UK Pension Transfer for Portugal Residents (2026)

British residents of Portugal who hold UK pensions face a different landscape in 2026 than in previous years. The Non-Habitual Resident (NHR) regime has closed to most new arrivals, a new UK-Portugal tax treaty has come into force, and the rules on transferring a UK pension overseas tightened sharply at the end of October 2024. This page sets out the current position on UK pension transfers and pension income for people who are, or plan to become, tax resident in Portugal.

The term transfer covers two very different things. One is moving a UK pension into a Qualifying Recognised Overseas Pension Scheme (QROPS). The other is simply drawing income from a UK pension while living in Portugal. The tax treatment differs, and so do the recent rule changes.

• The NHR regime closed to new entrants at the end of 2024, with a limited transition window into 2025.
• Its successor, IFICI (often called NHR 2.0), targets specific research and innovation roles and does not exempt foreign pension income.
• A new UK-Portugal double tax treaty took effect for Portugal from 1 January 2026 and for UK income tax from 6 April 2026.
• Under the new treaty, private, occupational and state pensions are taxed by Portugal; UK government service pensions stay taxable in the UK.
• The Overseas Transfer Charge of 25% now applies to many transfers that were previously exempt, following the 30 October 2024 Budget.

The end of NHR and the arrival of IFICI

The NHR regime offered favourable treatment to many foreign-source income types for a ten-year period, including, for some applicants, exemption or reduced rates on foreign pension income. It closed to new entrants from the end of 2024, with a narrow transition window for those already in the application pipeline running into 2025. People already registered under NHR keep their benefits for the remainder of their ten-year term under the terms that applied to them.

The replacement regime is the Tax Incentive for Scientific Research and Innovation, known as IFICI and informally as NHR 2.0. It applies a flat 20% rate to qualifying Portuguese employment or self-employment income in eligible activities, mainly in research, higher education and certain innovation roles. Unlike the old NHR, IFICI does not exempt foreign pension income. A retiree moving to Portugal on pension income alone will generally not qualify for IFICI and will be taxed under standard Portuguese rules.

How the new UK-Portugal treaty taxes pension income

A new UK-Portugal Double Taxation Convention was signed on 15 September 2025 and entered into force in late December 2025. It took effect for Portuguese tax from 1 January 2026 and for UK income tax from 6 April 2026, replacing the long-standing 1968 treaty. The change matters because it sets out which country has the right to tax each type of pension.

Under the new treaty, private pensions, occupational schemes, personal pensions and SIPP income paid to a Portuguese resident are taxable in Portugal, not the UK. The UK State Pension is treated the same way and falls to Portugal once the recipient is Portuguese tax resident. Pensions for past government service, such as civil service, armed forces, police and judicial schemes, remain taxable only in the UK. The treaty includes relief mechanisms so the same income is not taxed twice.

Portuguese tax on pension income is charged at progressive rates after a personal deduction. The exact rate depends on total income and individual circumstances, so figures should be confirmed with a Portuguese tax adviser. The practical point is that, for most ordinary UK pensions, Portugal is now the taxing country once residence shifts there.

Transferring a UK pension: the Overseas Transfer Charge

Moving a UK pension into a QROPS is separate from drawing income. The Overseas Transfer Charge (OTC) is a 25% charge that can apply when a UK pension is transferred to a QROPS. Historically, transfers to a scheme established in the European Economic Area (EEA) or Gibraltar were excluded from the charge where the member was UK resident or resident elsewhere in the EEA.

That EEA and Gibraltar exclusion was removed for transfer requests made on or after 30 October 2024, the date of the Budget. Transfers requested before that date and completed before 30 April 2025 could still rely on the old exclusion. After the change, a transfer that would once have been exempt can now attract the 25% charge unless another exclusion applies.

One exclusion that remains is where the member is tax resident in the same country in which the QROPS is established. In practice the number of Portugal-based schemes on HMRC's recognised list is very limited, so a UK resident or a Portugal resident transferring to a scheme outside Portugal may face the charge. From 6 April 2025, overseas schemes in the EEA also have to meet the same conditions as schemes elsewhere in the world. Anyone considering a transfer should check the current QROPS position and the charge with reference to GOV.UK before acting.

What this means in practice

For most British retirees in Portugal, the realistic position in 2026 is to draw UK pension income directly and be taxed on it in Portugal under the new treaty, rather than transferring to a QROPS. The closure of NHR removes the pension exemption that once made Portugal attractive for that purpose, and the OTC changes have narrowed the cases where an overseas transfer avoids the 25% charge. Whether a transfer makes sense at all depends on individual circumstances, scheme type and residence, and the rules continue to change.

This article is for general information only and does not constitute financial, tax or regulatory advice. Kaeltripton.com is not authorised or regulated by the FCA. Pension and tax rules differ by country of residence and change over time. Verify any figure with official sources such as GOV.UK, HMRC or the FCA, and take advice from a suitably authorised adviser in your country of residence before acting.

FAQ

Is the NHR regime still available to new residents of Portugal?

No. NHR closed to new entrants at the end of 2024, with a limited transition window into 2025. The successor regime, IFICI, targets specific research and innovation roles and does not exempt foreign pension income.

Where is my UK private pension taxed if I live in Portugal?

Under the new UK-Portugal treaty effective in 2026, private, occupational and personal pensions and SIPP income paid to a Portuguese tax resident are taxed in Portugal, not the UK.

Is the UK State Pension taxed in the UK or Portugal?

The UK State Pension is taxed in Portugal once you are Portuguese tax resident under the new treaty. UK government service pensions, by contrast, remain taxable in the UK.

Does the 25% Overseas Transfer Charge apply to transfers to the EEA?

The exclusion for EEA and Gibraltar schemes was removed for transfer requests made on or after 30 October 2024. Such transfers can now attract the 25% charge unless another exclusion, such as same-country residence, applies.

Should I transfer my UK pension into a QROPS to live in Portugal?

There is no single answer. Since NHR closed and the OTC exclusions narrowed, many residents draw UK pension income directly and are taxed in Portugal under the treaty. Whether a transfer is appropriate depends on individual circumstances and should be checked with a suitably authorised adviser.