Does the UK leaving Europe mean you have to give up your plans to live, work, retire or invest in Spain? Absolutely not! But financial planning has become just as important as sun cream, after the UK left Europe. So, here is what you need to know about how to manage your finances in Spain right now.
Taxation
If you spend more than 183 days in Spain within a single calendar year, or if your primary professional activities are conducted in Spain, you will be considered a Spanish tax resident.
Spain has signed a double tax treaty with the UK which means that you should not have to pay tax twice on the same income, and you should only pay tax in the UK or in Spain.
If you live in Spain and own assets in excess of €50,000 outside of Spain you are required by law to declare those assets to the Spanish government (Modelo 720) by the 31st March each year.
Spanish tax residents are liable to pay income tax on their worldwide income, once personal allowances have been taken into account.
Income tax in Spain starts at 19% and goes up to 45% depending on your income.
Understanding the rules around tax is essential for expats. If you don't understand the rules, you could end up paying more tax than needed, so speak to a professional if you're not sure.
Retirement planning
You should check how your Spanish pension payouts will be taxed. In most cases, a tax treaty will make your pension payouts taxable only in your new country of residence.
You may also be able to transfer private pension earnings without incurring charges through an overseas pension scheme. For UK pensioners in Spain, this is possible through a Qualifying Recognised Overseas Pension Scheme (QROPS) commonly used by UK citizens who move abroad with private pension funds.
You can still receive your UK State Pensions while living in Spain. The State Pension will continue to increase in line with the rate paid in the UK. For more information on pensions, check out the UK government website.
Deciding what the right strategy is for your retirement planning will come down to your situation. Speak to a professional adviser to find out more.
Savings & investments
Nowadays, your bank rarely offers the best interest on your savings. Furthermore, the security you have with a Spanish bank may not give you the peace of mind you once had in the UK. Before moving money to any Spanish saving or investment vehicles, it's important to review your options as an expat.
Spain allows its residents to hold savings offshore, whilst often generating higher interest and returns. Spanish-compliant savings vehicles are also exempt from the Modelo 720 annual declaration.
Tax-free investments from the UK, including ISAs and Premium Bonds will become taxable as a resident of Spain. Always check you have the most suitable savings vehicles in place.
Most UK based financial advisers are no longer be in a position to manage your savings and investments, as “passporting rights” from the UK FCA have now been removed after the UK has left the Europe. Be sure to recruit an independent financial adviser who is authorised and experienced to guide you as a Spanish resident.
Residency/Citizenship
Since the UK left the EU on January 1st 2021, British expats are allowed to stay in Spain for 90 days within a 180-day period. Hopefully you were able to apply for your residencia before the deadline, as you will need to meet specific entry requirements which you can read by clicking here.
The Spanish Golden Visa programme is the most efficient way of gaining residency in the country. The Spanish investor visa can be renewed every two years. After five years it is possible to gain permanent residency and after ten years you could apply to become a Spanish citizen.
Check out our blog on the Spanish Golden Visa for more information.
Have the right money, in the right place at the right time
Always take the time to review and regularly check your finances. A sound financial plan can ensure you meet your long-term financial goals and stay abreast of any changes in law or taxation. Be mindful that the law and taxation rules can change regularly, so can yours or your families' circumstances.
Stay up to date with local news and consult a trusted financial planner once every few months.
For any questions or queries or for a general financial check-up, please feel free to get in touch with our recommended partner - Holborn Assets. They are an award winning, cross-border financial planner with local advice in over 100 different countries. Claim your free review here.
