Tax considerations before you buy property in Spain
It is always sensible to have your finances in good order, and careful financial planning is an important part of buying a property anywhere in the world, but it becomes even more crucial when you are planning to buy property overseas. Any property purchase abroad has an impact on your worldwide estate, so you need to protect your assets in the UK and elsewhere and ensure you are not paying additional taxes unnecessarily, particularly if you are planning to become resident in Spain instead of the UK.
We always recommend speaking with an independent financial advisor (IFA) prior to your move. Some of the key considerations are:
- How to notify HMRC that you are planning to leave the UK in a timely manner. It is essential that you do this if moving outside the UK. There could be the added benefit of a tax rebate for doing so.
- Assess the various tax implications of your move to Spain carefully. Particularly if you are letting your UK property.
- The benefits of continuing National Insurance Contributions when you move to Spain, and how this affects your UK state pension.
- Assess your existing life assurance and savings policies in the UK, to see if they will cover you in Spain.
- Remember it’s not usually possible to continue contributing to an ISA once you have moved to Spain. Be sure of what you can and can’t do with any investments you may have in the UK.
- Ask your financial advisor if it will be possible make payments into your UK pension and if you will still be eligible for tax relief or accumulated pension rights.
- Consider how you will manage any large cash balances you hold in the UK – perhaps you would like to transfer these, or move them offshore? Your financial advisor can guide you around this.
- Be clear on your residence status and what is required of you from the Statutory Residence Test in Spain. This is especially important if you are planning to spend an equal amount of time in both the UK and Spain.
- Know what is required of your tax returns in both Spain and the UK and when you need to submit them – there are now considerable fines levied for late submission.
- Inheritance issues – Inheritance law differs in the UK from the Spanish system, so find out what this entails to ensure your estate and your will are protected.
We can put you in touch with a professional financial advisor, who can help you with all these important plans before your move to Spain.
The effects of currency exchange rates on your income in Spain
If you are planning to use a pension or any investments from the UK as an income once you move to Spain, the amount you receive for these in euros will vary according to the fluctuating exchange rates. Consulting an experienced currency specialist, such as our recommended partners, Smart Currency Exchange, means you can stay on top of currency market movements and even set the exchange rate for any regular income payments, so you will always know what funds you will receive. To get in touch with their friendly team, request a quote or contact the Spain Property Guide Resource Centre.