Europe Still Financially Attractive to the British – Brexit or No Brexit

Date Posted:Tue, 3rd Dec 2019

Europe Still Financially Attractive to the British – Brexit or No Brexit

By BBG Member Jason Porter, Blevins Franks Financial Management


Many Britons in the Gulf will be planning their retirement. But will they choose somewhere warm rather than retiring to chilly Britain. Here we consider the financial benefits of relocating to the popular southern European destinations of Spain, France and Portugal.


There are estimated to be one million Britons living in Spain, with UK expatriates making up the largest group of European foreign nationals.

There are potential tax planning advantages in moving from the UK to Spain, in terms of asset disposals and other opportunities.

One of the best tax-planning opportunities is to keep investments within a life assurance bond ‘wrapper’ which can hold a variety of different investments similar to unit trusts, open-ended investment companies and the like. 

Income from ‘Spanish approved’ life assurance bonds is taxed very favourably in Spain, including:

  • There is no Spanish income tax or capital gains tax if the income and gains are accumulated within the policy and no withdrawals are made.
  • Where a withdrawal is made, it is taxed very favourably. Only the ‘growth’ element of the amount withdrawn is taxable in Spain. If the whole portfolio of assets within the policy has grown by, say, 10%, only 10% of the withdrawal is taxable; 90% of the withdrawal is tax-free. If there is no gain, there is no tax.
  • Additionally, the growth element of the withdrawal is not subject to the general rates of Spanish personal income tax, which are normally between 19% and 45% for fiscal year 2019. Instead, the more favourable Spanish savings income tax rates apply.
  • The life assurance contract can potentially reduce any wealth tax liability in Spain, due to the fact the wealth tax bill plus the income tax bill cannot exceed 60% of the total taxable income. As the policy reduces your total taxable income, it also has the potential to help reduce any wealth tax liability payable. 

Be aware too that all purchases and sales within the policy are normally transacted at no cost. Investment changes and switches within the policy are also tax-free.


France is often viewed as a country of relatively high rates of taxation. But British expats moving there to join their 330,000 compatriots can take advantage of a tax break which around one-third of French nationals uses.

This is the tax-efficient life insurance policy called Assurance Vie. This is a financial ‘wrapper’ that holds long-term savings and financial investments and is one of the best ways to protect and grow your savings efficiently.

It’s also suitable for providing retirement income. There are no restrictions on when and how much you can withdraw. No tax is payable on dividends and income received, nor the gains arising on buying and selling of investments – they are all accumulated in the policy.

Only the ‘profit’ element contained in any withdrawal is taxable. This ‘gain’ is taxed at a single flat rate of 30%.

France also has attractive rules around the taxation of pension scheme lump sums, which might only be liable to 7.5% taxation. This fits very conveniently with the UK pensions freedom legislation.


Once you join the 39,000 Britons resident in Portugal, you are liable to Portuguese tax on worldwide income and certain capital gains, as well as for some ancillary taxes, so you need to be prepared for this. 

You are usually considered tax resident after 183 days in Portugal, but it can be earlier – potentially even the day you arrive – if you relocate with the intention of making it your home.

Be mindful of the residency rules in the UK. New rules were introduced from 6 April 2013. As an example, you could unintentionally trigger tax residency and come back in line for British taxes again after just 16 days there.

If you plan ahead and have flexibility, it is possible to time your change of residency to minimise tax liabilities – and maximise opportunities – in both countries. 

New residents can enjoy significant tax benefits for their first ten years through Portugal’s ‘non-habitual residence’ (NHR) regime. To qualify, you cannot have been resident within the last five tax years and should apply through the local tax office soon after arrival.

Besides offering a fixed 20% income tax rate to those employed in ‘high value-added’ professions, NHR lets you receive some foreign income – like UK pensions – tax-free. You could also pay no Portuguese tax on gains from UK property. 

Even outside of NHR, Portugal can be highly tax-efficient for expatriates. While income is taxable at progressive income tax rates up to 48%, there are often fully compliant routes to lower taxes on investment and pension income, given the right financial advice.  

Please refer to and for the latest on how Brexit affects Britons in Europe.

Jason Porter is a Director of specialist expat financial advisers Blevins Franks, which has been rated Best Overall Adviser Firm in the ‘International Adviser’ magazine best practice awards. Jason is the co-author of the book ‘Retiring to Europe’.