So, you’ve started to get settled in your new Portuguese home. You now have a Portuguese bank account and a fiscal number, and all being well you have working telephones, Internet access and some television to watch. By now, you can hopefully order a restaurant meal in Portuguese, and have probably already identified a couple of very palatable wines that sell for under €3 a bottle. It’s time to get serious again now, and start planning your tax affairs.

By means of a comparison to the UK, we’ll begin with the bad news. Income tax rates are somewhat higher, the top rates kick in at lower income thresholds, and Portugal doesn’t offer the same generous personal allowances.

Thankfully, there are also some factors that act as a counterbalance. Married couples income is combined for the purposes of tax calculations, so households with one main earner can effectively double those scarily low income thresholds. In addition, more things are tax deductible in Portugal, including mortgage interest or rent on a primary residence. Finally, those lucky enough may qualify for the “non habitual resident” scheme, resulting in a long tax-free period for those who fit the criteria. 

All of these differences make one thing abundantly clear. You MUST seek good professional advice. Fellow expats and members of Internet forums will all tell you what you should do with total conviction. Ignore them all, and instead concentrate on finding an accountant you trust.

This part can be tricky. How tricky depends on your situation. Most accountants in Portugal are used to dealing with retirees, and if you are retired and living off a pension and savings, your situation should be reasonably straightforward. If, however, you are still working, perhaps freelance or remotely, or have “international” business interests, expect to see several accountants before you choose one. In this situation, you really need to find someone who fully understands the situation both in Portugal and in any other countries involved in your working life. These accountants exist, but can be hard to find.

Once you have found an accountant, you need to make sure your paperwork is in order, not just here in Portugal but also back in the UK. Presumably, you completed HMRC’s P85 “Leaving the UK” form before you left? Given that nobody tells you to, there is a good chance you didn’t! Don’t worry, you can do it retrospectively. This can in fact be a good test for a new accountant - if they know about this form, it proves they know a bit about how things work in the UK!

Be very wary of anyone who tells you that you can choose where to pay your tax - this is rarely the case, as the respective tax departments use set criteria to determine fiscal residency. Also, unless you like to live your life in fear of the doorbell, avoid the temptation to “stay under the radar.” Governments need all the money they can get these days, and they will come looking for it!

Getting all of this organized WILL be a stressful time, and we haven’t even talked about national insurance and social security yet! Think about how long you expect each stage to take, and double it. Government departments can sometimes take months to reply to letters, so tempting though it is to ignore it until the last minute, you can remain far more relaxed by starting early. That way, each stage can take as long as it needs to, with no need for an increase in your blood pressure!