The treaty, signed in mid-September, replaces a framework that has been in place since 1968 and is being described as a long-overdue update for a post-Brexit world.

The agreement, confirmed by both governments, was signed in Lisbon alongside a parallel deal to improve the exchange of financial information between the tax authorities in London and Lisbon.

The changes are expected to modernise the fiscal relationship between the two countries and strengthen cooperation on tax transparency.

Although the treaty has been signed, it is not yet ratified or in force. This transition period, experts say, is a critical window for expatriates to review their financial structures and prepare for what could be significant changes to their tax treatment.

Jake McLaughlin, Executive Director of deVere Portugal — part of the world’s largest independent financial advisory group, which serves 80,000 expatriates globally — said the development was “hugely significant” for British residents in Portugal.

“This new treaty represents the first major overhaul of UK–Portugal tax cooperation in more than half a century,” he said.

“It’s designed to bring clarity, eliminate grey areas and modernise the rules for the way people actually live, work and invest today.”

While the full text has not yet been released, early indications suggest the treaty will introduce clearer provisions on pension and investment income — two areas that have long been a source of confusion and inconsistent interpretation for expats.

“In practice, many expats have faced uncertainty about where certain types of income should be taxed, whether in the country of residence or the country of source,” McLaughlin said.

“A modernised DTA could finally provide the certainty people need to plan properly.”

The timing of the reform is particularly relevant for retirees and professionals with cross-border income.

Since Brexit, many UK nationals in the EU have found themselves subject to complex and sometimes conflicting tax rules. The new DTA aims to reduce double taxation, strengthen cooperation between authorities, and prevent evasion through greater transparency.

Analysts expect the revised framework to clarify how tax credits and exemptions are applied, adjust withholding tax limits on dividends, interest and royalties, and possibly update definitions of “permanent establishment” to reflect today’s digital economy.

For pensioners, even modest adjustments could have meaningful financial consequences.

“Small changes to pension tax treatment can translate into big differences in disposable income,” McLaughlin said.

“Anyone who draws income from UK-based pensions or investments while living in Portugal should be paying very close attention to how this develops.”

He added that now is the time for expatriates to assess their positioning before the new rules take effect.

“Once treaties are ratified, flexibility is lost quickly,” he said. “By then, your planning options narrow. This interim period is when independent cross-border advice can add the most value.”

McLaughlin also warned that while the treaty is expected to simplify compliance, it may come with stricter reporting standards and closer scrutiny of offshore assets.

“The cooperation between the two tax authorities will increase,” he said. “There will be fewer grey areas — and fewer excuses for getting it wrong.”

He noted that the companion agreement on the exchange of confidential information shows clear intent from both sides: to ensure income is declared in the right jurisdiction. “That will make transparency unavoidable,” he said. “Expats need to make sure their structures and declarations are watertight.”

The UK remains one of Portugal’s largest sources of foreign residents, with tens of thousands of British nationals living in the Algarve, Lisbon and Madeira. For them, the coming changes are likely to have practical and personal effects.

“Expats should not assume that what worked under the 1968 treaty will continue to work under the new one,” McLaughlin said.

“The rules are changing and independent advice is essential to ensure you’re on the right side of those changes.”

Until the new agreement is ratified, the 1968 framework remains in effect. But ratification could follow within months.

For expats with cross-border income, this is the moment to prepare and to understand exposure, optimise income streams, and confirm compliance under both systems.

“This is one of those turning points that can either strengthen or weaken an expat’s financial position, depending on how they respond,” McLaughlin said. “Those who take advice early are far more likely to come out ahead.”


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