Portugal tax update (2026) – what UK expats should know

If you’re a UK national living in Portugal (or planning the move), the 2026 tax year is broadly a ‘steady as she goes’ update: a small easing of Portuguese income-tax bands, no headline change to investment tax rates, and ongoing planning opportunities around property and estate structuring.

Quick headlines

• Portuguese IRS income-tax brackets increased by 3.51% and rates reduced by 0.3 percentage points for the 2nd–5th bands.

• Solidarity surcharge remains 2.5% (EUR 80,000–250,000) and 5% (over EUR 250,000).

• Most investment income (dividends/interest) remains taxed at 28%, with a higher 35% rate where income arises from a Portuguese ‘blacklisted’ jurisdiction.

• IMT (property transfer tax) brackets are updated by 2% for 2026; some youth buyer relief remains in place.

• UK inheritance tax (IHT) rules changed from 6 April 2025 (long-term residence framework), and unused DC pensions are due to fall into the IHT net from April 2027.

1) Portugal income tax (IRS) – 2026 bands

For Portuguese tax residents, most worldwide income is brought together and taxed progressively (with different category rules and possible special treatments). The general IRS bracket rates for 2026 are:

High earners should also factor in the additional solidarity tax (2.5% between EUR 80,000 and EUR 250,000; 5% above EUR 250,000). Madeira and the Azores have their own variations on rates and deductions.

2) Investment income – still a flat 28% (in most cases)

Dividends and interest are generally taxed at a flat 28% in Portugal. In some situations you can elect aggregation into the progressive scale, if that produces a better result. If income is paid from a jurisdiction on Portugal’s ‘clearly more favourable’ list, a higher 35% rate may apply.

3) Capital gains – keep the property rules front of mind

For Portuguese residents selling property, 50% of the gain is typically added to taxable income and taxed at the relevant marginal rate. There are important reliefs, notably where you sell a main home and reinvest the proceeds in another main home in Portugal or the EU/EEA (subject to conditions).

For people aged 65+ (or retirees meeting conditions), there may also be planning around reinvesting certain proceeds into eligible insurance contracts or pension arrangements – this is one area where specialist Portuguese tax input is essential.

4) NHR legacy vs NHR 2.0 / IFICI

‘Legacy’ NHR holders should be very aware of their remaining term and plan well ahead for the end of the 10-year period. Portugal’s replacement regime (NHR 2.0 / IFICI) is narrower and aimed at specific high-value professions; it is generally not a retirement/passive-income regime.

5) Property taxes: IMT and AIMI

The 2026 State Budget updates the IMT brackets used to calculate property transfer tax on residential purchases by 2%. If you’re buying, small changes to thresholds can still move the needle, so it’s worth checking the current table for your exact purchase price.

AIMI (an additional annual property tax on higher-value Portuguese residential property) continues to apply above EUR 600,000 of taxable value per person (often doubled for couples filing jointly).

6) Estate planning: Portuguese stamp duty + UK IHT changes

Portugal does not have a UK-style inheritance tax. Instead, stamp duty may apply at 10% on Portuguese assets received by inheritance or gift, but transfers to spouse/partner, descendants and ascendants are generally exempt. This makes cross-border structuring particularly important for UK families.

On the UK side, IHT moved to a long-term residence framework from 6 April 2025. Separately, unused defined contribution pensions are expected to become subject to IHT from April 2027. That ‘two-country’ interaction is exactly why joined-up UK/Portugal planning matters.

What I’d do next (practical steps)

• Map your income sources (pensions, rental income, dividends/interest, business income) and confirm the Portuguese category/treatment for each.

• Review investment wrappers and account locations – especially anything based in a blacklisted jurisdiction.

• If you’re approaching the end of NHR, model your post-NHR position early and restructure while you still have options.

• If property is in the plan, stress-test IMT/AIMI and the timing of your purchase vs your tax residency.

• Review estate planning with a UK/Portugal lens, including pension beneficiary nominations and the April 2027 IHT change.

If you’d like a straightforward review of your position – and how to sequence decisions before and after you become Portuguese tax resident – click on the link below for your initial Discovery Call: https://calendly.com/steve-atlasbridgewealth

Important note - This update is for general information only and isn’t tax advice. Tax outcomes depend on your residency status, income categories, treaty position and personal circumstances. Where needed, I coordinate with specialist UK and Portuguese tax advisers to ensure everything is aligned before decisions are made.

 ·       PwC Portugal – 2026 State Budget (IRS brackets): https://www.pwc.pt/en/pwcinforfisco/statebudget/pit-and-social-security.html

·       PwC Portugal – Fiscal Guide (solidarity tax + higher 35% rate for blacklisted jurisdictions): https://www.pwc.pt/pt/pwcinforfisco/guia-fiscal/2026/irs.html

·       Portuguese Government portal – ‘What’s new in 2026’: https://www.portugal.gov.pt/en/gc25/communication/news-item?i=whats-new-in-2026

·       HMRC guidance – IHT and long-term UK residence (from 6 April 2025): https://www.gov.uk/guidance/inheritance-tax-if-youre-a-long-term-uk-resident

·       Guardian explainer on April 2027 pension/IHT change: https://www.theguardian.com/money/2025/mar/22/what-new-uk-rules-on-pension-inheritance-may-mean-for-you