Are you planning to move to Chiclana de la Frontera? What a good choice. It is a lovely part of Spain, with so many
different factors contributing to a very enjoyable and beneficial
lifestyle. Spain also offers many
advantages from a financial point of view.
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 - in Andalucía
it is 48%.
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 here. 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.
Tax rates, scope and reliefs may change. Any statements concerning taxation are based
upon our understanding of current taxation laws and practices which are subject
to change. Tax information has been
summarised; an individual should take personalised advice.
David
Bowern, Partner, Blevins Franks
Email:
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Tel: 952 809 212
Learn
more about Blevins Franks.
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