A UK State Pension or private pension paid to a Portuguese resident is taxable only in Portugal (2025 UK-Portugal Convention, art. 17). Government-service pensions are the exception: article 18 makes them taxable only in the UK, or in both states for a Portuguese national who is not British. The convention applies to Portuguese tax from 1 January 2026 and to UK Income Tax and CGT from 6 April 2026.
Short Answer: The Treaty Allocates Taxing Rights, But The Return Still Needs A Reporting Position
The UK-Portugal convention does not make filing obligations disappear. It decides which country has taxing rights, whether source-state withholding is capped, and how Portugal should treat the same income on the Modelo 3. For a UK-to-Portugal move, map each income stream before filing:
- UK State Pension and private pensions
- SIPP, SSAS, and lump-sum withdrawals
- Dividends, interest, and royalties
- Capital gains on property-rich entities
- Principal Purpose Test (PPT) risk and evidence of the main purpose
Entry Into Force
The convention entered into force on 29 December 2025. It applies to withholding taxes in both countries from 1 January 2026. Other covered Portuguese taxes use it for periods beginning on or after that date; UK Corporation Tax uses financial years beginning on or after 1 April 2026, and UK Income Tax and CGT use tax years beginning on or after 6 April 2026. Identify the tax and income date before selecting the applicable convention.
State Pension, Private Pensions And Government Service
Article 17 gives the residence state the right to tax pensions, except government-service pensions within article 18. For UK State Pension and qualifying private pensions received by a Portuguese treaty resident, Portugal has the exclusive taxing right. State Pension is paid without withholding; a UK liability outside applicable treaty relief may be collected through another PAYE code or a return.
Under article 18, government-service remuneration and pensions are normally taxable only in the paying state. If the recipient is not a national of that state but is a national of the other state, both states may tax, with double-tax relief under article 21. This exception does not automatically exempt the pension in the paying state.
Personal Pension Drawdowns: SIPP, SSAS
Article 17 covers private pension income generally. UK-pension drawdowns paid to a Portuguese tax resident, including SIPP withdrawals, are taxed in Portugal under treaty allocation. The UK pension commencement lump-sum label does not create a Portuguese exemption. Portuguese treatment depends on the scheme, contributions, basis, payment form, and the Category H rules applicable to the facts. Pre-arrival pension restructuring (timing of crystallisation, partial vs full drawdown) is one of the most consequential decisions on a UK-PT move.
Dividends, Interest, Royalties
Articles 10, 11 and 12 limit source-country tax on dividends, interest and royalties when treaty requirements are met. The rates depend on the payment and recipient.
For Portuguese-source payments to a UK resident, the Portuguese relief-at-source claim uses Form 21-RFI and UK residence evidence issued by HMRC as required by AT. In the reverse direction, a Portuguese resident uses the applicable UK relief procedure, including DT-Individual where appropriate, with a separate Portuguese Certificate of Residence attached. AT does not certify the DT-Individual form itself.
HMRC processes the claim; the payer changes PAYE only after the applicable authorisation. If too much was withheld, check the refund procedure and deadline.
The OECD Principal Purpose Test (PPT)
Article 27 introduces the OECD BEPS Action 6 Principal Purpose Test. Treaty benefits can be denied if obtaining them was one of the principal purposes of an arrangement, unless granting the benefit accords with the treaty's object and purpose. It is a test of purpose: what matters is why the arrangement was made. Pre-arrival restructurings must now pass not just domestic anti-avoidance rules but also the PPT. Document the commercial rationale.
Before Filing Or Requesting Relief
- Establish tax residence and the convention applicable to the tax and income date.
- Classify each pension, dividend, interest payment or gain and gather residence and tax-paid evidence.
- Request relief through the withholding country’s procedure; certification alone does not change PAYE.
- Report foreign income in Annex J where required. Aggregation can be mandatory or optional depending on the category, year and CIRS conditions.
- Report UK State Pension as Category H income with the applicable treaty treatment; do not wait for withholding to stop on a payment made gross.
- Before selling assets, compare the rules at disposal, including article 13 exceptions.
Portuguese tax outcomes depend on dates, documents, elections, source country rules, and the exact income or asset involved.
Frequently Asked Questions
When did the new UK-Portugal tax treaty enter into force?
On 29 December 2025. Both countries apply it to withholding taxes from 1 January 2026; for the other covered taxes, the first period it applies to depends on the tax, as set out under Entry Into Force.
How is my UK State Pension taxed when I move to Portugal?
UK State Pension within article 17, paid to a Portuguese treaty resident, is taxable only in Portugal. The pension is paid without withholding; HMRC does not pay State Pension. Report it in Annex J, Category H, and reflect the position in the UK tax record.
What about my UK occupational pension?
Private occupational pensions within article 17 are taxable in the residence state. For UK PAYE relief, use DT-Individual where applicable with a separate Portuguese Certificate of Residence attached; AT does not certify the form itself. Withholding changes depend on HMRC processing and authorisation. Government-service pensions follow article 18 and require a nationality check.
How does Portugal treat the 25% UK pension lump sum?
Portugal characterises the lump sum under its own Category H rules. The UK 25% PCLS is a UK domestic concept, so its UK treatment does not carry over automatically. Plan crystallisation timing carefully before becoming Portuguese tax resident.
How are UK dividends and interest taxed under the new treaty?
Articles 10, 11 and 12 limit source-country tax on dividends, interest and royalties when treaty requirements are met. The rates depend on the payment and recipient.
For Portuguese-source payments to a UK resident, the Portuguese relief-at-source claim uses Form 21-RFI and UK residence evidence issued by HMRC as required by AT. In the reverse direction, a Portuguese resident uses the applicable UK relief procedure, including DT-Individual where appropriate, with a separate Portuguese Certificate of Residence attached. AT does not certify the DT-Individual form itself.
HMRC processes the claim; the payer changes PAYE only after the applicable authorisation. If too much was withheld, check the refund procedure and deadline.
Can I sell UK shares while resident in Portugal without UK tax?
Generally, gains within article 13(5) are taxable in the residence state. Check the exceptions for real estate, interests deriving more than 50% of value from real estate during the 365-day lookback, and permanent-establishment assets. A UK stock-exchange listing does not, by itself, determine the taxing right.
Does the new treaty have an anti-abuse rule?
Yes. Article 27 introduces the OECD Principal Purpose Test (PPT). Treaty benefits can be denied if a principal purpose of an arrangement was to obtain them. Record the commercial reasons for the arrangement.
I moved before 6 April 2026. Which treaty applies to my UK tax?
UK Income Tax and CGT use the prior convention for tax year 2025-26 and the new convention from 2026-27. But UK withholding taxes already use the new convention for amounts paid or credited from 1 January 2026. Covered Portuguese taxes follow the dates in article 28; your move date alone does not select one convention for every payment.
Related guides
- Guide · UK Expat Tax In PortugalLiving in Portugal with UK income? Check pensions, rent and gains, tax residence and which returns need filing with HMRC and Finanças.
- Guide · How Portugal taxes foreign pensions in 2026Check how Portugal taxes UK, US and other foreign pensions: treaty treatment, existing NHR rights, pension deductions and lump-sum risks.
- Guide · Foreign income in Portugal: Anexo J step by stepA Portuguese tax resident is taxed on worldwide income, including income obtained abroad (CIRS art. 15(1)).
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