By 2019-01-19 InEconomy & Finance

Review your finances for the New Year

Make sure one New Year’s resolution is to review your financial planning to check it is on track to protect your family’s long-term wealth.

Preparing for Brexit
Although the official Brexit date is just weeks away, there is still much uncertainty about what it will actually mean and when changes will take effect.

Whatever happens, if you are already formally resident in Portugal, your right to remain should be secure. You can continue receiving the same access to healthcare and other benefits as you do today for as long as you are settled here.

But if you still plan to move to Portugal or have not yet registered as tax resident, time really is running out. Even if a transition period is guaranteed, it is sensible to work towards the shortest possible cut-off date; so take urgent steps to establish your settled status before March 29, 2019.

Post-Brexit, you can still apply for and enjoy significant tax advantages through Portugal’s non-habitual residency (NHR) scheme.
However, you need to meet Portuguese residency rules to qualify; this will be less straightforward if you are no longer an EU citizen.

Tax planning
Regular tax reviews are crucial to ensure your investments and wealth are arranged in the most suitable way to limit your liabilities – wherever you have financial interests – while meeting your obligations.

Today, with the ‘automatic exchange of information’ regime well underway, it is more important than ever to get it right. Over 100 countries – including Portugal and the UK – are already sharing data on residents’ overseas income and assets, with more joining each year. This means your local tax office will receive financial information about you without having to even ask for it.

Last October, the UK government introduced tougher penalties for failing to declare offshore income, assets or activities accurately and on time. Now they can impose an unlimited fine and up to six months in prison where undeclared tax exceeds £25,000 in any tax year.

Cross-border tax planning is complex, so take specialist advice to achieve peace of mind and potentially secure significant tax savings.

Savings and investments
The Bank of England (BoE) increased the UK interest rate to 0.75% in August – the first time in over nine years that rates reached over half a percent. While some banks eventually passed on an increase to savers, rates remain relatively low. Today’s best rates for easy access savings accounts linger at around 1.5%, with up to 2.7% on offer for locking your cash away for five years.

Keeping savings in cash can be risky if you are not earning enough to keep pace with the increased cost of living. With the current rate of inflation still hovering above the BoE’s target of 2% – reaching as high as 2.7% last August – many savers are actually earning a negative real rate of return. British expatriates have the added concern of exchange currency risk in what is currently a highly volatile time for Sterling.

Successful investing is about having a strategy specifically based around your personal circumstances, time horizon, needs, aims and risk tolerance. You should ensure you have adequate diversification to avoid over-exposure to any given country (including the UK), asset type, sector or company. Using investment structures that allow multi-currency flexibility can help minimise exchange rate risk.

In any case, remember to review your portfolio annually to take market developments into account, address any changes in your circumstances and take advantage of opportunities for residents in Portugal.

Today’s pension landscape offers more choices than ever, but this may change with Brexit. For example, it is possible that tax-free transfers to Qualified Recognised Overseas Pension Schemes (QROPS) may be targeted once the UK sheds its EU obligations. Carefully weigh up all your options, as well as the tax implications in Portugal and the UK, to establish the best course of action for you.

Make sure you take regulated advice to protect your retirement savings from pension scams and do what is right for your personal circumstances and aims.

Estate planning
It is important to review your estate planning when living in Portugal, as both succession law and tax work very differently to the UK.

Your estate plan should be set up to achieve your wishes in the most tax-efficient way possible. If you remain UK domiciled – as many expatriates do – you continue to be liable for UK inheritance tax, so you should plan to reduce this liability for your heirs. Speaking of heirs, do not forget to take into account any new additions to your family this year!

Whether it is investments, tax, pensions or estate planning, take personalised advice to establish the most suitable approach for you. Spending a little time on a financial health-check now can provide peace of mind that you and your family are in the best financial position to enjoy a prosperous 2019 and beyond.

By Dan Henderson

Dan Henderson, Partner of Blevins Franks, is a highly experienced financial adviser, specialising in retirement, investment and succession planning. He holds the Diploma for Financial Advisers and advanced CII qualifications in pensions and investment planning.

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