If you are planning to move to Spain, or have recently done so, you have made an excellent choice. With its rich culture, warm climate, and relaxed lifestyle, Spain offers a wonderful quality of life. It also presents opportunities to review and adapt your financial planning.
Where possible, it is best to begin preparations well before relocating. Early planning gives you time to understand the tax and wealth management implications of becoming resident in Spain, as well as how the Spanish and UK systems interact. Structuring your savings, investments, and assets in advance may help you avoid unexpected tax consequences.
That said, if you are already living in Spain, it is never too late to review your financial position and take steps to improve your tax efficiency. A timely review can provide peace of mind and help ensure your wealth is managed in line with your objectives.
1. Where Will You Need to Pay Tax?
You will generally be tax resident in Spain if you:
- Spend more than 183 days in the country in a calendar year, or
- Have your spouse and/or minor dependent children living there, or
- Have your centre of economic interests in Spain.
As a Spanish tax resident, you are liable for tax on your worldwide income, gains, and wealth. You will also be subject to Spanish succession and gift tax rules.
If you still have income in the UK — such as pensions, rental income, or capital gains from UK assets — the UK/Spain double tax treaty determines where this should be declared and taxed.
Other UK taxes may still apply, including the overseas transfer charge on pensions, UK inheritance tax on worldwide assets for up to 10 years after departure, and always on UK-situated assets. From April 2027, UK pensions will also be within scope for inheritance tax.
It is also important to be mindful of the UK statutory residence test, to avoid unintentionally re-triggering UK tax residency.
2. What Tax Will You Pay in Spain?
Spanish taxes vary by autonomous community, as regional governments can adjust rates and allowances.
- Income tax: General income (pensions, employment, rental) is taxed at progressive rates that differ by region, ranging roughly from 18% to over 50%.
- Savings income: Interest, dividends, and capital gains are taxed from 19% (up to €6,000) to 30% (over €300,000).
- Wealth tax: Applies annually to households with worldwide assets exceeding €1 million (after allowances). Rates vary by region, with Andalucía and Madrid having eliminated the tax, while other regions apply different thresholds and reliefs. A “solidarity tax” also applies nationally for individuals with assets above €4 million.
The good news is that Spanish-compliant investment structures can sometimes reduce the tax on savings and investment income. The benefits depend on personal circumstances, so specialist advice is essential before taking action.
3. Holding Savings and Investments
A common mistake is assuming that what worked in the UK is equally efficient in Spain. For example, ISAs lose their tax-free status once you leave the UK, and income or gains may become taxable in Spain.
Your personal circumstances and goals will also change once you relocate. It is advisable to review your portfolio to ensure it suits your objectives, risk profile, and time horizon. Where assets are held can also impact taxation, available investment options, and investor protection.
Since Brexit, UK-based financial advisers and institutions no longer have “passporting” rights in the EU. UK accounts or products may face restrictions or closure. This makes it important to work with an EU-authorised adviser who can provide regulated, cross-border advice.
4. Currency Considerations
Living in Spain means most of your spending will be in euros. Keeping all your savings in sterling exposes you to exchange rate fluctuations. Consider structures that allow you to diversify and hold multiple currencies, with flexibility to choose the currency of withdrawals.
5. Property Ownership
Property is a major consideration for many expats. The timing of selling a UK home or buying in Spain can significantly affect capital gains tax and stamp duty in both countries.
High-value property may also increase your exposure to Spanish wealth tax and succession tax. Understanding the implications in advance can help you make informed choices.
6. What About Your UK Pensions?
Pensions are one of the most important considerations for British retirees in Spain. Options include leaving your pension in the UK, transferring to a Qualifying Recognised Overseas Pension Scheme (QROPS), or consolidating into other structures.
Each choice carries different implications for income tax, inheritance tax, and flexibility. From April 2027, pensions will also fall within the scope of UK inheritance tax, meaning your heirs could face additional exposure.
Because pensions are complex and heavily regulated, personalised advice is essential before taking any action.
7. Estate Planning in Spain
Spanish succession law applies forced heirship rules, which automatically allocate a portion of your estate to direct family members. However, under the EU Succession Regulation (Brussels IV), you may be able to elect for UK law to govern your estate instead — though this needs to be clearly stated in your will.
Succession and gift tax also differs from the UK. Rules vary depending on the relationship between donor and beneficiary, their residency, and the location of assets. Some regions, such as Andalucía, Madrid, and Valencia, have introduced significant reliefs for transfers between spouses and children.
British expatriates remain liable for UK inheritance tax on UK assets, and potentially on worldwide assets for up to 10 years after leaving the UK. Relief from double taxation usually applies, with heirs paying whichever liability is higher.
Having a Spanish will is strongly recommended for assets in Spain. Reviewing your arrangements across both jurisdictions helps ensure your estate passes as smoothly and efficiently as possible.
Integrated Planning
The sooner you review your finances, the sooner you can enjoy life in Spain without concern that something may have been overlooked. A joined-up approach to income, investments, pensions, property, and estate planning helps ensure all aspects of your financial life are aligned.
Cross-border advice is key to avoiding unexpected consequences and making the most of available opportunities.
This communication is for informational purposes only and is not intended to constitute, and should not be construed as, investment advice, investment recommendations or investment research. You should seek advice from a professional adviser before embarking on any financial planning activity. Whilst every effort has been made to ensure the information contained in this communication is correct, we are not responsible for any errors or omissions.
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