Keeping a UK Rental While Living in Portugal: The New Property Income Tax Rates from 2027

Many British families who move to Portugal keep their UK home and let it out. It provides income, keeps a foot on the UK property ladder and leaves the door open to coming back.

From 6 April 2027, that income will be taxed more heavily. Finance Act 2026 created separate income tax rates for property income in England, Wales and Northern Ireland, set 2 percentage points above the standard rates.

This guide explains what is changing, why it still applies once you live in Portugal, and how the UK and Portuguese tax systems interact.

The new UK property income rates

The new rates apply to property in England, Wales and Northern Ireland. Scotland sets its own rates, and the Scottish and Welsh governments have powers to set their own property income rates.

Mortgage interest: individual landlords still cannot deduct mortgage interest from rental profits. Instead, they get a tax credit at the basic rate. From April 2027 that credit rises from 20% to 22%, in line with the new property basic rate. Basic-rate landlords are broadly no worse off on interest; higher and additional-rate landlords still lose out.

Why UK rental income is still taxed in the UK when you live in Portugal

Under the UK–Portugal double tax treaty, income from land and buildings can always be taxed in the country where the property is. So, UK rental income stays taxable in the UK, whatever your residence.

In practice that means:

• You file a UK Self-Assessment return each year, declaring the rental profit.
• You are usually entitled to a UK personal allowance. British citizens living abroad keep the £12,570 allowance, so smaller rental profits may suffer little or no UK tax.
• Your income is taxed at the new property rates from 2027/28.

The Non-Resident Landlord Scheme

If you live abroad for more than six months a year, the Non-Resident Landlord Scheme (NRLS) applies. Your letting agent, or your tenant if there is no agent, must deduct basic-rate tax from the rent and pay it to HMRC.

From 6 April 2027, the withholding rate rises from 20% to 22%.

You can apply to HMRC (on form NRL1) to receive rent without tax deducted, provided your UK tax affairs are up to date. You then pay any tax due through your Self-Assessment return. Most landlords who file properly should apply: it improves cash flow and avoids over-withholding.

How Portugal taxes your UK rental income

Once you are tax resident in Portugal, you are taxed on your worldwide income. Your UK rental income must be declared on your Portuguese tax return (Anexo J).

Portugal taxes rental income (Category F) at a special flat rate, or, if you choose, at the normal progressive rates. It then gives you a credit for UK tax paid, up to the amount of Portuguese tax on that income.

The result is that you effectively pay the higher of the two countries' tax on that income:

• If UK tax is lower than Portuguese tax, you pay the difference in Portugal.
• If UK tax is higher, Portugal charges nothing more, but the excess UK tax is not refunded.

This is why the 2027 increase matters. For higher-rate UK taxpayers, the UK bill may now exceed what Portugal would charge, so the extra UK tax becomes a real cost rather than something credited away.

IFICI (NHR 2.0): if you qualify for Portugal's IFICI regime, some foreign income, including rental income, can be exempt in Portugal where it may be taxed in the source country under a treaty. UK tax still applies in full. See our guide to why IFICI applications are rejected for eligibility pitfalls.

Worked example

Sarah moved to Lisbon in 2025 and lets her flat in Bristol. Her net rental profit is £20,000 a year after allowable costs. She has no other UK income.

Sarah's UK bill rises by about £149. She declares the income in Portugal, and Portugal credits the UK tax against its own charge. For a landlord with larger profits paying 42%, the rise is bigger and more likely to be a cost she cannot recover through the credit.

Simplified illustration. It ignores mortgage interest and exchange-rate effects.

Selling the property: UK and Portuguese capital gains tax

Non-residents are liable to UK capital gains tax on UK residential property. You must report the sale and pay any tax within 60 days of completion, even if no tax is due.

• For property owned before April 2015, you can usually rebase to the April 2015 value, so only later growth is taxed in the UK.
• Private residence relief may cover years when the property was your home.
• Current UK CGT rates on residential property are 18% and 24%.

Portugal will also tax the gain as a resident, generally on 50% of the gain added to your other income at progressive rates, with a credit for UK tax paid. Timing a sale before or after you become Portuguese resident can make a large difference.

Other points to watch

• Making Tax Digital: from April 2027, landlords with qualifying income over £30,000 must keep digital records and file quarterly updates with HMRC. Non-residents with UK property income are not automatically exempt.
• Inheritance tax: UK property is always within UK inheritance tax, however long you have been away. See our guide to UK pensions and IHT from April 2027.
• Owning through a company: some landlords look at holding property in a limited company, where profits pay corporation tax instead. Transferring existing property usually triggers CGT and stamp duty, so this needs careful modelling.
• Exchange rates: UK tax is computed in pounds, Portuguese tax in euros. Keep good records of the rates you use.

Checklist before April 2027

1. Confirm you are registered under the Non-Resident Landlord Scheme and apply to receive rent gross if you are not already.
2. Check your expected UK marginal rate for 2027/28 under the new property rates.
3. Make sure the income is declared on your Portuguese return, and the UK credit is claimed.
4. If you are thinking of selling, model the UK and Portuguese CGT position first.
5. Review whether Making Tax Digital applies to you.

What Should UK Landlords Living in Portugal Consider?

With the new UK property income tax rates taking effect in April 2027, now is a good time to review how your rental income is taxed in both countries.

For British landlords living in Portugal, understanding how the two tax systems interact is particularly important. The new rates, available tax credits and reporting obligations can all affect how much tax you ultimately pay.

Planning ahead can help avoid unnecessary costs, ensure income is reported correctly in both countries and identify potential tax planning opportunities.

This article is for general information purposes only and does not constitute tax advice. Figures are correct as of 22 October 2026 and may change following the UK Autumn Budget on 28 October 2026.*