By Stephen Rankine, Financial Adviser, Blevins Franks.
https://www.blevinsfranks.com/portugal-tax-in-2026/
What does the current Portugal tax landscape look like for British expatriates living there, has anything changed in 2026? If you’re planning to move to Portugal, the country continues to offer a welcoming tax environment.
The 2026 Portuguese State Budget did not introduce many tax changes affecting British and other foreign nationals living there, especially if you are retired. Income tax bands and rates have improved a little, and, if you are buying a property, the scale IMT property transfer tax rates have increased with inflation.
A new proposal is currently being debated in parliament on reducing rental income tax rates for landlords (except short-term lets such as Airbnb), as well as an exemption from capital gains tax when the proceeds of sale of property are reinvested into a new rental property. This law has not yet been approved.
Portugal income tax
For residents of Portugal, worldwide employment earnings, pension, rental and most other income earned over the year is combined to calculate your income tax bill. For non-residents, only income sourced from Portugal is taxable.
For 2026 income, the income bands have all increased a little, while all but the top rate of tax are slightly lower than last year. For example, in 2025, the starting tax rate was 13% for income up to €8,059, while in 2026 it is 12.5% for income up to €8,342. At the other end of the scale, the top 48% rate now applies to income over €86,634, up from 2025’s €83,696. The aim is to reduce tax burdens and boost household incomes.
| Income tax rates 2026 | Income tax rates 2025 | |||
|---|---|---|---|---|
| Income | Tax rate | Income | Tax rate | |
| Up to €8,342 | 12.50% | Up to €8,059 | 13% | |
| €8,342 – €12,587 | 15.70% | €8,059 – €12,160 | 16.50% | |
| €12,587 – €17,838 | 21.2% | €12,160– €17,233 | 22% | |
| €17,838– €23,089 | 24.10% | €17,233– €22,306 | 25% | |
| €23,089– €29,397 | 31.1% | €22,306– €28,400 | 32% | |
| €29,397 – €43,090 | 34.9% | €28,400 – €41,629 | 35.5% | |
| €43,090– €46,566 | 43.1% | €41,629– €44,987 | 43.5% | |
| €46,566– €86,634 | 44.6% | €44,987– €83,696 | 45% | |
| Over €86,634 | 48% | Over €83,696 | 48% | |
Income tax rates in Madeira are lower than on the mainland. For 2026, the lowest rate is 8.75% for income up to €8,342, while the tax rate for income surpassing €86,634 is 33.6%.
There is no change to the additional solidarity tax applied to high earners. The rates remain 2.5% on income between €80,000 and €250,000, and 5% on income exceeding €250,000.
Investment income
Investment income is taxed at a flat rate of 28% in 2026, with no change from previous years. This fixed rate covers interest and income from capital investments such as shares, securities and bonds. Residents of Portugal can opt for the scale rates instead, if that works out cheaper.
If a bank account or investment is within a ‘tax haven’ jurisdiction classed, income is taxed at a higher rate of 35%. This includes Gibraltar and Guernsey.
Portugal continues to offer the potential to enjoy extremely favourable tax treatment on capital investments. If you have not reviewed your investment approach and structures since moving to Portugal, it is certainly worth doing so.
Capital gains tax in Portugal
There are no changes to Portugal’s capital gains tax regime in 2026. If you are a Portuguese resident and sell property anywhere in the world, 50% of the gain is added to your annual income and taxed at the relevant income tax rate. You won’t be taxed if you sell a main home and reinvest the proceeds to buy a new main home in Portugal or the EU/EEA.
Retirees or residents aged over 65 can also avoid capital gains tax when reinvesting into an eligible insurance contract or pension fund, if you meet the conditions. Life assurance policies – where you can hold a wide range of investment assets within its tax-efficient structure – are eligible for this relief.
Gains made on the disposal of shares, securities and bonds are taxed as capital gains tax at 28%. Indexation may be available to reduce the overall tax payable.
NHR status residents – it’s time to act
It’s been two years since Portugal’s non-habitual residence regime closed. If you obtained NHR status before then, keep an eye on how long you have left on your term. Once you reach the 10-year limit, you will lose the tax benefits you have been enjoying.
Take advantage of your NHR status and restructure your assets now to vastly improve your post-NHR tax position. Start planning years in advance to allow plenty of time to restructure your assets for the most tax-efficient transfer out of NHR possible, whether you stay in Portugal or relocate.
NHR 2.0 / IFICI
Portugal’s new version of non-habitual residence – the Tax Incentive for Scientific Research and Innovation or IFICI – is much more restrictive and not designed for retirees and those with passive income.
IFICI specifically targets highly qualified professionals in fields such as science, technology, education and innovation, and is strict on this. Those who qualify benefit from a reduced 20% flat rate on Portuguese-sourced employment and professional income, as well as exemption from Portuguese tax on foreign-sourced income and capital gains.
If you own a UK company and are semi-retired or approaching retirement, there are a couple of limited, specific opportunities within NHR 2.0 where you may consider undertaking an activity to take advantage the regime.
High value property
Portugal’s Adicional Imposto Municipal Sobre Imóveis (AIMI) applies a limited form of wealth tax to high-value Portuguese property. This is regardless of residence, but you are only liable on any value exceeding €600,000 (potentially double that for a couple). Rates are 0.7% for individuals, 0.4% for companies, 1% for properties over €1 million, and 1.5% for the value in excess of €2 million. Most companies are not eligible for the allowance.
Stamp duty on inheritances
Stamp duty, Portugal’s version of inheritance tax, compares very favourably to neighbouring countries and the UK. The rate is fixed at 10% and only applies on Portuguese property and assets inherited or gifted outside of the direct family.
In the past, most British expatriates remained subject to UK inheritance tax (IHT) on worldwide assets. Since April 2025, once you have been outside the UK for over 10 years, only assets you retain in the UK are liable. With this new system and the Portugal regime, you may be able to structure your assets and estate planning so that no inheritance taxes are due, anywhere. This would require specialist cross-border advice, especially since pension funds become subject to IHT next year.
Tax planning for Portugal
In summary, Portugal remains a tax-friendly country to live in, but specialist advice is more essential than ever before to ensure you make the most of the local regime.
It is sensible to regularly review your financial planning to ensure everything is optimised for your family’s circumstances and goals. The way you structure your assets and wealth can make a big difference to your tax bill, so contact Blevins Franks for personalised professional advice to make the most of tax-efficient opportunities and secure financial peace of mind in Portugal.
Tax rates, scope and reliefs may change. Any statements concerning taxation are based upon our understanding of current taxation laws and practices which are subject to change. Tax information has been summarised; individuals should seek personalised advice.