UK Budget 2026: What changes for British residents living in Portugal?

British residents in Portugal who still own property, receive rental income or hold investments in the UK could face important tax changes from April 2027. The UK Autumn Budget 2026 introduces higher taxes on property income, changes to reliefs for business owners and further measures affecting wealth and estate planning. For people whose financial affairs span both countries, moving abroad does not necessarily remove their UK tax obligations.

Presented on October 28, 2026, by Chancellor John Healey, the Budget contains several measures of particular relevance to British expatriates. Tax advisers from Forvis Mazars also examined their implications at a presentation in Quinta do Lago, in the Algarve, where UK property ownership, pensions and inheritance planning remain important concerns for international residents.

Some changes are newly announced proposals, while others were legislated in previous years and are approaching their implementation dates. Understanding the difference is essential before making financial decisions.

UK rental income: higher tax rates from April 2027

One of the most significant announcements concerns individuals receiving income from property in the United Kingdom.

From 6 April 2027, the UK Government plans to introduce the following rates for property income:

These rates are set out in the official HMRC Budget announcement ¹. They represent a further increase in property income taxation and apply to the relevant income bands, rather than every pound of rent received.

The published measure applies to England, Wales and Northern Ireland, with devolved arrangements allowing different treatment where applicable.

For someone living in Portugal while renting out a former family home in the UK, the change could mean a higher British tax bill. Becoming a Portuguese tax resident does not automatically exempt UK rental income from UK taxation.

Under HMRC’s Non-resident Landlords Scheme ², landlords living overseas may receive rent after tax has been deducted by a letting agent or tenant. Alternatively, they can apply to receive rental income without deduction and settle their UK liabilities through Self Assessment.

The applicable rate, deductible expenses and personal circumstances will determine the actual liability.

How the UK–Portugal tax treaty affects property owners

British residents in Portugal also need to consider the tax rules of their country of residence.

A new double taxation convention between the UK and Portugal entered into force on 29 December 2025 and became effective for Portuguese taxes from January 2026. It generally applies to UK income tax from April 2026.

Under the agreement, rental income from property situated in the UK may be taxed there, even when the owner is resident in Portugal. Portuguese tax obligations must then be considered separately, including any relief available for tax already paid in Britain.

The treaty is designed to address double taxation, not to make UK income automatically tax-free in Portugal.

This distinction matters for landlords who have retained property after relocating. The increased UK rates may affect their overall financial position, but the final outcome depends on their Portuguese tax treatment and the reliefs available under the convention.

The full agreement is available through HMRC’s UK–Portugal tax treaty collection ³.

Business owners face changes to capital gains tax relief

The Autumn Budget also introduces changes affecting entrepreneurs and shareholders selling qualifying business interests.

From April 2027, the lifetime limit for Business Asset Disposal Relief (BADR) is set to fall from £1 million to £500,000. The relief offers a preferential capital gains tax rate on qualifying business disposals, but the reduction means less of a qualifying gain may benefit from that treatment.

At the same time, the Government has announced a new Founders’ Relief, intended to support founders and significant early investors in innovative, high-growth UK companies.

The proposed relief would provide a 10% capital gains tax rate on up to £10 million of qualifying lifetime gains from April 2027. However, eligibility requirements are restrictive, and the detailed design remains subject to consultation and legislation.

The two measures therefore affect different groups of business owners. An entrepreneur who qualifies for BADR will not necessarily qualify for the new founders’ scheme.

For British entrepreneurs who have moved to Portugal, an additional question is whether a disposal remains taxable in the UK at all.

The answer depends on factors including the asset being sold, previous residence, the terms of the UK–Portugal tax treaty and the UK’s temporary non-residence provisions. Some gains realised while living abroad can become taxable in Britain if an individual returns within the relevant period.

The official Budget 2026 documentation ⁴ provides the framework for these changes.

Moving to Portugal does not necessarily end UK inheritance tax exposure

Inheritance tax remains another major consideration for British families living overseas.

Since 6 April 2025, the UK has applied a residence-based system for determining whether overseas assets fall within the scope of inheritance tax. It replaced the previous approach based primarily on domicile.

Broadly, individuals who have been UK tax residents for at least 10 of the previous 20 tax years may fall within the long-term residence rules.

Crucially, leaving the UK does not necessarily end that status immediately.

Depending on how long someone previously lived in Britain, exposure to UK inheritance tax on overseas assets may continue for between three and ten tax years after departure. Transitional provisions can also affect the result.

For example, a long-term UK resident retiring to the Algarve may still need to consider British inheritance tax when planning the transfer of assets, even after becoming resident in Portugal.

These rules were introduced before the 2026 Budget, but remain highly relevant to expatriates reviewing their finances. HMRC explains the conditions in its guidance on inheritance tax for long-term UK residents ⁵.

Unused pension funds face a major inheritance tax change in 2027

Another important deadline is approaching for British pension holders.

From 6 April 2027, most unused pension funds and pension death benefits will be brought within the value of a deceased person’s estate for UK inheritance tax purposes.

This reform was originally announced in the 2024 Autumn Budget and subsequently legislated. It is not an entirely new policy introduced in October 2026, although the latest Budget includes further technical provisions for its implementation.

For people who have treated their pensions as a way to pass wealth to children or other beneficiaries, the change may require a reassessment of existing plans.

It does not mean that every inherited pension will automatically generate an inheritance tax charge. The result depends on the estate, available allowances and exemptions, pension arrangements and applicable tax rules.

British retirees living in Portugal should be particularly careful about assuming that pension assets are automatically outside the UK inheritance tax system. Their residence history and the treatment of the relevant pension benefits can materially change the outcome.

HMRC compliance and cross-border reporting remain important

The Budget also continues the Government’s investment in tax compliance, debt recovery and enforcement.

For people with income, investments or assets in both the UK and Portugal, this reinforces the importance of maintaining accurate records and understanding reporting responsibilities in each country.

Someone living in Portugal may still need to submit a UK Self Assessment return for rental income or other taxable UK earnings. They may also have Portuguese reporting obligations relating to income received abroad.

The existence of a double taxation agreement does not remove these administrative requirements, even where foreign tax credits or treaty provisions reduce the final amount payable.

Before selling a UK property, disposing of a business, restructuring investments or making changes to pension beneficiaries, individuals should review the tax consequences in both jurisdictions.

What British residents in Portugal should review before April 2027

The most immediate consideration is the treatment of UK property income, particularly for landlords who may face higher rates from the next British tax year.

Business owners should examine the proposed changes to capital gains relief before deciding when to sell qualifying assets. Families with substantial assets or UK pensions should also review their succession arrangements in light of the inheritance tax rules already in force and the further reform taking effect in April 2027.

The central message is that relocating to Portugal changes where a person lives, but does not necessarily bring all UK tax liabilities to an end. With several measures approaching their planned implementation dates, coordinated advice from suitably qualified UK and Portuguese tax professionals can help individuals understand their position before making significant financial decisions.