Portugal continues to be one of the most attractive destinations in Europe for British expatriates. Its climate, lifestyle and welcoming international community make it a popular choice for retirees and internationally mobile professionals alike.
But what does the Portuguese tax landscape look like in 2026, and have any major changes been introduced?
The 2026 Portuguese State Budget did not introduce significant reforms affecting foreign nationals living in the country, particularly retirees. Income tax bands have been adjusted slightly, property transfer tax rates have increased with inflation, and the overall tax framework remains broadly stable.
For those already living in Portugal — or considering relocating — the country still offers a relatively favourable tax environment, particularly when combined with careful financial planning.
Portugal Income Tax in 2026
Portuguese tax residents are taxed on their worldwide income, including employment earnings, pensions, rental income and most other forms of income.
Non-residents, by contrast, are only taxed on Portuguese-sourced income.
For 2026, income tax bands have been slightly increased, and most tax rates have been marginally reduced compared with the previous year.
For example:
- In 2025, the starting rate was 13% on income up to €8,059
- In 2026, the starting rate has fallen to 12.5% on income up to €8,342
At the higher end, the top tax rate of 48% now applies to income above €86,634, compared with €83,696 in 2025.
These adjustments aim to reduce tax burdens and support household income.
Portugal Income Tax Rates 2026
| Income | Tax Rate |
| Up to €8,342 | 12.5% |
| €8,342 – €12,587 | 15.7% |
| €12,587 – €17,838 | 21.2% |
| €17,838 – €23,089 | 24.1% |
| €23,089 – €29,397 | 31.1% |
| €29,397 – €43,090 | 34.9% |
| €43,090 – €46,566 | 43.1% |
| €46,566 – €86,634 | 44.6% |
| Over €86,634 | 48% |
Lower Income Tax in Madeira
Residents of Madeira benefit from lower income tax rates compared with mainland Portugal.
For 2026:
- The lowest rate is 8.75% for income up to €8,342
- The highest rate is 33.6% on income exceeding €86,634
These regional tax differences can be attractive for individuals relocating to the island.
Additional Solidarity Tax
High earners in Portugal remain subject to an additional solidarity tax, which has not changed for 2026.
The rates are:
- 2.5% on income between €80,000 and €250,000
- 5% on income exceeding €250,000
This surcharge applies in addition to the standard income tax bands.
Investment Income Tax in Portugal
Portugal continues to apply a flat tax rate of 28% on most investment income, unchanged for 2026.
This rate typically applies to:
- Interest income
- Dividends
- Income from shares and securities
- Bond income
Residents may alternatively choose to have this income taxed under the progressive income tax scale if that results in a lower overall tax liability.
Income arising from jurisdictions considered tax havens by Portugal is taxed at a higher rate of 35%. This list includes locations such as Gibraltar and Guernsey.
With the right financial structuring, Portugal can still offer very favourable taxation on capital investments, which is why reviewing your investment structures after moving there can be highly beneficial.
Capital Gains Tax in Portugal
There have been no changes to the capital gains tax rules in 2026.
For Portuguese residents selling property anywhere in the world:
- 50% of the gain is added to your annual income
- The taxable amount is then subject to standard income tax rates
However, important exemptions exist.
You will not be taxed on gains from the sale of a primary residence if the proceeds are reinvested into another main home within Portugal or the EU/EEA.
For individuals aged 65 or older, it may also be possible to avoid capital gains tax by reinvesting the proceeds into eligible pension or insurance investment structures.
Certain life assurance investment bonds, which allow a wide range of underlying investments within a tax-efficient wrapper, can qualify for this relief if the required conditions are met.
Capital gains on shares, securities and bonds are taxed at 28%, although indexation relief may reduce the taxable amount.
Non-Habitual Residence (NHR) – Planning Ahead
It has now been two years since Portugal closed the Non-Habitual Residence (NHR) regime to new applicants.
Individuals who secured NHR status before the closure can continue to benefit from the regime for their 10-year eligibility period.
For those currently benefiting from NHR, it is important to monitor how much time remains before the regime expires.
Planning ahead is essential.
Restructuring assets while NHR benefits still apply may provide opportunities to review your tax position, depending on individual circumstances
Early planning also allows time to prepare alternative strategies whether you intend to remain in Portugal long-term or relocate elsewhere.
NHR 2.0 / IFICI Regime
Portugal has introduced a new scheme known as IFICI (Tax Incentive for Scientific Research and Innovation).
However, this new regime is far more restrictive and is not aimed at retirees or individuals living on passive income.
Instead, IFICI targets highly qualified professionals working in sectors such as science, technology, education and innovation.
Individuals who qualify can benefit from:
- A 20% flat rate on Portuguese-sourced employment income
- Exemption from Portuguese taxation on certain foreign income and capital gains
Although not widely applicable to retirees, there may be limited opportunities for business owners or semi-retired individuals to structure activities in a way that qualifies under this regime.
High Value Property and AIMI
Portugal applies a form of wealth tax on high-value property, known as Adicional Imposto Municipal Sobre Imóveis (AIMI).
This applies regardless of residency but only on property values exceeding certain thresholds.
Key rules include:
- The first €600,000 of property value per individual is exempt
- Couples may benefit from an exemption of €1.2 million
Rates are:
- 0.7% for individuals
- 0.4% for companies
- 1% on property value above €1 million
- 1.5% on property value above €2 million
Many corporate structures are not eligible for the exemption, making ownership structuring an important planning consideration.
Inheritance Tax and Stamp Duty
Portugal does not operate a traditional inheritance tax.
Instead, it applies a 10% stamp duty on certain transfers of Portuguese assets.
Importantly:
- Spouses and direct family members are exempt
- The tax typically applies only to transfers outside the immediate family
Combined with recent UK inheritance tax residency reforms, this can create interesting planning opportunities.
Since April 2025, individuals who have been non-UK resident for over 10 years may only be subject to UK inheritance tax on UK-based assets.
With appropriate structuring, it may be possible in some cases to reduce or eliminate inheritance taxes across both jurisdictions, although this requires careful cross-border advice.
Tax Planning for British Expats in Portugal
Portugal continues to be considered by many expatriates as a tax-efficient location, depending on individual circumstances. However, effective financial planning has become increasingly important as tax regimes evolve.
Regular reviews of your financial arrangements can help ensure that:
- your investment structures remain tax efficient
- pension and retirement income is optimised
- estate planning aligns with both UK and Portuguese rules
- your wealth is protected for future generations
The way you structure your assets and investments can make a significant difference to your long-term tax position subject to personal circumstances and applicable legislation.
Specialist Cross-Border Advice
Living internationally often means navigating two tax systems simultaneously.
For British expatriates in Portugal, taking specialist advice on cross-border tax, pensions, investment structuring and estate planning can support aligning your finances with your long-term goals.
With careful planning, Portugal can still offer a highly attractive financial environment for expatriates and retirees.
Disclaimer
This article is for general information purposes only and does not constitute tax, legal, or financial advice. Tax rules and regulations depend on individual circumstances and may change in the future. Professional advice should always be obtained before making decisions based on your personal situation.
This communication is for informational purposes only and is not intended to constitute, and should not be construed as, investment advice, investment recommendations or investment research. You should seek advice from a professional adviser before embarking on any financial planning activity. Whilst every effort has been made to ensure the information contained in this communication is correct, we are not responsible for any errors or omissions.