Moving to Spain - Financial Tips

Video Guide: Financial Implications of Moving to Spain

Watch this short video explaining the key financial considerations when relocating to Spain — including pensions, UK savings, tax filings, and estate planning essentials:

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• What happens to my UK ISA and other investments?
• What about my UK-based financial advisor?
• Don’t forget about Modelo 720
• How is the 25% pension lump sum treated in Spain?
• Should I have a Spanish Will?
• Investment Options in Spain: A Quick Comparison

If you're asking questions such as “What are the financial implications of moving to Spain?”, “How should I manage my UK investments and pensions?”, or “ How does relocating to Spain affect my investments?”, the answers depend heavily on your tax residence status, future plans, and financial situation. Below we break down the most important financial considerations when emigrating to Spain.

Spain offers various tax benefits for expats, but also some complexities. The key financial areas to consider when relocating to Spain include managing cross-border wealth, understanding Spanish taxation on foreign assets, planning for pensions, and dealing with Spanish inheritance laws.

What happens to my UK ISA and other investments?

Many expats moving to Spain may have UK-based investments such as ISAs, Premium Bonds, or general investment accounts. While these offer certain tax advantages in the UK, they are not recognized by the Spanish tax system and may lead to tax complications. Here's what you need to know:

• Taxation in Spain: UK tax-free investments are not tax-exempt in Spain. These types of investments may be taxed as savings income under Spanish tax laws, which can reduce the overall benefit.
• Withdrawal Restrictions: UK investment providers may restrict or prevent contributions to these accounts once you become a Spanish tax resident. In some cases, they may even encourage you to close your account.
• Solution: To avoid unnecessary tax exposure, it’s advisable to switch to Spain-compliant investment vehicles that meet Spanish tax requirements, such as investment bonds or EU-based savings plans that allow for tax-efficient growth.

What about my UK-based financial advisor?

Since Brexit, UK financial advisors can no longer provide services in Spain unless they are registered with Spanish authorities. This presents a significant issue for expats, as many of their existing advisors cannot legally assist them in managing finances in Spain.

As part of a regulated wealth management group authorized within the EU, we offer financial services to clients living in Spain. This includes tax-efficient investment strategies, pension planning, and providing expert advice on navigating Spain’s financial system while keeping in line with both UK and Spanish regulations.

Don’t Forget About Modelo 720

The Modelo 720 is a mandatory form for expats to declare foreign assets to the Spanish tax authorities. Here's what you need to know:

• Declaration of Assets: If your overseas assets exceed €50,000, you must file this form when you become a Spanish tax resident. It covers assets such as property, bank accounts, and investments.
• Deadlines: The Modelo 720 must be submitted by March 31st of the year after you become a Spanish resident.
• Tax Penalties: Failing to submit Modelo 720 or providing incorrect information can result in substantial fines, so it's crucial to file it correctly.

How is the 25% Pension Lump Sum Treated in Spain?

If you are a UK pension holder, reaching the age of 55 allows you to access your pension benefits, including the 25% pension commencement lump sum (PCLS). While this lump sum is tax-free in the UK, it is taxed in Spain.

• Plan Ahead: To avoid the tax liability in Spain, it is recommended to take the lump sum before becoming a Spanish tax resident.
• International SIPP: Whether or not you take the lump sum, you may want to consider transferring your pension to an International SIPP. This is a pension plan specifically designed for UK expatriates that allows you to implement the NT (Non-Taxable) tax code for maximum tax efficiency.

Should I Have a Spanish Will?

One of the most crucial financial considerations when relocating to Spain is estate planning. Spanish inheritance laws follow forced heirship rules, which means your estate may be divided differently than you would expect if you don’t have a Spanish Will.

• Avoid Forced Heirship: A Spanish Will is essential to ensure that your assets are distributed according to your wishes and not Spain’s forced heirship rules.
• Minimize Probate Costs: A Spanish Will can significantly streamline the probate process, avoiding expensive and lengthy delays in settling your estate.

Investment Options in Spain: A Quick Comparison

Spain offers a wide range of investment options for expats, but not all of them are tax-efficient. Here's a comparison of common investment vehicles and their suitability for expats:

Note: “Tax efficiency” depends heavily on how investments are structured and your Spanish tax residency status. Consider a personalized review to identify opportunities for tax efficiency.

FAQ: Moving to Spain and Financial Planning

Patrick Macdonald ACSI

International Financial Adviser specialising in cross-border wealth planning for expatriates

Patrick has over 14 years of experience helping expatriates navigate Spain's financial system. His expertise includes pensions, tax-efficient investments, and estate planning.

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