UK Budget 2026: What Actually Changed for UK Expats in Portugal

Earlier this month we set out what UK expats in Portugal should watch for ahead of the Autumn Budget. On 28 October 2026, Chancellor John Healey delivered it.

For most British families in Portugal, the headline is simple. If you own a UK rental property, your UK tax bill is going up further than expected. Most other areas that matter to expats were left alone.

At a glance

1. UK rental income: a bigger rise than expected

This is the change that matters most to expats.

Last year's Budget announced separate income tax rates for property income of 22%, 42% and 47% from April 2027. Today's Budget goes further. From April 2027, the property rates of income tax are 24% basic, 44% higher and 49% additional, separated from the main rates of 20%, 40% and 45%.

UK rental income stays taxable in the UK wherever you live, so this hits British landlords in Portugal directly. You will also declare the same income in Portugal, with credit for the UK tax. The higher the UK rate, the more likely UK tax exceeds what Portugal would charge, and that excess is not refunded.

Example: Sarah lives in Lisbon and has £20,000 of net rental profit from a Bristol flat. After her £12,570 personal allowance, £7,430 is taxable. Her UK bill was £1,486 at 20%. From 2027/28 it becomes about £1,783 at 24%, a rise of roughly £297 a year. A higher-rate landlord would see a larger increase.

Points to check with us:

• How the rise affects the tax withheld under the Non-Resident Landlord Scheme, if your agent deducts tax from your rent.
• Whether the finance cost (mortgage interest) credit follows the new basic property rate.
• Whether Scotland and Wales will set their own property rates. The new rates apply in England, Wales and Northern Ireland, and the Budget documents confirm both governments may set their own.
• Making Tax Digital: landlords joining from April 2027 will not get late-submission penalty points for their 2027/28 quarterly updates.

2. Savings income also rises

Savings income rates move to 24%, 44% and 49% from April 2027, from 20%, 40% and 45%. The £5,000 starting rate for savings and the Personal Savings Allowance (£1,000 basic rate, £500 higher rate) are unchanged.

For most people living in Portugal, UK bank interest is taxed in Portugal rather than the UK, but it is worth checking how your UK accounts are treated.

3. Inheritance tax: no change, and the pension rules go ahead

There was speculation about changes to inheritance tax reliefs. The Budget left inheritance tax rates and thresholds unchanged:

• 40% rate, 36% where 10% or more of the estate goes to charity.
• Nil-rate band £325,000, residence nil-rate band £175,000.
• The £2.5million allowance for 100% agricultural and business property relief is unchanged.

The Budget documents confirm that most unused pension funds and death benefits will enter the estate from 6 April 2027, with changes to how trustees and personal representatives administer them from the same date. Our guide to UK pensions and inheritance tax from April 2027 therefore still applies in full. If you are a long-term UK resident, or still within your inheritance tax "tail" after leaving, the planning steps in that guide remain urgent.

4. Capital gains tax: rates held, but two relief changes

The 18% and 24% rates, and the £3,000 annual exempt amount, are unchanged. For expats selling UK property, the tax rates do not change: non-residents remain liable to UK CGT on UK land and property, reported within 60 days. However, the Budget changes the late-filing penalties for UK land disposal returns from 28 October 2026, so reporting on time matters more than ever.

Two changes affect business owners:

• Founders' relief, a new 10% rate on up to £10million of lifetime gains for eligible founders of high-growth companies, from 6 April 2027. The detail is out for consultation until 30 November 2026, so the final rules may change.
• Business Asset Disposal Relief: the 18% rate stays, but the lifetime limit falls from £1million to £500,000 for disposals from 6 April 2027. Transitional rules apply to contracts made before then.

If you are thinking of selling a UK business before or after a move to Portugal, the timing and residence position now matter even more.

5. ISAs: the cash ISA cut is reversed

The planned cut to the cash ISA limit, from £20,000 to £12,000 for under-65s, has been dropped. The £20,000 limit is kept for everyone.

Non-residents generally cannot pay into an ISA, so this matters mainly to people planning to return to the UK. The Budget also announced a new First Time Buyer ISA, launching in April 2029, and cut the Lifetime ISA charge for buying a home above the price cap from 25% to 20%, from 29 October 2026.

6. State Pension top-ups: slightly more expensive

Voluntary National Insurance rates rise for 2027/28:

• Class 2: £3.80 a week (from £3.65).
• Class 3: £19.05 a week (from £18.40).

The rules introduced in April 2026, which ended Class 2 for most people abroad, still apply. If you are filling gaps in your State Pension record from Portugal, check which class you can pay and whether it still offers good value.

7. A new Pensions Tax Allowance, mainly for UK residents

From April 2027, people above State Pension age whose total income is no more than the new State Pension will pay no income tax, through a new Pensions Tax Allowance. It is a temporary measure, available for 2027/28 to 2029/30. Most expats in Portugal will see little benefit, because most UK private pensions are taxed in Portugal under the tax treaty. People returning to the UK in retirement should note it.

8. A new charge on high-value UK homes

From April 2028, a High Value Council Tax Surcharge will apply to properties worth £2 million or more. If you have kept a high-value home in the UK, whether you let it or leave it empty, factor this into your plans.

What to do now

1. Landlords: re-run your 2027/28 numbers at 24%, 44% or 49%, and check your Non-Resident Landlord Scheme position.
2. Business owners: if you plan to sell a UK company, review the cut to Business Asset Disposal Relief and whether founders' relief could apply.
3. Everyone with UK pensions: carry on preparing for the April 2027 inheritance tax change. Nothing in this Budget delays it.
4. Selling UK property: file your non-resident CGT return within 60 days. The late-filing penalties are changing.
5. Returners: factor in the higher savings rates and the kept £20,000 cash ISA limit.

Understanding the Changes Across Both Countries

For UK expats in Portugal, the important question is not just what changed in the UK, but how those changes interact with Portuguese tax rules.

Rental income, pensions, property sales and inheritance can have implications in both countries. Reviewing them together can help avoid unexpected tax consequences.

This article is for general information only and does not constitute tax or legal advice. It is based on the UK Budget publications released on 28 October 2026.

Sources: GOV.UK – Budget 2026 Overview of tax legislation and rates (OOTLAR) 

GOV.UK – Budget 2026: Breathing space for today, hope for the future 

GOV.UK – Budget 2026 Overview of tax legislation and rates, Annex A: rates and allowances 

GOV.UK – Supporting documents for Budget 2026