New Year financial planning review

The New Year is an excellent time to carry out a ‘wealth-review’ to make sure your money is working as well as it can for you. Spending a little time now will help you protect and preserve your wealth over the long term to meet your financial objectives.

Are you up to date with the latest developments in Portugal and internationally that affect you? Do you have a considered, strategic tax and wealth management plan in place? Has there been any change in your circumstances since you last reviewed your affairs?

This is a period of uncertainty in Portugal following the political changes of recent months, and tax planning may become even more important for wealthy expatriates.

Once you have assessed your investments, tax planning, succession planning and pensions, you will then be able to discuss any necessary adjustments with your financial adviser.

Savings and investments
Are you sure your investments, and the mix of them, is suitable for your life in Portugal – and for your circumstances, needs, time horizon and risk tolerance? This is such an important element of protecting and growing your wealth, yet many people do not have an investment plan in place, or have neglected one they set up years ago.

You may have built up a portfolio of shares and funds over the years, without really considering how they work together or whether they suit your aims. Consider the principles for successful investing below.

▪ Your appetite for risk Obtain a clear and objective assessment of your appetite for risk, or your portfolio will not be suitable for you.
▪ Match your risk profile to the optimum portfolio Make sure your investment portfolio matches your attitude to risk.
▪ Diversification 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.
▪ Yearly review Your portfolio can shift away from the one designed to match your risk profile and objectives, and your circumstances may have changed.

Many expatriates have savings and investments in the Isle of Man, Channel Islands or Gibraltar. These jurisdictions are included in Portugal’s official list of “tax havens”, and investment income derived from assets held within these territories is taxed at the higher rate of 35%. It may be time to reconsider your plans.

Tax planning
You need specialist advice to make sure your investments and wealth are arranged in the best, most up-to-date way to limit your tax liabilities. Choose someone who is well-versed in the nuances of both Portuguese and British taxation. The right tax-efficient arrangement can keep most of your investments in one place and help you legitimately avoid paying too much tax.

We still need to wait and see what tax reforms are imposed by the new Socialist government. While it may aim to improve disposable income for workers and families, it may seek to improve tax revenue by increasing capital taxes on wealthier residents.

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, you need to make sure you are using it to your full advantage.

Estate planning
Many expatriates have been affected by the new Portugal law to tax distributions from trusts and other fiduciary structures. It came into effect in January 2015 and the changes are significant. However, while some of the benefits of a trust have been taken away, they still have a role to play in estate planning, depending on your family circumstances. The new law only applies to payments made to residents of Portugal; payments to non-residents are not affected.
UK inheritance tax continues to affect most UK nationals, even if they have been living in Portugal for a while and, depending on whom your heirs are, you may need to consider Portuguese stamp duty (inheritance tax) too. You should also establish whether you can avoid probate on some of your assets for your heirs.

Deciding what to do with your pension fund now, particularly following the new ‘pension freedom’ in the UK, is of fundamental importance. There are more choices than ever before.
You need to understand all the new rules and the options they provide you, and the tax implications in Portugal, before you can make the correct decision for your objectives.
Whether it is investments, tax or pension planning, 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 so you can enjoy a healthy, wealthy 2016 and beyond.

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. |

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