Double Taxation Agreement UK Portugal: 2026 Guide

The double taxation agreement between the UK and Portugal decides which country can tax each type of income and gain when you have links to both. A new UK-Portugal Double Taxation Convention was signed on 15 September 2025 and replaced the 1968 treaty. It governs UK income tax and capital gains tax from 6 April 2026, so it is the treaty that applies for 2026/27.

For most people living in Portugal, UK private pensions and the State Pension are taxable only in Portugal. UK government pensions and UK rent stay taxable in the UK.

This guide covers both directions, Portuguese residents with UK income and UK residents with Portuguese income: dates, pensions, property, what changed and how to claim.

If you'd like this checked for your own situation, see our international tax advice service.

What is the double taxation agreement between the UK and Portugal?

What does it cover? It shares out taxing rights between the two countries and requires each to relieve tax the other is allowed to charge. Article 2 covers UK income tax, capital gains tax and corporation tax, and Portuguese personal income tax (IRS), corporate income tax (IRC) and the local corporate surtaxes.

What does it leave out? Inheritance tax, Portugal's 10% stamp duty on gifts and inheritances, National Insurance and Portuguese social security are all outside it. The UK has no inheritance tax treaty with Portugal.

When did the new treaty start? It was signed in London on 15 September 2025 and entered into force on 29 December 2025.

Image 1 — When the new UK-Portugal treaty takes effect

Which treaty applies to which period

So a 2025/26 UK tax return, due by 31 January 2027, is still prepared under the 1968 Convention. Article 28 has no transitional or grandfathering rule for pensioners or anyone else.

👉 GOV.UK: Portugal tax treaties

👉 GOV.UK: 2025 UK-Portugal Double Taxation Convention (in force)

👉 Diário da República: Resolução da Assembleia da República n.º 206-A/2025

Who counts as resident under the treaty?

Does the treaty decide where you are resident? Not at first. Each country applies its own rules. The UK uses the Statutory Residence Test over a tax year running from 6 April to 5 April, and Portugal uses a calendar year.

You are resident in Portugal if you spend more than 183 days there in any 12-month period beginning or ending in the year, or have a home there that you intend to keep as your habitual residence. Residence starts on the first day of your stay, not on 1 January.

Both countries can still claim you in the year you move. Article 4 then applies the tie-breaker tests in order: permanent home, centre of vital interests, habitual abode, nationality. See our guide to dual tax residency.

👉 Portal das Finanças: Código do IRS, artigo 16.º (Residência)

UK Portugal double tax treaty: who taxes what

How do you read the treaty? "Taxable only in" one country means the other can't tax the income. "May be taxed in" means both can, and your country of residence gives relief for the other's tax.

Who taxes what under the 2025 Convention

Image 2 — Who taxes UK income of a Portuguese resident

The dividend cap is 15% for property investment vehicles such as UK real estate investment trusts. The caps matter most for Portuguese dividends and interest, where Portugal's domestic withholding rate is 28%.

👉 HMRC manual: Portugal treaty summary (DT15602)

UK-Portugal tax treaty and pension income

Which country taxes a UK pension if you live in Portugal? Under Article 17, pensions paid to a Portuguese resident are taxable only in Portugal. That covers workplace and personal pensions and the UK State Pension. The 1968 treaty gave the same answer.

Government service pensions are different. Under Article 18, a pension paid by the UK government or a local authority for service to it, such as a civil service or armed forces pension, is taxable only in the UK. The one exception is where you are a Portuguese national and not a British national. Both countries may then tax it.

What about lump sums? The treaty has no separate lump sum rule, and HMRC's guidance is that most treaties then treat a lump sum like the pension. So the treaty doesn't protect the UK's 25% tax-free lump sum once you are Portuguese resident. Portugal applies its own law, so take Portuguese advice before you draw it.

👉 HMRC manual: pension lump sums under tax treaties (INTM163160)

Why the end of NHR matters more than the new treaty

Did the new treaty raise the tax on UK pensions? No. The change came from Portuguese law. The non-habitual resident (NHR) regime, which gave favourable treatment to foreign pensions, was closed to new entrants by Portugal's 2024 State Budget law. People already registered keep it until their ten years run out.

Its replacement, IFICI, is a 20% rate on Portuguese employment and self-employment income from specified research and innovation work. It gives nothing for pensions. For a new arrival, "taxable only in Portugal" now means Portugal's normal progressive rates, from 12.5% to 48% for 2026.

See also our guides to moving to Portugal from the UK and the tax treatment of pension income.

👉 Autoridade Tributária: IFICI leaflet

Property: UK rent, Portuguese rent and gains

Who taxes rent from a UK property if you live in Portugal? The UK does, under Article 6, and Portugal can tax it too with a deduction for the UK tax. You fall within the non-resident landlord scheme.

Gains on UK land and buildings are taxable in the UK under Article 13(1), and you must report the sale to HMRC within 60 days of completion. See non-resident capital gains tax.

The new treaty adds Article 13(2). The UK can now also tax a Portuguese resident's gain on shares that took more than 50% of their value from UK land at any time in the 365 days before sale. UK law only charges non-residents where the company is at least 75% UK land by value and you hold 25% or more.

The position mirrors for a UK resident with a Portuguese property. Portugal taxes the rent and any gain, and the UK taxes them too, with credit for the Portuguese tax.

New UK-Portugal tax treaty: what changed from 1968

Is the new treaty very different? For pensioners, hardly at all. Private and State pensions and the 5% royalty cap are unchanged. The real changes are below.

1968 Convention compared with 2025 Convention

From 2026/27 a Portuguese resident gets the UK personal allowance only under UK law, which gives it to British citizens, nationals of European Economic Area states and a few other groups. Other people living in Portugal no longer get it through the treaty. This follows from the wording of the two treaties and section 56 of the Income Tax Act 2007.

The principal purpose test lets either country refuse a treaty benefit where getting it was one of the main purposes of an arrangement.

👉 GOV.UK: 1968 UK-Portugal Double Taxation Convention (no longer in force)

👉 GOV.UK: Personal Allowance if you live abroad

👉 Legislation: Income Tax Act 2007, section 56

How to claim relief under the double taxation agreement

Is relief automatic? No. Your pension provider keeps deducting UK tax through PAYE until HMRC tells it to stop.

If you live in Portugal, the claim form is DT-Individual. HMRC has no Portugal-specific form. The Portuguese tax authority certifies your residence on the form, or gives you a separate certificate, and the form then goes to HMRC. You can only apply once the pension has started. If HMRC accepts the claim, it normally issues a "no tax" (NT) code and arranges a refund of tax already deducted under PAYE. The State Pension is normally paid without tax deducted anyway.

👉 HMRC form: DT-Individual treaty relief claim

If you file a UK tax return, you claim on the SA109 residence pages with the HS304 claim form and a Portuguese certificate of residence. If you are resident in both countries, you use helpsheet HS302 instead. We prepare these as part of our UK tax returns for expats service.

👉 HMRC helpsheet: HS304 Non-residents, relief under double taxation agreements

If you live in the UK and have Portuguese income, it works the other way round. You ask HMRC for a certificate of residence and give the Portuguese payer form Mod. 21-RFI, so that tax is withheld at the treaty rate. You then claim foreign tax credit relief on your UK return for the Portuguese tax the treaty allows.

Worked examples for 2026/27

Example 1: Margaret, a British citizen living in Lisbon

• Margaret moved in 2025, so she has no NHR status. In 2026/27 she has a UK private pension of £24,000, a State Pension of £12,000 and UK rental profit of £20,000.

• Pensions: £36,000 is taxable only in Portugal under Article 17.

• Rent: taxable in the UK under Article 6. As a British citizen she has the £12,570 personal allowance, so UK tax is (£20,000 − £12,570) × 20% = £1,486.

• Portugal taxes all £56,000 at its own rates and deducts the £1,486, up to the Portuguese tax due on the rent.

Example 2: Priya, an Indian citizen living in Porto

• Priya's only UK income is rental profit of £10,000 a year. For 2025/26 the 1968 Convention gave her the UK personal allowance, so she had no UK tax to pay.

• For 2026/27 that article has gone, and as an Indian citizen she doesn't qualify under UK law. UK tax is £10,000 × 20% = £2,000, and Portugal gives relief for it against its own tax on the rent.

Common mistakes with the UK-Portugal treaty

• Reading "taxable only in Portugal" as tax free. The treaty only says which country taxes. Without NHR, Portugal taxes a UK pension at its normal rates.

• Using the new treaty for a 2025/26 UK return. UK income tax and capital gains tax for 2025/26 still fall under the 1968 Convention.

• Treating a government pension like a private one. A civil service, armed forces or local authority pension normally stays taxable in the UK.

• Assuming a later return to the UK changes nothing. If you come back within five years, the temporary non-resident rules can tax some pension withdrawals and gains in the year you return, even if the treaty exempted them when paid.

• Expecting the treaty to cover inheritance. It deals with income and gains only.

Frequently asked questions

Is there a double taxation agreement between the UK and Portugal?

Yes. A new UK-Portugal Double Taxation Convention was signed on 15 September 2025 and entered into force on 29 December 2025, replacing the 1968 treaty.

When does the new UK-Portugal tax treaty take effect?

In the UK it applies from 1 January 2026 for tax withheld at source and from 6 April 2026 for income tax and capital gains tax. In Portugal it applies from 1 January 2026. UK income tax for 2025/26 and earlier years is still governed by the 1968 treaty.

Is my UK pension taxed in Portugal or the UK?

If you are resident in Portugal, a UK private or workplace pension and the State Pension are taxable only in Portugal. A UK government service pension is normally taxable only in the UK. You need to claim the relief from HMRC, or UK tax will keep being deducted.

Which HMRC form do I use to claim under the UK-Portugal treaty?

HMRC has no Portugal-specific form, so you use the standard form DT-Individual. The Portuguese tax authority certifies that you are resident there before the form goes to HMRC. If you file a UK tax return, you claim on the SA109 pages instead.

Do I pay UK tax on UK rental income if I live in Portugal?

Yes. The treaty lets the UK tax rent from UK property, and Portugal can tax it too with a deduction for the UK tax. You only get the UK personal allowance if UK law gives you one, for example as a British citizen.