Your UK State Pension in Portugal
Portugal is an EEA member state, so your UK State Pension is uprated annually. You receive the same increases as UK residents, protected under the UK-EU Trade and Cooperation Agreement. This was a major relief for the large British expat community in Portugal following Brexit.
You can have your State Pension paid directly into a Portuguese bank account in euros. Alternatively, keep a UK bank account and transfer funds as needed using a specialist currency service for better exchange rates than high-street banks typically offer.
The NHR Regime: What Happened and What It Means Now
Portugal’s Non-Habitual Resident (NHR) tax regime was one of the main attractions for UK retirees. It offered a flat 10% tax rate on foreign pension income for 10 years. However, the NHR regime closed to new applicants from 1 January 2024.
If you registered for NHR before the deadline, you continue to benefit from the 10% rate on UK pension income for the remainder of your 10-year period. This is a significant advantage that can save tens of thousands of euros compared to standard Portuguese tax rates.
The IFICI Replacement
The government introduced the IFICI (Incentivo Fiscal à Investigação Científica e Inovação) regime in 2024 as a replacement. However, IFICI is primarily aimed at scientific researchers, technology workers, and specific professional categories. It offers a flat 20% rate on qualifying Portuguese-source income for 10 years, but retirees receiving foreign pension income are unlikely to qualify.
Standard Portuguese Tax on UK Pensions
Without NHR, your UK pension income is taxed at Portugal’s progressive income tax rates:
| Taxable Income | Rate |
|---|---|
| Up to €7,703 | 14.5% |
| €7,704 – €11,623 | 21% |
| €11,624 – €16,472 | 26.5% |
| €16,473 – €21,321 | 28.5% |
| €21,322 – €27,146 | 35% |
| €27,147 – €39,791 | 37% |
| €39,792 – €51,997 | 43.5% |
| €51,998 – €81,199 | 45% |
| Over €81,199 | 48% |
Under the UK-Portugal double taxation agreement, UK pension income is generally taxable only in Portugal (not in the UK). You need to apply to HMRC for relief from UK tax.
The 25% Tax-Free Lump Sum
The UK’s 25% pension commencement lump sum is tax-free under UK rules. Portugal’s treatment of this lump sum depends on your circumstances. Under NHR, the lump sum was generally treated favourably. Without NHR, there is a risk that Portugal treats it as taxable income. This is a complex area where you need specialist advice from a Portuguese tax adviser (consultores fiscais) before taking any lump sum.
Keeping Your Pension in the UK vs QROPS
The majority of UK expats in Portugal keep their pension in a UK SIPP. The advantages are clear: competitive fees, wide investment choice, FCA regulation, and the flexibility to return to the UK. There is no Portuguese QROPS market to speak of, so expats who do want a QROPS typically use EEA-based schemes in Malta or Gibraltar.
Because Portugal is in the EEA, the 25% overseas transfer charge does not apply to transfers to EEA-based QROPS. However, the ongoing fees of a QROPS and the loss of UK regulatory protections mean this option only makes sense for larger pension pots with specific needs around currency or estate planning.
Cost of Living and Retirement Budget
Portugal offers a significantly lower cost of living than the UK, particularly outside Lisbon and the Algarve. Key budget considerations include:
- Housing — rental and purchase prices are lower than the UK, though Lisbon and popular Algarve areas have seen significant price increases
- Healthcare — the SNS is free or low-cost with an S1. Many expats also take out private health insurance (around €100–€300/month depending on age and coverage)
- Food and drink — significantly cheaper than the UK, especially local produce, restaurants, and wine
- Council tax equivalent — IMI (Imposto Municipal sobre Imóveis) is much lower than UK council tax for equivalent properties
Residency Requirements
Since Brexit, UK nationals moving to Portugal need to apply for a residence permit. The most common route for retirees is the D7 visa (passive income visa), which requires proof of regular income (such as a pension) of at least the Portuguese minimum wage (approximately €820/month in 2026). You apply at the Portuguese consulate in the UK before your move.
Once in Portugal, you register with SEF (now AIMA — Agência para a Integração, Migrações e Asilo) for your residence card. After five years of legal residence, you can apply for permanent residency or Portuguese citizenship.
Planning Checklist for Portugal
- Check your NI record and consider voluntary contributions before leaving
- Apply for an S1 form for Portuguese healthcare
- Engage a Portuguese tax adviser before your move to understand your tax position
- Apply for a D7 visa through the Portuguese consulate
- Get a Portuguese NIF (tax identification number) — you will need this for almost everything
- Notify HMRC of your move and apply for DTA relief
- Review currency risk and set up a specialist transfer service
- Check whether your UK pension provider will continue to service overseas clients
See also our retiring abroad pension checklist and guides for Spain and France.