Is your tax and wealth management in shape for 2015?

Do you have a considered, strategic tax and wealth management plan in place? If so, is it up to date with all the latest developments in Portugal and internationally that affect you? If not, make a New Year resolution to review your tax planning, investments and pensions. Are they ready for what 2015 will bring? Are they designed to preserve your wealth over the long-term and meet your objectives?

Savings and investments

Many people have built up a portfolio of shares and funds bought over the years, without much consideration to how they work together or suit your aims. Could your portfolio be exposed to unexpected or unrewarded risk and is it still adequately aligned to your needs?
Consider the principles for successful investing below. If you do not have them in place it is time to make changes.

Your appetite for risk

The starting point is to obtain a clear and objective assessment of your appetite for risk, or your portfolio will not be suitable for you. There are some sophisticated ways of evaluating your risk appetite.

Matching your risk profile to the optimum portfolio
Every set of investments can be forecast to display a given amplitude of risk. Low amplitude, less risk but also lower likely returns. A higher amplitude of risk brings greater potential returns. The key is ensuring your investment portfolio matches your attitude to risk, otherwise you could find yourself with a portfolio that is too risky or cautious for you.

It is critical to ensure your investments are suitably diversified, so you are not over-exposed to any given asset type, country, sector or stock. Spreading across different assets and markets gives your portfolio the chance to produce positive returns over time without being vulnerable to any single area or stock under-performing. A ‘multi-manager’ approach provides further diversification.

Review your portfolio around once a year to re-balance it. As asset values rise and fall, your portfolio can shift away from the one designed to match your risk profile and objectives. You may need to re-establish your original weightings, and consider if your circumstances have changed.

Tax planning

Besides considering the above investment principles, you want to ensure that your investments are held in the most suitable arrangement to limit your tax liabilities. It is crucial to take advice from someone who is well-versed in the nuances of Portuguese taxation and how it can impact your wealth. Otherwise, you could see your investment returns slashed by Portuguese tax – levies that could have been avoided or mitigated.

The personal tax hikes introduced under Portugal’s bailout programme have been kept in place for 2015 income. This includes a top income tax rate of 48% on income over €80,000, a surtax of 3.5% on income included in tax returns and a 28% tax on investment income, increasing to 35% for assets held in “tax havens” (including Channel Islands and Isle of Man).

Those with savings and investments therefore need specialist tax planning to protect their capital, income and assets from tax. The right tax efficient arrangement can keep most of your investments in one place and help you legitimately avoid paying too much tax.

Estate planning

Do not risk leaving your estate planning too late.

While the inheritance tax regime (“stamp duty”) in Portugal is relatively benign, depending on whom your heirs are it may affect them. British expatriates also need to plan for UK inheritance tax.

You also need to consider Portuguese succession law, the new EU European Certificate of Succession from August 2015, and whether you can avoid probate on some of your assets for your heirs.

UK pensions

If you are a UK national, 2015 is a big year for pensions. You need to understand the new pension freedom from April, the tax implications in Portugal and any opportunities, and weigh up all your options to establish the best way forward for you. This is very complex so you need specialist, up to date advice.

New residents and the Non-Habitual
Resident scheme

If you are still at the planning stages of moving to Portugal, or not yet tax resident here, seek advice on Portugal’s Non-Habitual Resident (NHR) regime which provides beneficial tax treatment for the first 10 years of residence.
If you are already approved under the scheme, are you sure you are using it to your full advantage?

Whether it is your investment, pension or tax planning, you need to seek specialist advice to ensure you do what works best for your personal situation. Use an adviser who can guide you on all these aspects and provide holistic solutions.

Tax rates, scope and reliefs may change. Any statements concerning taxation are based upon our understanding of current taxation laws and practices, which are subject to change. Tax information has been summarised; an individual is advised to seek personalised advice.

By Gavin Scott
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Gavin Scott, Senior Partner of Blevins Franks, has been advising expatriates on all aspects of their financial planning for more than 20 years. He has represented Blevins Franks in the Algarve since 2000. Gavin holds the Diploma for Financial Advisers. |