UK vs Portugal tax in 2026: what changes for British residents of Portugal

Two residence tests, one tie-breaker

Portugal makes you tax resident after more than 183 days in any twelve-month window, or as soon as you keep a home here that looks like your habitual residence (IRS Code, art. 16.º). The year is split: you are taxed as a resident from the day you arrive.

The UK uses the Statutory Residence Test: automatic overseas tests (fewer than 16 days in the UK, or full-time work abroad with fewer than 91 UK days), automatic UK tests (183 days, or your only home in the UK), then the “sufficient ties” count — family, accommodation, work, 90 days in earlier years, country tie. The UK tax year runs 6 April to 5 April and can also be split in the year you leave.

If both countries claim you, article 4 of the new convention decides in this order: permanent home → centre of vital interests → habitual abode → nationality → mutual agreement. A British retiree who sells or lets the UK house and lives in Portugal is Portuguese-resident under every limb; someone who keeps a home in both and family in the UK needs the file built before the move.

• 1 January 2026 the 2025 convention applies in Portugal (6 April 2026 for UK income tax)
• Pensions: residence state only (art. 17) — a Portuguese resident's UK private and state pensions are taxed in Portugal, not in the UK
• 10 % / 10 % / 5 % treaty ceilings on dividends, interest and royalties (15 % for property funds, 0 % for 10 % corporate holdings)
• Government pensions stay British (art. 18) unless the pensioner is a Portuguese national only

Income tax, side by side

Portugal’s brackets start lower and climb faster: a single person on 40 000 € of pension income pays more IRS than the equivalent UK tax, while a couple filing jointly on the same income pays less. The one honest answer is “run the numbers with the split and the deductions” — that is a twenty-minute job we do before you decide on a date.

What the 2025 convention changes

The 1968 convention applied until 28 December 2025. The new text, signed in London on 15 September 2025, follows the OECD model with these practical consequences for individuals:

• Pensions (art. 17) — taxable only in the state of residence. HMRC stops taxing UK company, personal and state pensions of a Portuguese resident once a claim on form DT-Individual is stamped by Finanças; Portugal taxes them at the progressive rates after the 4 587 € deduction. Detailed on the UK pension page.
• Government service pensions (art. 18) — civil service, armed forces, police, local authority and similar pensions paid by the British state remain taxable only in the UK. Exception: a pensioner who is a Portuguese national and not a British national may be taxed in both, with credit.
• Dividends (art. 10) — 10 % at source (15 % for distributions by property investment vehicles, 0 % for a company holding 10 % for a year). The 1968 treaty allowed 15 %.
• Interest (art. 11) — 10 % (5 % to banks, 0 % to governments). Royalties (art. 12) — 5 %.
• Capital gains (art. 13) — property and property-rich companies taxed where the property is; everything else only in the residence state. See the capital gains page.
• Employment (art. 14) — the 183-day rule applies over any twelve-month period, not the tax year.
• Relief (art. 21) — credit method in both countries; Portugal credits UK tax on income the treaty lets the UK tax, within the limits of art. 81.º of the IRS Code.
• Mutual agreement with mandatory binding arbitration after three years, and a principal-purpose test against treaty shopping.

What the UK keeps taxing after you leave

Leaving the UK does not end UK tax on UK-source income. Non-residents still pay on UK rental income (through Self Assessment and the non-resident landlord scheme), on UK employment exercised in the UK, and on gains on UK land and property (reported within 60 days). They usually pay nothing on the State Pension, on gilts, and — under the new convention — on private pensions once the treaty claim is in place. Interest on UK savings is generally disregarded income for non-residents.

Inheritance tax is the trap British expats forget. Since 6 April 2025 the UK charges IHT on worldwide assets of a “long-term UK resident” — resident in 10 of the last 20 tax years — and keeps that status for three to ten years after you leave, depending on how long you lived there. UK-situated assets (the house, ISAs, UK shares) stay within IHT for ever. Portugal has no inheritance tax between spouses, children and parents (stamp duty 10 % for other heirs).

Property, both ways

The full Portuguese side, with the 2026 brackets and worked examples, is on the property tax guide for UK expats.

Social security and health

The EU–UK Trade and Cooperation Agreement coordinates social security since 2021: a worker sent temporarily by a UK employer keeps paying National Insurance under a certificate; a person employed in Portugal pays Portuguese contributions (11 % employee, 23,75 % employer). UK state pensioners living in Portugal register with the SNS through the S1 form issued by the NHS Business Services Authority, which also exempts them from the consular travel-insurance requirement at visa stage. Pension uprating continues for UK pensioners in Portugal.

Special regimes

NHR is closed. The IFICI regime (20 % for ten years) applies to listed activities — research, university teaching, certified start-ups, some qualified jobs in exporting companies — not to retirees; see NHR and IFICI. The UK’s remittance basis for non-doms ended on 6 April 2025, replaced by a four-year foreign-income exemption for new arrivals in the UK — relevant only if you go back.

Before you move: the order of operations

Questions from British clients