for 14 days on return to the UK). Increasingly, Brits are venturing west from the Golden Triangle along the coast to towns such as Carvoeiro, which offer comparable facilities, a coastal location and villas between €500,000 and €600,000, according to Zoie Hawker, a managing partner of Fine & Country Algarve.
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