Investment Strategies For UK Expats Settling In Spain
If you are planning a move to Spain, you may already be considering how exactly you will move your finances there too.
Or perhaps you have already made a home for yourself in the Spanish sunshine and you’re wondering how to make your money go further?
UK Expats in Spain
Fortunately, moving to Spain can prove to be quite tax efficient if you plan correctly.
Whilst there are several investment options available to British expats, it’s important to get clear on your financial goals and adjust your plans accordingly. Seeking advice from a professional is the best and safest way to do so.
Investment Strategies
There are a few compliant opportunities which can significantly reduce your tax bill once you move to Spain, especially on investment capital.
However, expert guidance from an independent financial adviser is crucial when it comes to managing your investments in Spain- as some will not be as tax efficient as they might have been in Britain.
For example, any profits from ISAs, dividends, premium bonds and life insurance policies are taxable in Spain.
Apart from income tax, it is a legal requirement for anyone living in Spain to complete the Modelo 720 each year. On this form, residents must declare all assets they hold outside of Spain in the excess of €50,000 (failure to do so can result in serious penalties or even criminal charges).
These assets are usually not taxable, and this is just the Spanish Government’s attempt at preventing tax evasion- but it could mean that many assets held offshore will no longer be as tax efficient for expats living in Spain.
UK Pensions In Spain
If you’re planning on retiring in Spain, its important to review your pension options to ensure your money goes further and to minimise any risks to your savings.
Transferring your pension out of the UK may be the best option to protect your wealth for many reasons.
An international SIPP or a QROPS can allow your pension to be held in multiple currencies, as opposed to only in Sterling with a British pension. If the pound weakens this could become very problematic for those living abroad relying only on pension income.
There are many limiting features of holding onto your UK pension which include;
No ongoing management of your pension investments
Not being able to access your pension when needed
Lack of diversification with investments (UK pensions tend to be very UK-centric)
Currency risk
By transferring your pension to a SIPP or QROPS, you can gain greater diversification, ensure the correct risk tolerance has been made with the investment portfolio, gain access to your pension as and when required and take income in euros.
By working with an adviser an investment strategy can be implemented to align your pension with your goals such as generating income or growing the pension value.
Planning really is everything when it comes to managing your money abroad. The Spanish tax system can be complicated to understand, and improper planning could cost you dearly.
By working with a regulated cross-border expert, you can negate any pitfalls and gain peace of mind at the same time.
See our full guides to the SIPP and QROPS for expats residing in Spain here.
Spanish Compliant Bond (SCIB)
A Spanish Compliant Bond can offer a legitimate tax advantage to any expats moving to Spain, specifically when it comes to income and succession tax.
This financial product is a life insurance policy, with the issuer acting as the fiscal representative in Spain, taking full responsibility for the calculation and payment of tax on the policyholder’s behalf.
Any growth in the bond is not taxable until a withdrawal is made, and even then, you will only be taxed on any gains made from growth in the bond. This bond does not need to be included on your Modelo 720 as it will report directly.
A Spanish Compliant Bond can be a way of not only protecting, but also growing your wealth once you move to Spain.
For a full breakdown of this specialist investment account, see our Spanish Bond page here.
Spanish Residency
Spain is known to have relatively ‘high’ tax rates, and you will be considered a tax resident of Spain if you spend more than 183 days a year in the country. In the past many British expats have previously opted to retain their British tax residency by spending less than 6 months in Spain, but this tactic has become increasingly difficult since Brexit.
Making the decision to move to Spain and embracing residency comes with many benefits. Here is some advice on settling in and adjusting to the Spanish way of life.
UK Expat Financial Advice
The Wealth Genesis is a specialist cross-border pension and wealth management expert. We help UK nationals in Spain with their financial planning requirements by providing flat-fee, independent and fully regulated advice.
Book a discovery meeting using the diary below to speak to a qualified and adviser today.
