When changing tax residency from the UK to Spain, there are potentially costly mistakes that can be made due to not taking advice, or getting the wrong advice, as well as advantages that can be achieved with well advised planning.
Our legal, financial and tax professional associates assist our client with all the formal matters related to taking up residency in Spain, in particular Spanish tax planning.
Tax in Spain
Most are aware that the Spanish tax system is very different to that of the UK. Income tax allowances vary depending age and whether you have dependents. Tax rates for earned income are higher, and there are different rates for other types or income, such as that from investments or from letting residential property.
Click / tap here to read more about the different types of tax in Spain here.
Financial & Tax Related Things To Consider When Taking Up Residency in Spain
The following is some general information covering the common areas that are most often relevant to people moving from the UK to Spain, or those planning to.
These have to be declared to the tax office if all your cash and savings total equivalent of €50,000 or more. You don’t pay tax on savings, only on interest, however depending on your overall wealth i.e. other assets including your home, along with your savings, Wealth Tax may apply. Whether it does or not will depend on the region of Spain that you live in or are planning to move to. Wealth Tax was recently removed in Andalucia, but for example in Catalunya, you get a €500k allowance plus and additional €300k for your main home, giving a total of just €800k before Wealth Tax kicks in.
If you have investment ISA’s, these lose their tax free status once you become resident in Spain. You would become liable to pay Capital Gains Tax on any growth or interest. Gains on other investments also attract Capital Gains Tax. If you don’t have proof of how much of the ISA or investment is capital that you put in, and how much is gain, everything drawn out will treated as investment income and taxed as a Capital Gain. The tax rate starts at 19% and goes up to 26%.
Investments also have to be declared following the same rule as saving we’ve detailed for savings, i.e. if the total value of all investments is equivalent to €50,000 or more they must be declared.
There are tax efficient ways to invest as a Spanish resident.
Work pensions are taxed as regular income in Spain, however as since the UK left the EU, personal pensions such SIPP’s have fallen into the the category of general investments. This can be beneficial, and with correct planning, tax paid on drawdown from these can be significantly reduced, often to less than you would pay as a UK resident.
Tax free lump sums are taxed in Spain either as income or capital gain, depending on the type of pension they are paid from. General guidance is therefore to take lump sums before taking up residency in Spain.
Click / tap here to read more about taxation of UK pensions in Spain.
If you are planning to sell your home in the UK, you need to be aware that if you do so after becoming resident in Spain, you might have to pay Capital Gains Tax. Basic advice is to sell whilst you are still tax resident in the UK and not take up residency in Spain until the following tax year.
If you are not planning to, or able to sell your property before you move to Spain, there are things you can do to enable you to avoid Capital Gains Tax in Spain, if you want to sell your home in the future.
With the UK no longer in the EU, Financial Advisers in the UK cannot provide services to, or advise clients who live in the EU, unless they have a branch in an EU country. Conversely, most UK financial and investment product providers will not accept instructions from EU based advisers, unless they also have a branch in the UK and are registered with the UK regulator the Financial Conduct Authority.
There aren’t many Financial Advisers in the UK who can provide services or advice to clients who live in Spain, and even fewer who are sufficiently qualified or have the necessary knowledge to provide financial advice taking into account Spanish taxation.
Click / tap here to read more about Spanish residency and tax in Spain.
Planning For Spanish Tax Residency
When moving to Spain from the UK, we recommend the following:
- Learn about the tax system – what needs to be done and when
- Understand how the Spanish tax regime differs in your situation and what tax you will have to pay
- Find out what tax treatment applies to assets you own and tax breaks that you currently enjoy
- Make changes in your financial set up to minimise, limit or avoid Spanish tax
- Get professional advice on financial or tax matters in both the UK and Spain
If you are not sure about your tax position, have questions about tax in Spain, or would like assistance with any of the steps above, we can provide you with an initial review of your situation. We’ll highlight key tax points relating to tax, your situation and answer your general questions.
You may need further help understanding how tax in Spain affects you, or planning to limit how much it does. In which case our team of financial and tax consultants specialised in change of residency planning between UK and Spain, are here to help.
Our professional associates UK trained and qualified consultants and advisers, with many years of experience working with our Spanish accountants and lawyers helping our clients plan their change from UK to Spanish tax residency.
Spanish Residency Financial & Tax Consultation
If you would like to speak one of our consultants, we will be happy to offer an initial call to discuss your plans, review your situation and access your needs.
Following the call we’ll provide you with a summary outlining Spanish tax planning areas relevant to you, and if applicable a proposal for further consultation or advice.
The initial review of your situation is free of charge, thereafter if you require further guidance, consultation or advice, this will be offered at the relevant fee for the time and work required.
We’ll need some information from you to complete the initial review and assessment. You can provide a summary of your situation outlining your financial set up by email to
firstname.lastname@example.org, or you can click here to complete our online questionnaire.