Why Wealthy Brits are Flocking to Portugal: The Hidden Tax Escape Plan

Surge in Property Prices

Property prices in Portugal have skyrocketed by over 10% in 2024 as affluent Britons seek permanent residences to escape the impending tax hikes announced by the Labour government. This increase is largely attributed to a £70 billion boost in public spending financed by higher taxes.

Non-Dom Tax Loopholes

Currently, UK residents with primary homes outside the country, known as “non-doms,” enjoy tax exemptions on foreign income. However, Chancellor Rachel Reeves has vowed to eliminate this loophole by April 2025, prompting a rush to secure properties abroad.

Market Dynamics

Rebecca Thomson, co-founder of Liberty Real Estate in the Algarve, notes a significant imbalance in supply and demand, with Brits comprising about 70% of the buyer market in regions like Quinta do Lago and Vale do Lobo.
She observed a notable increase in inquiries and property viewings from British clients towards the end of the year, driven by pent-up demand and anticipation of Reeves’ budget.

Long-Term Trends

The National Statistics Institute reports that Portugal's house prices have surged by over 60% from 2019 to 2024, with no signs of this trend slowing down. Zosie Hawker, managing partner of Fine and Country, emphasizes that the UK remains the largest market for property sales in Portugal, with buyers attracted by security, lifestyle, and favorable weather.

Tax Changes Driving Relocation

The recent freeze on the personal allowance and increases in income tax for high earners in the UK are also pushing residents to consider relocating. Asas Khan, an international property investor, highlights how these changes could lead Britons to seek lower tax environments in Europe.

Future Implications

With the capital gains tax also expected to rise, there is potential for further migration of wealthy individuals seeking financial advantages in countries like Portugal. A Treasury spokesperson maintains that the UK tax system remains competitive compared to G7 countries, but the allure of lower rates abroad may continue to drive emigration.