What it really costs to pack up and move to Portugal: Your pension and savings will go a LOT further while you’ll pay a fraction of the tax. Read our detailed guide

With a profession within the Royal Navy and the Ministry of Defence, Peter Reynolds and his spouse Karen had been used to transferring home. Whereas Peter hails from Scotland, the couple lived in Portsmouth and Eastleigh with postings to Hong Kong and Gibraltar.

And when it got here to retiring, they knew they needed to settle overseas. After many glad holidays in Portugal’s Albufeira, they discovered a country property quarter-hour inland of the Algarve’s largest tourism resort.

One of many benefits is that within the eating places of their village, Cerro do Roque, they’re usually surrounded by native employees fairly than vacationers.

After they tuck into bread and olives, adopted by piri piri rooster or pork and clams washed down with a beer or a glass of native vinho verde, that menu do dia (menu of the day) prices simply €10-12.

In 2022, the couple fell in love with a four-bedroom quinta – or rural home – with a small swimming pool surrounded by a big backyard of fig, almond lemon and loquats bushes that they purchased for €330,000 (£278,000), lower than they obtained for the sale of their four-bedroom home in Eastleigh, Hampshire.

The home has a small swimming pool surrounded by a big backyard of fig, almond lemon and loquats bushes

‘Peter’s pensions and our financial savings go quite a bit additional than they’d again in Hampshire,’ says 64-year-old Karen, who used to run the household hair and wonder salon, Traditional Cuts. ‘We positively have a really snug life right here.’

In actual fact, together with the sunshine and a extra stress-free life-style, the affordability of residing in Portugal stays an enormous driver for retirees throughout Europe. Previously decade, Portugal’s inhabitants of overseas retirees has greater than doubled, with British expats accounting for 19 per cent of it, in response to the Portuguese Statistics Division, ProData.

It additionally helps that Portugal is among the most secure nations on this planet – rated seventh finest within the 2024 World Peace Index, the very best in southern Europe – and final 12 months there have been 45,218 UK residents residing there, practically thrice the quantity in 2013, in response to the Portuguese border and immigration authority. 

The price of residing in Portugal is 37.5 per cent decrease than within the UK, when meals and on a regular basis bills similar to transport and utility payments are in contrast, in response to Numbeo.com.

Housing just isn’t included within the calculation, and property costs in Portugal held up extra strongly than many Eurozone places in 2023 – up 7.8 per cent, 12 months on 12 months, in response to Eurostat. The favored Algarve is comparatively costly in comparison with the nation’s inside, with the common property in Portugal costing round €150,000 (£126,867), in response to Idealista.com. 

In distinction, the common worth of a indifferent home in Eastleigh bought in March 2024 was £533,000, in response to the Workplace for Nationwide Statistics. However it’s on annual property tax the place there’s an actual value saving. In Eastleigh, the common (Band D) council tax is £2,137 per 12 months – on Peter and Karen’s home it is €167 (£141). 

Though it does not apply to the Reynolds’ property, for properties price greater than €600,000 there’s additionally a further property or AIMI tax at 0.7 per cent of its worth, however a pair can ‘pool’ their allowance so the tax is just payable on properties price €1.2 million or extra.

Karen, 64, who used to run the household hair and wonder salon, Traditional Cuts, says she and Peter dwell a ‘snug life’ in Portugal

Peter and Karen hope to take pleasure in many extra years of their new Portuguese dwelling. They each love pottering within the backyard and heading to the seashore

The eating places within the village the place Peter and Karen dwell are pretty low-cost. The menu of the day at one restaurant prices simply €10-12

Together with the sunshine and a extra stress-free life-style, the affordability of residing in Portugal stays an enormous driver for retirees throughout Europe

Within the UK, the sum of £43,100 is required for a pensioner to take pleasure in a cushty retirement, in response to The Pensions and Lifetime Financial savings Affiliation (PLSA), or £31,300 a 12 months for a ‘average’ life-style. In Portugal, retirees can dwell comfortably on €1,300 to €1,500 per 30 days – €15,600 (£13,147) to €18,000 (£15,168) a 12 months – in response to relocation advisory firm World Citizen Options.

At 67, Peter advantages from a full UK state pension (£221 per week) plus his index-linked naval pension and a Ministry of Defence pension from his profession within the Royal Navy. It was when he was posted to Gibraltar that the couple first started to drive as much as Albufeira for holidays.

Portugal has not been immune from meals and gas inflation. The price of the Reynolds’ weekly meals store is round €80 to €100 per week – a bit decrease than what it could be within the UK. Nevertheless it’s the truth that the couple do not should pay for healthcare that could be a large bonus – as soon as they grew to become resident they had been capable of register for the well being service, or SNS, which (not like the Spanish equal) they need not pay into.

 The couple’s family payments are very low too. Karen says they pay €70 a month for water, €60-80 for electrical energy and round €40 a month for gasoline bottles as they aren’t on mains gasoline. The wholesale value of electrical energy in Portugal in April 2024 was at its lowest level in additional than 5 years, in response to Statista. 

The Reynolds’ TV, telephone and cellular bundle is €60 per 30 days, and their dwelling insurance coverage simply €120 (£103) a 12 months – half the present UK common of £212 per 12 months, in response to Go.Examine. It is also cheaper to run a automobile in Portugal, says Karen.

Insurance coverage is €300 (£254) per 12 months – together with breakdown cowl – and tax €120 (£101). The MOT (or IPO) is €35 (£30) after the fourth 12 months of possession from new, then each two years.

Peter can already benefit from OAP reductions. Over-65s get half-price practice and bus fares, plus the identical (or typically free entry) to museums, together with decrease charges at swimming swimming pools and sports activities centres.

Price-conscious retirees keep away from the vacationer sizzling spots, says Karen. ‘In an area cafe we pay round €2.50 for espresso and a cake – similar to the everyday custard-tart accompaniment, pastel de nata. Should you go into Albufeira that may be €7.50.’

The identical applies to a glass of wine or beer. ‘We are inclined to pay €1-€2 for a beer domestically, and though it may cost €3.50 for a big glass of wine – half the UK worth – it is extra widespread that we sit within the backyard with mates and revel in a good bottle from the grocery store for between €2 and €5.’

Peter and Karen hope to take pleasure in many extra years of their new Portuguese dwelling. With it being reported this week that southern Europeans will turn out to be the longest residing individuals on this planet, they’ve settled in the best place.

‘We love pottering within the backyard, heading to the seashore, particularly the lengthy sandy sweep of Praia de Gale, or strolling across the marina at Vilamoura. However we do miss our family and friends within the UK,’ says Karen.

The couple have two daughters and 6 grandchildren, the oldest of whom is 24. ‘They do go to and it is a great massive backyard the place we will entertain and so they love the pool,’ she says. ‘Our day-to-day life is nice right here, it is a a lot better way of life than we might have had again dwelling.’

All you might want to learn about tax

Retirees ought to begin planning early for a transfer. The Portuguese tax 12 months runs from January 1 to December 31. For brand spanking new arrivals, Portugal has launched a break up 12 months for residency functions.

Earnings derived from authorities pensions – nurses, academics, firemen and so forth – will proceed to be taxed within the UK after which the Double Taxation Settlement (DTA) is utilized in Portugal so you aren’t taxed twice. State and personal pensions might be taxed in Portugal.

For 15 years the NHR (Non-Ordinary Residency) regime was an additional draw for rich retirees as a result of it taxed pension earnings at a flat price of 20 per cent for a 10-year interval.

Now the helpful price has been eliminated, pensions are taxed at a progressive earnings tax price that begins at 13.25 per cent on the primary €7,703 of earnings and rises by way of to a prime price of 48 per cent on earnings of €82,000 or extra.

Inheritance and items tax have been abolished in Portugal, however a stamp obligation of 10 per cent applies on the switch of belongings (homes, automobiles and so forth) positioned in Portugal upon dying

An extra solidarity tax is payable by these on greater incomes – present charges are 2.5 per cent on earnings between €82,000 and €250,000, and 5 per cent above that.

Funding earnings (curiosity, dividends, rental earnings, capital good points) is taxed at a flat price of 28 per cent, or will be added to the taxpayer’s different earnings and taxed on the scale charges. 

‘Married {couples} resident in Portugal will be taxable on the mixture earnings of husband, spouse and dependent kids or can select to be taxed individually,’ says Jason Porter, of Blevins Franks, a cross-border wealth advisory service.

Mr Porter says retirees must also keep in mind that UK tax-efficient investments similar to Isas and Premium Bond winnings are more likely to be taxed in Portugal.

Good points on the sale of actual property – besides the principle dwelling – are taxable if the property was acquired since 1989. For Portuguese residents, solely 50 per cent of the achieve is taxable.

Beware that in case you promote your UK dwelling after you turn out to be tax resident in Portugal, you would be topic to capital good points tax there. If somebody with €30,000 earnings has a capital achieve of £500,000 on their UK dwelling, the tax due may very well be €118,556 (£100,000), in response to a calculation by Blevins Franks.

Inheritance and items tax have been abolished in Portugal, however a stamp obligation of 10 per cent applies on the switch of belongings – homes, automobiles and so forth – positioned in Portugal upon dying.

Brexit visa guidelines for Britons

Submit-Brexit guidelines imply the one method you’ll be able to legally keep in Portugal for greater than 90 out of 180 days is to get a D7 visa, except you’ll be able to hint some Irish or different EU household roots to use for an EU passport, or are married to somebody with one – through which case you’ll be able to apply for residency as their dependent.

The D7 is the apparent route, and Peter and Karen say it’s pretty simple to acquire. You might be required to indicate you’ll not be a monetary burden by proving passive sources of earnings of a minimum of €9,840 (£8,328) per 12 months for a single individual, or €14,760 (£12,492) for a married couple.

The visa is utilized for within the UK from the Portuguese Consulates in London or Manchester.

Submit-Brexit guidelines imply the one method you’ll be able to legally keep in Portugal for greater than 90 out of 180 days is to get a D7 visa

Earnings sources are assessed on a case-by-case foundation, says Paula Meireles, a lawyer within the Algarve. ‘The consulates will settle for financial savings, however their choice is for pensions or different sources on ongoing earnings.’

When arriving in Portugal you could have journey medical insurance however then register on the SNS – the equal of the NHS. You do not want non-public cowl as soon as you might be established.

The visa utility prices round €200, plus authorized/translation charges. A D7 residence allow is granted for 2 years, then will be renewed for 3 years.

After 5 years of authorized residency, you’ll be able to apply for everlasting residency or citizenship.

The D7 assumes these relocating will turn out to be tax resident in Portugal, which robotically occurs in case you spend greater than 183 days within the nation.