Portugal Tax for Expats in 2026: An Honest Update After the NHR

May 2026

By Will Glyn

A quick caveat before we begin. Proctor Wealth Associates is not a tax adviser. This piece is educational — to give you a current picture of how Portugal taxes expats in 2026, what changed when the Non-Habitual Resident regime closed, and where older guides still in circulation get it wrong. Anyone making real decisions about residency, structuring or relocation should be working with a qualified Portuguese tax professional. We're happy to make an introduction if you don't already have one.

Portugal remains one of the most popular destinations in Europe for expats — the climate, the coastline, the cost of living, the language flexibility, the safety. But the tax landscape that drove a decade of expat migration to Portugal has changed in two large steps. The first was the closure of the Non-Habitual Resident regime to new applicants from 1st January 2024. The second was the UK's move from domicile-based inheritance tax to a residence-based system from 6th April 2025. Several guides written before either change are still doing the rounds in 2026, and they are misleading new arrivals in important ways.

Here's how it actually sits now.

Tax residency: 183 days, and a common misconception

Portugal's primary test is the same as most countries: spend more than 183 days in Portugal in any 12-month period and you're a Portuguese tax resident.

There is a secondary test that catches a lot of people. Under Article 16 of the Portuguese Personal Income Tax Code (CIRS), if at any point during the year you have a home in Portugal in conditions that suggest you intend to use it as your habitual residence, you can be treated as resident even with fewer days on the ground. Long-term lease contracts, utility bills in your name, furniture and personal effects kept in place — all of these can constitute evidence.

The point worth correcting upfront, because it appears in several published guides: it is not true that you can only be a tax resident of one country at a time. You can absolutely meet the domestic residency tests of two countries in the same year. When that happens, the tie-breaker rules in the relevant double tax treaty — permanent home, centre of vital interests, habitual abode, nationality — determine which country has primary taxing rights. Brexit did not change any of this; UK–Portugal tax treaty matters are governed by the bilateral treaty, which has nothing to do with EU membership.

The end of the NHR — and what's actually available now

The Non-Habitual Resident regime, launched in 2009, offered new arrivals up to ten years of generous tax treatment: a flat 10% rate on most foreign pensions, broad exemptions on most other foreign-source income, and a 20% rate on Portuguese-source income from "high-value-added" professions.

The 2024 State Budget closed NHR to new applicants from 1st January 2024. A transitional regime allowed late applications for individuals who could prove a clear, documented commitment to relocate before key cut-off dates in 2023 — a signed employment contract, a property or rental agreement, children enrolled in Portuguese schooling, or a residence visa application already underway. The window for those transitional applications ran until 31st March 2025 and is now closed.

Crucially, existing NHR holders retain their benefits for the rest of their ten-year period. If you already have NHR status, the rules under which you registered continue to apply — including the 10% pension rate where relevant — until your decade runs out. That's true even though the regime is closed to new entrants.

What replaced it is more focused. The Tax Incentive for Scientific Research and Innovation (IFICI) — sometimes marketed as "NHR 2.0", which is misleading shorthand — offers a 20% flat rate on Portuguese-source employment and self-employment income for ten years, but only to people working in defined high-value activities: scientific research, qualifying technology and innovation roles, certain higher-education positions, work in companies with recognised innovation or export status, or specific roles certified by IAPMEI or AICEP. There is no foreign-pension benefit under IFICI, and there is no equivalent of the old NHR's broad foreign-income exemption.

Practical translation: a retired expat moving to Portugal in 2026 will not have access to a 10% pension rate. They will be taxed under standard Portuguese rules. That changes the maths of relocation meaningfully and is worth modelling carefully before committing.

Income tax: the rates you'll actually pay on

Portugal taxes residents on worldwide income at progressive rates across nine bands. The 2025 budget cut several mid-band rates, and the 2026 budget raised all band thresholds by 3.51% to keep up with inflation, plus reduced certain mid-band rates by a further 0.3 percentage points.

The headline range in 2026 sits at roughly around 13% at the bottom up to 48% at the top, with the top rate kicking in above approximately €81,000 of taxable income. There is also an additional solidarity surcharge of 2.5% on income between €80,000 and €250,000, rising to 5% above €250,000. The minimum subsistence floor — the level of income below which no IRS is payable — was raised in the 2026 budget to €12,880.

Anyone with income near a band boundary should confirm the exact figures with a Portuguese tax adviser before acting; specific band thresholds shift each budget and different sources can lag behind.

Pension income — without the NHR

For new arrivals in 2026, foreign pension income is taxed at the standard progressive rates. There is no longer a 10% flat rate available. UK State Pension, private pension drawdown, and most occupational pensions paid to a Portuguese tax resident are taxable in Portugal under the UK–Portugal double tax treaty. The UK side will exempt them from UK tax once the right paperwork (the DT-Individual / NT code procedure) is processed.

The big exception is UK government service pensions — armed forces, civil service, NHS, teachers, police and similar. These are taxed in the UK at source, not in Portugal, under the government service article of the treaty. They cannot be paid gross in Portugal.

A specific note on UK pension lump sums

This catches a lot of British expats out. Under UK domestic rules, the first 25% of a defined contribution pension can be taken as a tax-free lump sum, capped by the Lump Sum Allowance (LSA) of £268,275. Portugal does not recognise that UK treatment. Once you become a Portuguese tax resident, a lump sum drawn from a UK pension is taxable in Portugal as pension income, at standard progressive rates.

The practical implication: if you're planning to draw a tax-free lump sum, time the withdrawal so it falls in a UK tax year in which you are still UK resident, before you become a Portuguese tax resident. Once you've moved, the window is closed. This is one of the single most common, and most expensive, sequencing mistakes in UK-to-Portugal retirement planning.

Investment income for Portuguese residents

For Portuguese tax residents (without NHR), the broad rules are:

• Interest, dividends, and most capital gains — taxed at a flat 28% by default, with the option to "include" them in the progressive return if it produces a lower bill.
• Income from Portugal-blacklisted jurisdictions — taxed at 35%. Portugal publishes a list of blacklisted jurisdictions, which is updated periodically. Whether a particular Channel Island, Caribbean, or Gulf jurisdiction sits on the list at the moment of a transaction is worth checking with a Portuguese tax adviser at the time, rather than relying on a static list in a published guide.
• UK ISAs and Premium Bonds — Portugal does not recognise either as tax-exempt. ISA dividends and interest are taxable in Portugal as if held in a normal account, and Premium Bond winnings are typically treated as taxable income too. You can keep an ISA after moving to Portugal but you can no longer contribute (HMRC requires UK residence).
• Investment bonds and structured wrappers — there are Portuguese-compliant insurance-based investment products that defer tax until withdrawal and apply a reducing effective rate over time. These are a core part of how a financial planner structures portfolios for clients moving to Portugal.

Property — buying, holding, and the rule that just changed for non-resident sellers

Portuguese property comes with three taxes worth knowing about:

• IMT (Imposto Municipal sobre Transmissões Onerosas de Imóveis) — purchase tax, paid by the buyer, on a sliding scale that depends on price, intended use (primary residence vs second home), and location.
• IMI (Imposto Municipal Sobre Imóveis) — annual property tax, set within a statutory range by each municipality and applied to the property's Valor Patrimonial Tributário (VPT), the tax-rated value, which is typically well below market value.
• AIMI (Adicional ao IMI) — sometimes called the "Portuguese wealth tax", though it is specifically a property surtax. Applies only above a generous individual exemption.

On AIMI: the individual exemption is €600,000 of VPT (so €1.2m for a married or civil-partnered couple filing jointly). Above that, the rates are 0.7% on the band €600,000–€1m, 1% on €1m–€2m, and 1.5% on the amount above €2m. Properties held by companies are charged at a flat 0.4% with no exemption — which is why some published guides quote "0.4% to 1.5%" as the AIMI range, but for individuals the floor is 0.7%.

The change worth flagging on selling property: until 1st January 2023, non-residents who sold Portuguese property were taxed on the full gain at a flat 28%. After EU infringement pressure (because residents were taxed on only 50% of the gain at progressive rates, which was a more favourable footing), Portugal changed the rules. From 1st January 2023, non-residents are taxed on 50% of the gain at the same progressive rates as residents, taking worldwide income into account when determining the applicable band. The flat 28% rate for non-resident property sellers no longer exists. Older guides that still describe it are out of date.

For Portuguese tax residents selling a primary residence, there is a long-standing rollover relief — the gain is exempt if proceeds are reinvested into another primary residence in Portugal, the EU or the EEA within a defined window. The rules are detailed and the timing matters; this is a relief worth taking advice on rather than relying on.

Renting it out

If you keep a UK property as a rental after moving to Portugal, the rent stays within the UK tax net (UK-source property income is always taxable in the UK), and you also declare it in Portugal. The UK–Portugal treaty allows UK tax paid to be credited against the Portuguese liability, so you don't pay twice — but you do pay the higher of the two effective rates.

If you let a property in Portugal — including a holiday home as short-term rental — you have to register the activity (the Alojamento Local / AL regime). Standard long-term rental income is taxed at a flat 28%, with the option to include it in the progressive return. AL-registered holiday rental income has its own rules under the simplified or organised-accounts regime, and the effective rate depends on which path you elect, the location of the property, and the most recent budget tweaks. The rules around new AL registrations were tightened by the 2023 Mais Habitação law and partly loosened again by the new government in 2024 — this is an area worth fresh local advice on, not a checklist from a 2024 guide.

Inheritance: stamp duty, forced heirship, and the UK-side change you must know about

Portugal abolished traditional inheritance tax in 2004. What remains is Imposto do Selo (Stamp Duty), which applies to gifts and inheritances only of Portuguese-situated assets, and only at a headline rate of 10% — payable by the beneficiary. There are wide exemptions:

• Spouses, registered partners, children, grandchildren, parents and grandparents are fully exempt.
• For property passing to a non-exempt beneficiary, an additional 0.8% applies, taking the effective rate on real estate to 10.8%.
• Cohabiting couples (same-sex or opposite-sex) who have lived together for at least two years can be treated as married for these purposes, but the Autoridade Tributária needs to be notified.

For most retirees with direct-line heirs, this is therefore a very benign inheritance regime by European standards.

The UK side, however, has changed dramatically and that is where the planning work now sits. From 6th April 2025, the UK abolished domicile-based inheritance tax and replaced it with a Long-Term Residence (LTR) test:

• If you have been UK tax resident for 10 or more of the previous 20 UK tax years, your worldwide estate is within UK IHT.
• When you leave the UK, an "IHT tail" applies. The tail is a minimum of 3 tax years if you were UK resident for 10–13 of the last 20 years, rising by one year for each additional year of UK residence, up to a maximum of 10 years.
• After the tail expires, only your UK-situated assets remain in the UK IHT net.

For long-standing British expats already settled in Portugal for a decade or more, the IHT tail may already have run, and only UK assets matter. For more recent leavers, worldwide IHT exposure can persist for a decade. There is also a separate change coming on 6th April 2027, when unused UK pension pots will be brought into the IHT calculation for the first time. SIPP holders living in Portugal should plan for that change now.

There is no death-tax treaty between the UK and Portugal. Each country grants unilateral relief where it can — but that does not always eliminate double taxation, particularly where the same asset is taxed under different "events" (one country on the gift, another on the death).

Forced heirship — and the Brussels IV escape valve

Portugal, like most civil-law jurisdictions, has forced heirship rules. A reserved portion of the estate, the legítima, must go to defined heirs — the spouse, descendants, and (in the absence of descendants) ascendants. Depending on family composition, the reserved portion is between one-half and two-thirds of the estate, with the precise split varying by who survives the deceased. Anyone planning around this should get the current breakdown confirmed by a Portuguese lawyer; it is a question of statute (Articles 2156–2161 of the Portuguese Civil Code) but the practical interaction with cross-border wills is more subtle than a simple percentage table suggests.

Without further action, a UK national who dies habitually resident in Portugal would have these rules applied to their entire worldwide estate, regardless of what their UK will says.

The escape valve is Article 22 of the EU Succession Regulation (Brussels IV). Portugal applies the Regulation. The UK never opted in, but UK nationals can rely on the Regulation from the Portuguese side: you can elect, in your will, that the law of your nationality governs the succession of your estate. For an English or Welsh national, that means English law and full testamentary freedom; for a Scottish national, Scottish law and its own forced-share rules.

The election must be clearly and expressly stated in the will. It is not implied by being British. This is the single most common drafting error in cross-border wills for British expats in Portugal — a UK will alone, or a Portuguese will without the choice-of-law clause, will leave the legítima in force. Get this right at drafting and forced heirship is a non-issue.

A practical structural note: keeping a UK will and a Portuguese will (one for assets in each country) is sensible and common, but they must be drafted together so the second does not inadvertently revoke the first. This is a job for solicitors in both jurisdictions, working in tandem.

Where we sit alongside your tax adviser

Proctor Wealth Associates is not a tax adviser. For Portugal-specific filing, structuring and compliance, our clients work with qualified Portuguese tax professionals — and where helpful, we'll make an introduction to one we trust. Where PWA adds value is the financial planning layer: pension structuring, currency management, investment portfolios, life insurance, trust planning, and the cross-border coordination that keeps everything working as one plan rather than a stack of disconnected pieces.

If you're moving to Portugal, already there, or weighing it against another destination, and you'd like an introduction to a Portuguese tax professional or a conversation about how the financial planning layer fits, we are happy to help.

This article is for general informational purposes only and does not constitute tax, legal or financial advice. Tax law changes frequently and individual circumstances vary widely. All figures and rules referenced are believed to be correct as at May 2026, but you should always seek bespoke advice from a qualified professional in the relevant jurisdiction before acting.

Will is an Independent Financial Adviser with over a decade of experience helping expats make the most of their international status.