ChiFRA

As well as a lower tax bill for you and your heirs, strategic tax planning can help provide estate planning advantages and boost investment returns.

When it comes to your savings and investments, is your main objective to preserve your wealth, provide an income or generate growth? Perhaps it is all of the above? Whatever the answer, tax planning plays an important role in protecting and making the most of what you have.

While the tax tail shouldn’t necessarily wag the investment dog, there are numerous benefits to strategic tax planning, especially for expatriates who have cross-border considerations. Here are four of them. 

Long-term residents of Spain will be familiar with Modelo 720 (Form 720), but newer residents may be unclear on what they have to do.  The penalties are prohibitive, so you need to get it right.  The deadline, as every year, is 31^st March.

If you were tax resident in Spain in 2020 you are legally obliged to submit a Modelo 720 declaring the assets you own outside Spain worth over €50,000.  This is not a tax return as such; you need to complete it over and above your income and wealth tax returns.

While there was little in the way of immediate changes in the latest UK Budget, the freezing of some allowances is set to increase tax bills in the long run.

This year’s UK Budget predictably focused on ongoing pandemic support, bringing very few changes to personal taxes. Chancellor Rishi Sunak did, however, introduce some longer-term measures to collect more tax by freezing the main allowances and exemptions for the next five years.

According to the Office for Budget Responsibility (OBR), the overall impact of these measures will be that the UK’s tax burden will rise to its highest level since the 1960s!

So, what changes in April may affect UK nationals living in Spain, and what can you do to minimise any negative impact?

Residents of Andalucía are affected by two annual government budgets: the state budget and the regional one.  The autonomous communities in Spain can adjust the local half of the income tax rates and adapt rates and allowances for wealth tax and succession tax. 

The good news this year is that, although the state has increased the top rate for wealth tax, this does not affect us in Andalucía – in fact our rates have been reduced. The state has imposed new higher income tax rates, but this is only on a high level of income and not many people will be affected.