If you’ve moved from the UK to Portugal and still hold investment trusts in your portfolio — or you’re wondering whether you should — this guide is for you. Investment trusts are one of the UK’s best-kept investing secrets, but their tax treatment, platform access and reporting requirements change the moment you become Portuguese tax resident. Here’s how to think about them in 2026.

What is an investment trust, in plain English?

An investment trust is a closed-ended fund listed on the London Stock Exchange. Instead of issuing and redeeming units like a unit trust or OEIC, it has a fixed number of shares that trade like any other equity. You buy and sell them through a stockbroker. Famous examples include Scottish Mortgage, City of London and F&C Investment Trust — the latter being the oldest collective investment in the world, dating back to 1868.

Because they’re closed-ended, the share price can trade at a premium or discount to the underlying net asset value (NAV). That’s both their charm and their risk.

Why UK investors love them

Investment trusts have a few structural advantages that have kept them popular with British retail investors for decades:

• Gearing. They can borrow to invest, which boosts returns in rising markets (and amplifies losses in falling ones).
• Revenue reserves. They can hold back income in good years to smooth dividends in bad years. Some trusts have increased their dividend every year for over 50 years.
• Lower ongoing charges than many actively managed open-ended funds.
• Specialist exposure to illiquid assets — infrastructure, private equity, renewables — that wouldn’t work in a daily-dealing fund structure.

What changes when you move to Portugal

Here’s where it gets interesting — and where many expats trip up.

1. Your UK platform may close your account

This is the biggest practical issue. Most UK retail platforms — Hargreaves Lansdown, AJ Bell, Interactive Investor — will not service clients who have moved their tax residency outside the UK. Some give you a 30-day notice; some let existing positions stay but block new buys. If you’re still holding investment trusts on a UK platform after moving to Portugal, check your terms carefully. We’ve covered this issue in detail in our guide to UK investment platforms closing expat accounts.

2. Portuguese tax treatment is different from UK treatment

In the UK, dividends and capital gains from investment trusts are taxed under standard UK rules, with the benefit of ISAs and SIPPs if held inside them. In Portugal, none of those wrappers exist. Once you’re Portuguese tax resident:

• Dividends from UK investment trusts are taxable in Portugal at a flat 28% (with credit for any UK tax withheld under the double tax treaty — usually nil for trust dividends).
• Capital gains on disposal are taxable in Portugal at 28% (or you can elect to aggregate them with other income under progressive rates, which is rarely beneficial).
• No tax-free wrapper. ISAs lose their tax shelter for Portuguese residents — Portugal does not recognise them.

3. The “blacklist” question

Portugal applies a punitive 35% withholding tax to income from jurisdictions on its tax haven blacklist. The UK is not on the blacklist, and UK-domiciled investment trusts (which are almost all of them) sit comfortably outside this regime. So that’s one worry you can park.

Investment trusts vs ETFs for Portugal-resident investors

Many expats ask whether they should switch their UK investment trusts into Irish-domiciled ETFs once they move. There’s no one-size-fits-all answer, but here’s the trade-off:

• Investment trusts: active management, gearing potential, dividend smoothing, deeper exposure to alternative assets. But the share price can disconnect from NAV, and you may have limited platform access from Portugal.
• Irish-domiciled ETFs: lower costs, predictable NAV pricing, no discount/premium risk, widely available on European platforms (Interactive Brokers, Saxo, DEGIRO). Better suited to passive, long-term holders.

For most expats building a portfolio from scratch in Portugal, Irish ETFs are usually the more practical choice. For those with established holdings in well-regarded trusts — particularly those bought long ago at low cost — selling can trigger a substantial Portuguese capital gains tax bill that may outweigh the cost savings of switching.

The discount question

One of the quirks worth understanding: investment trusts often trade at a discount to NAV. In 2024 and 2025, many high-quality infrastructure and renewables trusts were trading at discounts of 20% or more, partly because of rising interest rates. That can be either a value opportunity or a value trap. For Portugal-resident investors, the calculus is the same as it would be in the UK — but with the added wrinkle that any eventual narrowing of the discount produces a capital gain that’s now taxed at 28% in Portugal rather than potentially shielded inside an ISA.

Reporting obligations

If you hold investment trust shares as a Portuguese tax resident, you’ll need to:

1. Declare any dividends received in your annual Portuguese IRS return (Anexo J for foreign-source income).
2. Declare any capital gains realised on disposal in the same return.
3. Possibly report the account on Modelo 38 / IES if held through a foreign broker — though most retail expats fall under the de minimis threshold.

You’ll also need to keep clean records of your acquisition cost in EUR terms, because Portugal calculates gains in euros, not pounds. A pound that was strong when you bought and weak when you sold may produce a tax bill on a gain that doesn’t really exist in sterling terms — or vice versa.

Practical next steps

If you’ve moved to Portugal and you’re holding UK investment trusts, the questions to work through are:

1. Is your platform still happy to hold the position now you’re non-UK resident?
2. What’s the embedded gain in EUR terms, and what would the Portuguese tax bill be if you sold today?
3. Are these trusts doing a job in your portfolio that can’t be done more efficiently by an Irish ETF or another structure?
4. Is there a sequencing strategy — selling some positions each tax year — that keeps the gain inside an annual allowance or simply manages the bill?

The bottom line

Investment trusts can still play a useful role in an expat portfolio, particularly for income-focused investors who value dividend smoothing and access to alternative assets. But the move to Portugal removes the tax-wrapper protections that made them so attractive in the UK, and platform access is a real practical hurdle. For most expats, the right answer is to review existing holdings carefully — and not to add new investment trust positions without a clear reason that outweighs the simpler, cheaper, more Portugal-friendly ETF alternative.

At Arthur Browns we help UK expats in Portugal review their existing UK investments and decide what to keep, what to switch, and how to do it tax-efficiently. If you’d like a second pair of eyes on your portfolio, get in touch.

This article is for general information only and does not constitute personal financial or tax advice. Tax treatment depends on individual circumstances and may change. Always seek regulated advice before acting.

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