If you have retired to Portugal and are in receipt of pension income, one of the first things you will need to do is work out how you will get your hands on your pension money. Just as important, though perhaps less pleasing, is working out how and where you pay tax on the money.

If you are in receipt of a UK state pension, then it is usually paid to you via direct credit into a UK bank account. If possible, it is best to maintain a UK bank account after you move. It is usually significantly harder to open a new account if you decide to return than it is to leave an existing account running. If you have pension income regularly credited, your bank is unlikely to object to changing your contact address to one in Portugal.

There are various ways of drawing your money out of a UK account. Using Multibanco (ATM) machines is one option, but banks often charge fees for this. This is why many expats arrange a periodic transfer, either via their Portuguese bank or through a currency specialist, such as Smart Currency Exchange.

It is important to seek financial advice as to whether you need to pay tax on any of your pension income. In some circumstances, you may be liable for tax in Portugal that didn’t have to pay in the UK. The essential starting point is to inform the Department for Work and Pensions in the UK when you depart for Portugal.

Contrary to plenty of the ill-informed advice that appears on Internet forums, you rarely get a choice as to where you pay your tax. Fiscal residency is determined by some quite specific criteria. Broadly speaking, once you become properly resident in Portugal, and cut ties with the UK, you will be taxed in Portugal on your worldwide income. One exception to this is if you are in receipt of a forces or public service pension - these pensions are always liable for tax in the UK.

Good advice from an accountant who comes recommended is essential here. Although, as mentioned above, some income may be liable to tax where it wasn’t in the UK, certain allowable tax deductions and the combining of allowances for married couples mean that many expats find they have more disposable income once they have moved to Portugal.

When choosing an advisor, be sure to find someone with in depth experience of the pension and taxation systems in both Portugal and the UK, as mistakes made in this area can be stressful and expensive. The correct advice has a direct impact on how much delicious Portuguese wine you can afford during your retirement years!

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