UK pension tax in Portugal for expats changed in 2026, because a new UK and Portugal double taxation convention replaced the previous convention, signed in 1968. For British retirees who are tax resident in Portugal for treaty purposes, most UK private and workplace pensions, including personal pensions such as SIPPs, are now generally taxable only in Portugal, while pensions paid for UK government service generally stay taxable only in the UK. With the Non-Habitual Resident (NHR) regime closed to new applicants, new arrivals are generally taxed on pension income at Portugal's progressive income tax (IRS) rates, which rise to 48% plus a solidarity surcharge on the highest incomes, and the UK 25% tax-free lump sum does not carry its UK tax-free status into Portugal. This guide explains how the new treaty allocates taxing rights, how Portugal taxes regular pension income, how lump sums have been treated, how the UK State Pension and government pensions fit in, how to stop UK tax being deducted, and what existing NHR holders should check. It is general information, not personal tax advice. Portuguese figures are for the 2026 tax year (Portugal's tax year is the calendar year) and UK figures for the 2026 to 2027 tax year, the information was reviewed on 29 October 2026, and rates, allowances and treaty practice should be rechecked before you rely on them.
The UK and Portugal signed a new double taxation convention in London on 15 September 2025. It entered into force on 29 December 2025 and, according to GOV.UK, has effect in Portugal from 1 January 2026, and in the UK from 1 January 2026 for taxes withheld at source, from 1 April 2026 for corporation tax and from 6 April 2026 for income tax and capital gains tax. The previous convention, signed in 1968, stops having effect for each tax as the new one takes effect, so it remained relevant to the UK 2025 to 2026 tax year. Under Article 17 of the new convention, pensions and other similar remuneration paid to a resident of one country are taxable only in that country, subject to the government service rules in Article 18(1). Unlike the old pensions article, which referred to pensions paid in consideration of past employment, the new wording is not limited to employment pensions, so personal pensions are more clearly covered, although this is an interpretation of the wording rather than an express statement, and the classification of a particular payment remains a tax question. For a British retiree who is Portuguese tax resident, the practical result is that most UK private, workplace and personal pensions are generally taxable only in Portugal, provided you are treaty resident in Portugal and the income is within Article 17. Whether a particular payment is a pension for treaty purposes, and how each country classifies it under its own law, still needs checking. Our guide to tax in Portugal for expats explains how Portuguese tax residence is decided.
Portuguese tax residents are taxed on worldwide income, and regular pension payments, including drawdown income and annuities from UK schemes, are generally category H (pensões) income under article 11 of the IRS Code. Under article 53, a specific deduction is allowed against pension income, set by reference to the social support index (IAS); for 2026 it is 4,587.09 euros per person, and it can be higher where mandatory social protection contributions exceed that amount. The balance is added to your other taxable income and taxed at the progressive general rates in article 68. For 2026 on the mainland there are nine bands, from 12.5% on the first 8,342 euros of taxable income up to 48% above 86,634 euros, and an additional solidarity rate of 2.5% applies to the part of taxable income above 80,000 euros up to 250,000 euros, and 5% to the part above 250,000 euros. These are the 2026 rates in force at the time of review, but Lei 64-B/2026 of 22 October 2026 authorises the government to cut the rates of the first six bands for 2026 income, retroactively to 1 January 2026, and the government has proposed a first band rate of 12.2%; the bands from 43.1% upwards and the band limits are not affected, so check the final table once the implementing decree is published. Madeira and the Azores have their own reduced rates. A married couple or civil partners can choose joint taxation, which can reduce or increase the total bill depending on how income is split between them, so both options are worth comparing. Foreign pension income is declared on the annual return (Modelo 3, with Annex J for foreign income), normally filed between 1 April and 30 June of the following year (confirm each year's dates on the Portal das Finanças), so 2026 income is reported in 2027. UK pension payers do not operate Portuguese withholding, so there may be a sizeable bill when the return is assessed, and planning cash flow for it matters. UK tax may also be deducted until an NT code is in place, as explained below.
In the UK, up to 25% of a defined contribution pension can usually be taken tax-free, subject to the lump sum allowance of £268,275 for most people in 2026 to 2027, as explained in our guide to the tax-free lump sum when you live abroad. That tax-free status is a UK rule. Portugal applies its own law, and the new treaty gives Portugal the taxing right over pensions and other similar remuneration paid to its residents, so a lump sum can be taxable in Portugal even when no UK tax is due. How Portugal classifies a lump sum depends on the type of scheme and payment. In binding rulings on particular cases, published on the Portal das Finanças (for example processes 3874/2018 and 29573), the Portuguese tax authority has treated a full single withdrawal from a UK occupational scheme as capital income (category E) under article 5(3) of the IRS Code, rather than as pension income, with the taxable amount broadly based on the investment return and the treatment of the contributions depending on whether they were taxed on the way in. Category E income received by residents is generally taxed at the special rate of 28% under article 72 of the IRS Code, unless you opt to aggregate it with your other income, and, as the rulings note, article 5(3) contains time based rules that can exclude part of the return depending on how long the plan has run, subject to conditions. These rulings do not create a general rule and apply only to the facts of the person who requested them, and the treatment of a partial lump sum, such as a pension commencement lump sum taken alongside drawdown, is not settled in the same way, so the classification of any lump sum should be confirmed with a Portuguese tax specialist before you draw it. Portuguese treatment of UK lump sums is uncertain and may change. Timing also matters: a lump sum taken before you become Portuguese resident, and taxed under UK rules only, can produce a very different result from one taken afterwards, although the UK rules on leaving, including split year treatment and temporary non-residence, also need checking.
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The UK State Pension is not a government service pension, and for a Portuguese resident it is generally taxable only in Portugal under the new treaty, where it is generally treated as pension income alongside private pensions. The UK State Pension is generally paid without UK tax being deducted, although HMRC can still collect UK tax in some circumstances, for example where you have other UK income, and because Portugal is in the European Economic Area, GOV.UK confirms that the State Pension is increased each year for people living there, as it would be in the UK. Pensions paid for services to the UK government, such as civil service, armed forces and some other public sector pensions, are dealt with by Article 18. They are generally taxable only in the UK, unless the individual is a national of Portugal and not a national of the UK, in which case both countries may tax and Portugal gives credit for UK tax under Article 21. Whether a public sector pension counts as a government service pension depends on the scheme and the employer, so it should be confirmed rather than assumed. Where a pension is taxable only in the UK, it still needs to be considered on your Portuguese return, and how it is reported and whether it affects the rate on your other income should be checked with a Portuguese tax adviser.
UK pension schemes generally deduct UK income tax through PAYE unless HMRC tells them otherwise. If your pension is taxable only in Portugal under the treaty, you can generally apply to HMRC for relief at source using form DT-Individual, with certification of your Portuguese tax residence from the Portuguese tax authority, and HMRC can then issue an NT (no tax) code to the pension payer. An NT code only stops UK deductions; it does not make the pension exempt from Portuguese tax. Processing can take time, and UK tax deducted before the code is in place generally has to be reclaimed, which can be done through the DT-Individual claim itself or through a UK Self Assessment return with the residence pages. Government service pensions remain taxable in the UK, so they will usually continue to be taxed under PAYE. Leaving the UK also matters for UK tax on other income and for the year you move, as our guide to the Statutory Residence Test and split year treatment explains, and our guide to drawing your UK pension while living abroad covers NT codes and the timing of withdrawals in more detail.
The NHR regime closed to new applicants from 1 January 2024, with a transitional window that ended on 31 March 2025. People who registered for NHR keep it for the remainder of their 10 year period. For people who registered on or after 1 April 2020, qualifying foreign pension income is generally taxed at a flat 10% under NHR, while some people who registered earlier may have different treatment under transitional rules. When the 10 year period ends, pension income moves to the progressive rates described above, which can be a large increase for someone with a substantial pension. NHR holders should check how the new treaty interacts with their status. In particular, some people who registered before April 2020 had a foreign pension exemption rather than the later 10% rate, and how that exemption interacts with the new treaty's exclusive Portuguese taxing right should be reviewed with a Portuguese tax adviser. NHR holders should also plan ahead of the year their NHR period ends. The successor regime, IFICI, is directed at eligible professional activities and does not generally provide the former NHR treatment for foreign pension income, so most new retirees arriving in 2026 are taxed under the standard rules from the start.
Some people consider transferring a UK pension to an overseas scheme, which is a regulated pension transfer advice matter. The 25% overseas transfer charge on transfers to a QROPS is not new, but for transfers requested on or after 30 October 2024 the former exclusion for transfers within the EEA and Gibraltar no longer applies, so the charge generally applies unless the member is tax resident in the same country as the QROPS or one of the employer scheme exclusions applies. A Portuguese resident transferring to a QROPS in Malta or Gibraltar would therefore generally face the 25% charge. The Overseas Transfer Allowance (£1,073,100 for most people) is tested even where an exclusion from the overseas transfer charge applies, and any value above the available allowance can be charged at 25% under separate rules. The two charges are alternatives, not cumulative, so the same transfer value is not charged twice. Our guide to the Overseas Transfer Allowance and the 25% charge explains the rules. Whether to keep, transfer or restructure a UK pension depends on individual circumstances and needs regulated advice. A transfer may not be suitable and can involve the 25% charge, the loss of UK protections, higher charges, investment risk and adverse tax consequences. Each option has different tax, charge, investment, flexibility and consumer protection consequences, so the right answer depends on your circumstances and needs advice. On death, UK inheritance tax is legislated to apply to most unused pension funds and death benefits from 6 April 2027, and how this affects someone living abroad depends on their circumstances, including their long-term UK residence status, as our guide to inheritance tax on pensions from April 2027 explains, while article 1(5) of the Portuguese Stamp Duty Code excludes amounts in pension funds from stamp duty on inheritances, although the treatment of a foreign scheme is fact specific and subject to the detailed rules covered in our guide to inheritance tax in Portugal. Exchange rates also matter: pensions paid in sterling and spent in euros can rise or fall in value with currency movements. Any decision about when and how to draw, transfer or restructure a pension should take account of tax in both countries, charges, investment risk, flexibility and your income needs, not tax alone.
In my view the new treaty is clearer than the old one: for many British retirees who are treaty resident in Portugal, private and personal pensions are now generally taxable in Portugal rather than the UK, although each scheme and payment needs checking. The surprise for many people is the lump sum, because what is tax-free in the UK is not automatically tax-free in Portugal. It is worth confirming how Portugal would treat any withdrawal before you take it, and some people will find nothing needs to change.
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The UK tax-free status does not carry over. Portugal applies its own rules to lump sums paid to its residents, and the Portuguese tax authority has treated some UK lump sums as taxable capital income.
The new convention has effect in Portugal from 1 January 2026 and for UK income tax from 6 April 2026. Guidance based solely on the 1968 convention may not reflect the position from the new convention's effective dates.
UK schemes generally keep deducting PAYE until HMRC issues an NT code. Without one you may pay tax in both countries and have to reclaim the UK tax later.
When an NHR period ends, foreign pension income moves to the progressive rates of up to 48%, plus the solidarity surcharge on the highest incomes. Planning ahead of that year can matter.
Only pensions for UK government service fall under Article 18, and the treatment depends on the scheme, the employer and your nationality. The UK State Pension is not a government service pension.
A Portuguese resident transferring to a QROPS outside Portugal would generally face the 25% overseas transfer charge for transfers requested on or after 30 October 2024, unless an exclusion applies.
People moving to Portugal often ask whether they should move their UK pension offshore. Since October 2024, a transfer to a QROPS outside Portugal would generally face the 25% overseas transfer charge, so that cost, along with charges, the regulation of the receiving scheme, the loss of UK protections and investment risk, needs to be weighed against keeping the pension where it is. Whether to keep, transfer or restructure a pension depends on your income needs, costs, flexibility and tax position in both countries, and a transfer is not suitable for everyone.
Illustrative example only, not a real client. This example is simplified and fictional, applies the 2026 Portuguese rules and the 2026 to 2027 UK rules as stated assumptions, ignores currency movements and costs, and is not a guarantee of any outcome. It is a hypothetical illustration: it does not describe advice given to any client, does not represent the experience of actual clients, does not illustrate a recommended course of action and should not be relied on as an indication of the outcome of advice. Graham and Helen plan to become Portuguese tax resident in 2026. Graham has a UK personal pension worth about £420,000 and receives the UK State Pension. Helen has a pension from her years in the civil service and a smaller workplace pension. They did not register for NHR and assumed that, as in the UK, Graham could take 25% of his pension tax-free after the move and that the UK would keep taxing their pensions.
In this fictional example, a review by a regulated financial adviser, working alongside a Portuguese tax specialist, explained that, on these assumptions, Graham's personal pension and State Pension, and Helen's workplace pension, would generally be taxable only in Portugal under the new treaty, at progressive rates after the specific deduction, while Helen's civil service pension would generally stay taxable only in the UK. It flagged that a lump sum taken after the move would not be tax-free in Portugal simply because it is tax-free in the UK, and that its Portuguese classification needed a specialist opinion before any withdrawal. It also set out the steps to apply for NT codes on the pensions taxable in Portugal, the Annex J reporting on their first Portuguese return, and the UK inheritance tax changes to pensions from April 2027. The review compared the costs, risks and tax consequences of different ways and timings of drawing income with making no changes.
Illustrative outcome only: this does not assess suitability or recommend any course of action, does not represent a typical client experience, and no tax outcome, liability or saving is guaranteed. On these assumptions, the issues that would need consideration include which country taxes each pension, the timing and form of any lump sum before the move and before drawing it, and the fact that UK tax could be deducted until NT codes were issued. Whether any change to how pensions are drawn or held would be appropriate is a separate question needing its own suitability assessment and tax advice, and advice may conclude that no changes are suitable. Results depend on individual facts and could be less favourable: different facts, such as NHR status or a different pension type, could produce a very different result.
Illustrative example, not a real client.
Clarity Global Wealth helps British people moving to Portugal, or already living there, understand how their UK pensions could be taxed before they act, including which country can tax each pension under the new treaty, how regular income and any lump sum might be treated in Portugal, how to stop UK tax being deducted, and what NHR holders should check before their regime ends. We can arrange a free introduction to regulated financial planning; the introduction is an initial conversation, not advice, and places you under no obligation to proceed with advice or any product, so you can review your position with a regulated financial adviser before making changes to your pensions, where advice is appropriate. Any charges for advice would be explained to you before you proceed. The value of investments and pension funds can fall as well as rise, tax treatment depends on individual circumstances and can change, and advice may conclude that no changes are suitable. Clarity Global Wealth does not provide tax, legal or accounting advice, and adviser comments in this guide are general information, not personal recommendations. Portuguese and UK tax returns and tax opinions are work for qualified tax specialists, so where that is needed we coordinate with them.
Related guides: Tax in Portugal for Expats in 2026, Drawing Your UK Pension While Living Abroad, Your UK Pension Tax-Free Lump Sum When You Live Abroad, The Overseas Transfer Allowance and the 25% Charge, Inheritance Tax on Pensions from April 2027, Inheritance Tax in Portugal for Expats, Dividend and Interest Tax in Portugal for Expats and Capital Gains Tax in Portugal for Expats.
This guide is provided for general information only and reflects our understanding of the rules as at the date of publication. It is not personal financial, investment, pension or tax advice, and should not be relied upon as such. Rules and tax treatment can change and depend on your individual circumstances and country of residence. You should always seek regulated advice specific to your situation before taking action.
Under the new UK and Portugal treaty, most UK private, workplace and personal pensions paid to someone who is resident in Portugal for treaty purposes are generally taxable only in Portugal. It has effect in Portugal from 1 January 2026 and for UK income tax from 6 April 2026. Pensions for UK government service generally remain taxable only in the UK.
Regular pension income is generally taxed at Portugal's progressive IRS rates, from 12.5% to 48% for 2026 on the mainland at the time of review (a retroactive cut to the lower band rates for 2026 has been authorised and is awaiting the implementing decree), after a specific deduction of 4,587.09 euros, with a solidarity rate of 2.5% on the part of annual taxable income above 80,000 euros up to 250,000 euros and 5% on the part above 250,000 euros. NHR holders registered under the post-2020 rules may pay 10% on qualifying foreign pension income until their regime ends. Recheck rates each year.
Not automatically. The UK tax-free status does not carry over, and Portuguese tax authority rulings in particular cases have treated certain lump sums from UK schemes as capital income, generally taxed at 28% on the taxable part unless aggregated. The treatment depends on the scheme and payment, so get a Portuguese tax opinion before drawing.
For a Portuguese resident, the UK State Pension is generally taxable only in Portugal under the new treaty. It is generally paid without UK tax deducted, although HMRC can still collect UK tax in some circumstances, and, because Portugal is in the European Economic Area, it is increased each year.
Where the pension is taxable only in Portugal, you can generally apply to HMRC on form DT-Individual, with Portuguese residence certification, so HMRC can issue an NT code to your pension payer. An NT code stops UK deductions but does not make the pension exempt from Portuguese tax. UK tax deducted before then generally has to be reclaimed, which the same form can be used for.
No. NHR closed to new applicants from 1 January 2024, with a transitional window that ended on 31 March 2025. Existing NHR holders keep it for the rest of their 10 year period, and the successor IFICI regime is directed at eligible professional activities and does not generally provide the former NHR treatment for foreign pension income.
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