Ten Money Matters If Moving To Spain

Are you planning to move to Spain? What a good choice. It is a lovely place to live, with so many different factors contributing to a very enjoyable and beneficial lifestyle. Spain also offers many advantages from a financial point of view.


By Jason Porter


Here is a general overview of the key financial considerations for UK nationals of relocating to Spain. It is also useful for those already living here.


1. Tax residency and obligations
You need to establish what makes you resident in Spain for tax purposes. It is not just a matter of day counting. If you meet the residency criteria, then you are liable for Spanish tax on your worldwide income, gains and wealth, and subject to the Spanish succession tax rules.
You also need to understand the UK tax residence rules to make sure you do not inadvertently find you are resident in the UK for tax purposes – it is easier than you may think.


2. Your home
Your home is likely to be among your most important assets. If you own property in the UK and/or in Spain, which do you sell, when and why? What is the best plan to limit or avoid UK or Spanish capital gains tax? Appropriate, timely advice, will avoid common pitfalls.


3. Notifying the tax authorities
If you have not yet left the UK, advise HM Revenue & Customs of your departure date on Form P85 (available from local tax offices or www.hmrc.gov.uk).
You then need to make yourself known to the Spanish tax authorities and submit income tax returns each year.


4. Structuring your assets to minimise tax
Spanish taxpayers have had a particularly high tax burden over recent years, though they have improved a little in 2015. The top income tax rate is between 44% and 48%, depending on where in Spain you live.
With specialist advice you can structure savings and investments to be tax efficient in Spain.
Do not presume that what was tax efficient in the UK is tax efficient in Spain. You will probably need to vary existing arrangements with those designed for Spanish residents.


5. Bank accounts
If you retain any UK bank accounts, the bank interest will be taxable as a Spanish resident. To receive UK bank interest gross you can usually submit Form R105 to your UK bank.


6. Currency
Many British expatriates keep their savings and investments in sterling. This puts income at the mercy of exchange rate fluctuations. A sensible rule of thumb is to match your assets to your liabilities, so if your long-term spending will be in euros you should consider holding an appropriate amount of your assets in euros to reduce currency risk.
If you may return to the UK in the future, it is often wise to have diversification in your assets, including currencies.


7.  Pensions
There are usually ways to improve your private pension arrangements to make them work better for you when living in Spain. It is vital that you receive specialist advice before you take any pension decisions. There are various options for your UK pension funds, and each has different implications for your long-term income and the tax payable.


8. Inflation and your long-term security
Inflation will reduce the spending power of your savings over your retirement years. It is essential that you take action now to protect your wealth in real terms, so that you can enjoy the standard of living you are used to throughout retirement.


9. Investments
Your investment strategy should be specifically designed around your circumstances and objectives. Having moved to a new country, you now need to review your strategy to see if it needs to be adjusted for your new life in Spain.


10. Estate planning
It is important to review your estate planning when you move to a new country. Your estate planning arrangements need to take both Spanish and UK succession law and tax into account. Ensuring that assets pass to the right beneficiaries at the right time, with the minimum of administration or taxation, can be a complicated process. It is important to undertake a succession planning health check, with help of a specialist wealth manager.
Taking advice from a professional tax planning and wealth management specialist is invaluable. It is the only way you can be sure that you have not overlooked anything, and that you have established what all your options are and how suitable they are for you.


Jason Porter is a Director of International Tax & Wealth Management firm, Blevins Franks