UK Tax Reform Affecting UK Residents with Non-UK Domicile:

Why Portugal Is Gaining Attention

From 6 April 2025, the United Kingdom (UK) abolished its long-standing non-domiciled (“non-dom”) tax regime, under which certain UK residents whose permanent home for legal purposes was outside the UK could claim taxation on a remittance basis, notwithstanding the approved transitional period. The remittance basis for foreign income and gains no longer applies, trust protections for non-doms largely disappear, and inheritance tax exposure is now determined by long-term residence. For high-net-worth and internationally mobile individuals, these changes create both uncertainty and significant planning pressures.

In this context, Portugal’s Incentivo Fiscal à Investigação Científica e Inovação (IFICI), also known as NHR 2.0., can offer an alternative residence-based tax framework for eligible new tax residents.

The IFICI regime is a targeted tax framework for new residents, offering a 20% flat rate for ten years on Portuguese-source employment income, provided the activity falls within specific qualifying categories. In addition, eligible individuals may also benefit from a ten-year exemption on qualifying foreign-source income, creating a potentially efficient and predictable structure for international earnings.

Key Advantages of IFICI for UK HNW Individuals

Exemption of foreign income:

Qualifying foreign-sourced income may be exempt from Portuguese taxation, even if remitted to Portugal. This makes the IFICI particularly appealing for individuals who previously benefited from the UK non-dom remittance rules, with the added advantage that the exemption applies regardless of remittance.

Inheritance tax benefits:

Portugal levies inheritance tax only on assets located in the country, and there is no inheritance tax for close relatives, including spouses, descendants, and ascendants. This is particularly attractive in comparison with the UK’s new 10/20-year long-term residence test.

Preferential tax treatment:

Portuguese-source employment income from eligible activities is taxed at a flat 20% for ten years, providing preferential treatment in addition to the applicable foreign exemptions.

Lifestyle, legal certainty, and European mobility:

Portugal offers political stability, a high quality of life, and an extensive double tax treaty network. Portuguese residency also provides freedom of movement within the Schengen Area, facilitating travel, business, and family mobility across Europe.

Important Considerations

While IFICI offers meaningful advantages, careful analysis is essential:

Eligibility: The regime applies only to specific qualifying activities and professions. Not all investors, retirees, or internationally mobile individuals will automatically qualify.

Blacklisted jurisdictions: Income derived from jurisdictions deemed “blacklisted” by Portugal is taxed at 35%, with no exemption.

CFC rules and trusts: Certain foreign-owned companies or trusts may bring income under Portuguese taxation depending on ownership and structure.

Why Portugal Can Be a Viable Alternative

The abolition of the UK non-dom regime increases the tax burden on internationally mobile individuals. All UK residents are taxed on worldwide income and gains, trust protections are removed, and inheritance tax exposure depends on long-term residence.

In this context, Portugal’s IFICI regime presents a compelling alternative. It allows eligible individuals to benefit from a residence-based tax framework with meaningful exemptions and long-term predictability. Beyond tax efficiency, Portugal offers political stability, a high quality of life, and freedom of movement across the Schengen Area, making it an attractive destination for professionals, investors, and families alike.

Conclusion

Portugal’s IFICI / NHR 2.0 is not a universal solution, but it provides a structured alternative for UK non-doms affected by the abolition of the remittance basis and new long-term residence rules. The regime offers significant exemptions on foreign income, efficient inheritance tax treatment, predictable taxation, and European mobility. Nevertheless, outcomes depend on a careful, case-by-case assessment of each individual’s circumstances, making early advisory and pre-relocation planning essential.

How Almeida & Associados Can Help

At Almeida & Associados, we guide internationally mobile clients through every stage of their relocation and life in Portugal. We assist with assessing eligibility for IFICI/NHR 2.0, reviewing global income and asset structures, and aligning all reporting and compliance obligations. Our personalised tax consultancy and support encompass compliant, transparent, and sustainable tax optimisation, residency advisory, and ongoing legal assistance. We help individuals and families make clear, confident, and efficient decisions, fully aligned with both domestic and international tax standards.