UK Tax Changes in 2026: What Expats Moving to Portugal Must Know

The political winds in the UK are shifting in 2026, and for those eyeing a move to Portugal, that means one thing: tax changes are on the horizon. While the full details of the new UK leadership's fiscal policy are still emerging, early signals point to potential hikes in capital gains tax, adjustments to non-dom status, and stricter rules on overseas income. For expats, this creates both challenges and opportunities. Portugal’s tax regime—especially its Non-Habitual Resident (NHR) program—remains a powerful tool to legally reduce your tax burden, but only if you plan carefully. This guide breaks down what you need to know about the new UK tax landscape and how to position yourself for a smooth financial transition to Portugal in 2026.

Understanding the New UK Tax Direction

The UK's new leadership has signaled a shift towards higher taxes on wealth and investment income. Proposals being discussed include aligning capital gains tax rates with income tax rates (potentially up to 45% for high earners), closing inheritance tax loopholes, and revising the rules for non-domiciled residents. For expats, the most immediate concern is how these changes affect your UK-source income after you move. If you hold UK property, stocks, or pensions, you could face higher taxes on gains and dividends, even while living in Portugal.

Actionable tip: Before you move, review your UK investment portfolio. If you're sitting on unrealized gains, consider whether to sell before or after establishing Portuguese tax residency. The timing can make a huge difference. Also, keep an eye on the UK's autumn budget—any changes to the 'remittance basis' could affect how you bring money into Portugal.

Portugal’s Tax Regimes in 2026: NHR and Beyond

Portugal’s NHR program, which offers a 20% flat income tax rate for eligible professions and potential tax exemptions on foreign pensions, is still a major draw. However, the rules have tightened. As of 2026, new applicants must not have been tax residents in Portugal in the previous five years, and the program now applies to a narrower list of high-value activities like tech, research, and certain medical professions. For others, the standard Portuguese tax rates (up to 48%) apply, but there are still ways to optimize.

If you don't qualify for NHR, consider Portugal's 'Incentivado' regime for former residents, or look into the 'Programa Regressar' if you're a returning Portuguese citizen or their descendant. For most expats, the key is to plan your move so that your tax residency starts at the optimal time (e.g., after selling UK assets in a lower-tax year).

Double Taxation: The UK-Portugal Tax Treaty

The UK-Portugal double taxation treaty is your safety net. It ensures you don't pay tax twice on the same income. Under the treaty, UK pension income is typically taxed only in Portugal (if you're a Portuguese resident), but UK employment income for work done in Portugal is taxed there too. Dividends from UK companies may be taxed in both countries, but you can claim a foreign tax credit in Portugal for UK tax paid.

Actionable tip: After moving, you must file a tax return in Portugal (Modelo 3) and report all worldwide income. Keep detailed records of UK taxes paid—you'll need them to claim credits. Also, consider hiring a cross-border tax advisor who understands both systems; this is not the time for DIY.

Pensions and Retirement Planning

UK pensions are a major income source for many expats. The new UK leadership has hinted at reforms to pension tax relief, but the current 25% tax-free lump sum remains intact for now. In Portugal, under NHR, most foreign pensions can be taxed at a flat 10% (if they qualify as 'pension income' under the treaty). Outside NHR, you'll be taxed at progressive rates. A key move: decide whether to transfer your UK pension to a Qualifying Recognised Overseas Pension Scheme (QROPS) before moving. This can offer tax advantages, but it's complex and not always beneficial.

Actionable tip: If you're over 55 and considering a pension transfer, get advice from a UK-regulated advisor with Portuguese expertise. The UK's 25% tax-free cash is a one-time opportunity—get it right.

Capital Gains and Property Sales

Selling UK property before or after your move has different implications. If you sell while a UK resident, you'll pay UK capital gains tax (currently up to 24% for property, but set to rise). If you sell after becoming Portuguese tax resident, you'll pay Portuguese capital gains tax (28% on the gain, but you may be exempt if you've lived in the property for 24+ months and reinvest in another home). The treaty prevents double taxation, but the rates differ.

Actionable tip: If you plan to sell a UK property, consider doing it before you leave the UK if you expect UK CGT rates to rise. Alternatively, if you're moving to Portugal permanently, you might benefit from the Portuguese 'main residence exemption'—but you must meet strict conditions.

Wealth Taxes and Reporting Obligations

Portugal has no wealth tax, but it does have an additional tax on high-value properties (AIMI) for real estate worth over €600,000. The UK's new leadership has discussed introducing a wealth tax for non-doms, but as of 2026, it's not law. However, both countries require extensive reporting: in Portugal, you must declare all assets over €50,000 on your tax return (Modelo 3, Annex G). In the UK, you'll need to report any UK income to HMRC via a self-assessment, even if you're a non-resident.

Actionable tip: Keep a clear inventory of your assets and their values. Use both countries' reporting deadlines—Portugal's is typically June, UK's is January—to avoid late-filing penalties.

Frequently Asked Questions

Will the new UK leadership affect my UK pension if I move to Portugal?

Potentially yes. The new leadership may change pension tax relief or the rules for overseas pensions. However, under the current UK-Portugal treaty, your UK pension income is taxed only in Portugal once you're a resident there. With NHR, that could be as low as 10%.

Do I need to pay UK taxes after moving to Portugal?

You may still need to file a UK tax return if you have UK-source income (e.g., rental income, dividends, or UK property gains). The double taxation treaty ensures you don't pay twice, but you must claim credits. In most cases, you'll owe tax in Portugal on your worldwide income, but you can offset UK taxes paid.

Is the NHR program still worth it in 2026?

Yes, for those who qualify. It offers a 20% flat rate on eligible Portuguese-source income and potential exemptions on foreign income like pensions. But the rules have tightened, so check your eligibility early. If you don't qualify, other regimes like the 'Incentivado' for returning residents may help.

How can I avoid double taxation on my UK rental income?

If you rent out a UK property, you'll pay UK income tax on the rental profits. In Portugal, you'll also report that income on your Modelo 3, but you can claim a foreign tax credit for the UK tax paid. The treaty ensures the total tax isn't more than the higher of the two rates.