Rental income from property in Portugal

Hello, My husband and I are Portuguese nationals, resident and working in the UK for 6 years now. We are buying a property in Portugal, and we are considering moving back to Portugal in a few years time. We don't own property in the UK or anywhere else. We are thinking of renting our Portuguese property before we return. There is currently a Portuguese government housing scheme whereby we can rent the property to the Portuguese Government (who then sublets to tenants), and the rent we receive is tax free in Portugal. This will be in the order of around £12,000, and will stay in Portugal (to allow us to pay the PT mortgage). Under the PT/UK DTA, do we still need to pay rental income tax in the UK? If so, how much? Another question - are we considered "non-domiciled" residents and does this also not have implications for paying tax on foreign income in the UK? Thank you

Hi

The UK/Portuguese double taxation agreement, gives Portugal the first opportunity to tax your Portuguese property rental income and capital gains.  
As a UK resident, using the arising basis on your world-wide income (which is the default taxation method), HMRC would have the right to tax your overseas property income and capital gains.
As Portuguese nationals, resident in the UK, you would be considered to be resident and not domiciled in the UK (if resident in the UK for less than 16 years).  
This situation allows you claim the remittance basis, instead of the arising basis for calculating tax liability on your world-wide income.  
The remittance basis would mean that you only declare your UK income and capital gains and any overseas income or capital gain, brough into the UK, on your self assessment tax return.  
The remittance basis is not always the better option, as you lose your personal tax allowance and may also incur the remittance charge.  This could result in more tax being payable using the remittance basis instead of the arising basis.  
Have a look at
Residence, domicile and the remittance basis: RDR1
for more information.
If you choose the arising basis, you will need to declare the gross profit and expenses in your tax return.

Thank you