Selling Portuguese property as a UK resident: Portuguese tax, UK tax and the 2026 treaty

Which country taxes the gain?

Both. Portugal taxes the gain because the property is in Portugal. The UK taxes it because you are UK resident, and UK residents pay capital gains tax on gains anywhere in the world (GOV.UK, “selling overseas property”). The treaty between the two countries decides who goes first and how the double charge is removed:

	Portugal	United Kingdom
Right to tax	First right, as the country where the property is (treaty article 13(1))	Taxes UK residents on worldwide gains
Share of gain taxed	50%	100%
Inflation relief	Yes, coefficient on purchase price if held more than 24 months	No
Currency	Euros	Sterling, using the exchange rate at each date
Rate	12.5% to 48%, set by your worldwide income	18% within the basic-rate band, 24% above
Tax-free amount	None	£3,000 annual exempt amount
Relief for the other country’s tax	Not applicable	Credit for Portuguese tax, capped at the UK tax on the same gain (article 21(2)(a))

How does Portugal tax a UK resident?

As a non-resident of Portugal, you are taxed on 50% of the gain at Portugal’s progressive rates. The rate is set by adding your worldwide income, including your UK pension or salary, to the taxable half of the gain. The flat 28% rate that many UK sellers remember was abolished for property from 1 January 2023. Nothing is withheld when you sell. You declare the sale on a Portuguese return (Annex G) between 1 April and 30 June of the next year and pay by 31 August. The full method, with brackets and examples, is in our guide to capital gains tax for non-residents.

What changed with the 2026 UK–Portugal treaty?

A new double taxation convention replaced the one from 1968. According to GOV.UK and HMRC’s Double Taxation Relief Manual:

Event	Date
Signed in London	15 September 2025
Entered into force	29 December 2025
Effective in Portugal (all taxes)	1 January 2026
Effective in the UK for income tax and capital gains tax	6 April 2026

For a seller, the core rule is unchanged. Portugal may tax gains on Portuguese property, and the UK gives credit for the Portuguese tax. A sale completed before 6 April 2026 falls in the 2025–26 UK tax year, when the old convention still applied for UK purposes; credit relief was available under it too.

The new treaty matters more for people who live in Portugal. Under article 17, UK private and state pensions paid to a Portuguese resident are taxable only in Portugal. Government-service pensions, such as a civil service or armed forces pension, generally remain taxable only in the UK (article 18).

How does foreign tax credit relief work?

You work out the UK tax on the gain as if Portugal did not exist. You then deduct the Portuguese tax paid on the same gain. The credit is the lower of the Portuguese tax and the UK tax on that gain (HMRC International Manual, INTM169100).

• If Portuguese tax is lower, you pay the difference to HMRC.
• If Portuguese tax is higher, you pay nothing more to HMRC, but the excess is not refunded.

Either way, your total bill is roughly the higher of the two taxes. HMRC converts the Portuguese tax to sterling at the exchange rate on the date it became payable; if that date is unknown, the payment date is normally used (INTM162620).

Why does the exchange rate change my UK gain?

HMRC does not calculate the gain in euros and convert it. It converts each figure at the rate on its own date: the purchase price at the rate on the day you bought, the sale price at the rate on the day you sold, and costs at the rate when you paid them (Capital Gains Manual, CG78310, following Bentley v Pike). If the pound has weakened since you bought, your UK gain is larger than the euro gain. If it has strengthened, the UK gain shrinks and can even become a loss.

Take a villa bought for €300,000 and sold for €650,000 (full details below). The euro figures stay fixed; only the rate on the sale date changes:

€ per £ at sale	Sterling proceeds less sale costs	UK gain	UK tax at 24%	Portuguese tax credit	Extra UK tax
1.10	£554,386	£269,122	£63,869	£36,005	£27,864
1.15	£530,282	£245,019	£58,084	£34,440	£23,644
1.25	£487,860	£202,596	£47,903	£31,685	£16,218
1.40	£435,590	£150,325	£35,358	£28,290	£7,068

The same €650,000 sale produces UK gains that differ by almost £119,000 depending on the rate. For the table, the Portuguese tax (€39,606) is converted at the same rate as the sale for simplicity. Exchange rates are illustrative, not historical.

Worked example: both taxes on one sale

A UK-resident sole owner bought an Algarve villa in 2016, renovated it in 2021, and completes the sale in October 2026, which falls in the UK 2026–27 tax year. Their UK pension of £55,000 (about €64,000) already uses up the basic-rate band, so UK gains are taxed at 24%. The annual exempt amount is unused. Exchange rates and purchase costs are illustrative.

Portugal (in euros)

Step	Calculation	€
Sale price		650,000
Purchase price × 2016 coefficient	300,000 × 1.19	−357,000
Purchase costs (IMT, stamp duty, deed)	assumed	−21,000
Works in 2021	invoiced	−40,000
Agent 5% + 23% VAT, energy certificate	39,975 + 200	−40,175
Gain		191,825
Taxable half		95,912.50
Total for rate (half gain + €64,000 income)		159,912.50
Tax on total	159,912.50 × 48% − 11,387.17	65,370.83
Average rate		40.88%
Tax on the half gain	95,912.50 × 40.88%	39,208.19
Solidarity surcharge (prudent assumption)	(95,912.50 − 80,000) × 2.5%	397.81
Portuguese tax	payable by 31 August 2027	39,606

United Kingdom (in sterling)

Item	€	€ per £	£
Sale price (Oct 2026)	650,000	1.15	565,217
Purchase price (2016), no inflation relief	300,000	1.28	−234,375
Purchase costs (2016)	21,000	1.28	−16,406
Works (2021)	40,000	1.16	−34,483
Sale costs (Oct 2026)	40,175	1.15	−34,935
Gain			245,019
Less annual exempt amount			−3,000
Taxable gain			242,019
UK CGT at 24%			58,084
Less Portuguese tax (€39,606 at 1.15)			−34,440
UK tax to pay			23,644

Figures are rounded to the nearest pound. Total tax is €39,606 in Portugal plus £23,644 in the UK, about £58,084 in all, which equals the UK tax alone. Portugal takes about 20% of its gain; the UK’s higher rate on a larger sterling gain sets the overall cost. Try your own numbers in the selling calculator.

How do I report the gain to HMRC?

Gains on property outside the UK go on your Self Assessment return for the tax year of the sale. The online return and payment are due by 31 January after the tax year ends; for a sale between 6 April 2026 and 5 April 2027, that is 31 January 2028. If you do not normally file, you need to register for Self Assessment first.

HMRC’s “real time” Capital Gains Tax service cannot be used to claim foreign tax credit relief, so for a Portuguese sale Self Assessment is the practical route.

The 60-day “report and pay” return applies to UK residential property. GOV.UK’s 60-day guidance covers UK residential property only; other gains, including overseas property, are reported through Self Assessment or the real-time service. We found no GOV.UK guidance that requires a 60-day return for a Portuguese home sold by a UK resident.

What if the UK deadline comes before the Portuguese bill?

The two tax years do not line up. Portugal’s year is the calendar year; the UK’s runs from 6 April.

Sale completes	UK tax year	UK return and payment due	Portuguese return	Portuguese tax paid
1 Jan to 5 Apr 2026	2025–26	31 Jan 2027	1 Apr to 30 Jun 2027	By 31 Aug 2027
6 Apr to 31 Dec 2026	2026–27	31 Jan 2028	1 Apr to 30 Jun 2027	By 31 Aug 2027
1 Jan to 5 Apr 2027	2026–27	31 Jan 2028	1 Apr to 30 Jun 2028	By 31 Aug 2028

For a sale between January and early April, the UK deadline arrives before Portugal has assessed the tax. You can claim the credit later. The deadline is four years after the end of the UK tax year, or, if later, 31 January after the tax year in which the Portuguese tax is paid (INTM162560). Be ready to pay the UK tax first and recover the credit afterwards.

Can UK private residence relief apply?

Sometimes. If the Portuguese property was your only or main residence at some point, part of the UK gain may be relieved, and the final nine months of ownership always qualify (HMRC helpsheet HS283). Since 6 April 2015, extra conditions apply to a home in a country where you were not tax resident, such as spending at least 90 days (counted by nights) in the home in each tax year (Capital Gains Manual, CG64582). This is detailed; take advice if you plan to rely on it. Portugal’s own main-home relief has separate conditions.

What if I lived in Portugal and moved back to the UK?

Timing matters. If you sell while still Portuguese resident, Portugal taxes you as a resident and the UK usually does not tax the gain. GOV.UK warns, however, that people who return to the UK within five years of leaving may have to pay UK tax on overseas property sold while abroad. If you sell after becoming UK resident again, both taxes apply as described above, and your sterling cost is still fixed at the rate on the day you bought. See our guides to moving back to the UK and NHR status ending.

What about Irish residents?

The structure is similar. Portugal taxes 50% of the gain as for any non-resident. Ireland charges capital gains tax at 33% on most gains, after a personal exemption of €1,270 a year. You can claim a credit for Portuguese tax under the Ireland–Portugal treaty, capped at the Irish tax on the same gain (Revenue). Because both countries use the euro, there is no currency effect.

The Irish timetable runs ahead of Portugal’s. Irish CGT on a disposal between 1 January and 30 November is due by 15 December of the same year, and for December disposals by 31 January. The return is due by 31 October of the following year. The Portuguese tax is only settled the following August, so plan for the cash flow and ask your adviser how to handle the credit.

Key points

• Portugal taxes 50% of the gain at 12.5% to 48%; the UK taxes the whole sterling gain at 18% or 24% after the £3,000 exempt amount.
• The UK gives a credit for Portuguese tax, capped at the UK tax on the gain, so you pay roughly the higher of the two.
• The 2025 UK–Portugal treaty entered into force on 29 December 2025 and applies to UK capital gains tax from 6 April 2026.
• HMRC converts purchase and sale at the exchange rate on each date, so currency moves can change the UK gain by six figures.
• Report on Self Assessment, not the 60-day UK property return; claim the credit there, later if the Portuguese bill comes after.
• Irish residents pay 33% CGT with a credit for Portuguese tax, and must pay before Portugal assesses.