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HOW UK INVESTMENTS ARE TAXED IN SPAIN While adapting to a life in Spain comes easily to many expatriates, letting go of the things we are used to is not always easy. Having financial assets structured in a way that is familiar and that you understand can be comforting. But is holding investments in the UK the wisest choice if you live in Spain? Is this strategy tax-efficient, or are you sacrificing potential opportunities to stay with what feels safe? WORDS PAUL MONTAGUE, PARTNER, BLEVINS FRANKS
PREMIUM BONDS Possibly the main attraction of investing in premium bonds is that any winnings have always been tax-free in the UK. However, this is not the case once you become a resident of Spain. Gains from bonds will be added to your general income for the year and taxed at the progressive rates of income tax. These tax rates vary a little depending on which region you live in, and reach as high as 47% in Andalucía.
ISAs ISAs may be tax free in the UK, but the interest and gains earned from UK ISAs are fully taxable
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in Spain if you are a resident here, at the progressive savings income tax rates of 19%, 21%, 23%, and 26%, depending on how much savings income you earn. These savings income rates do not vary between the autonomous communities.
BANK INTEREST AND OTHER UK INVESTMENTS Like ISAs, worldwide bank interest is taxable for Spanish residents at the savings rates, irrespective of the UK resident’s tax-free threshold. Low interest rates have caused UK savings accounts to stagnate, while the rise of inflation decreases their value. In
fact, with the current economic climate, exploring alternative structures for your money could present you with better options. Ideally, you should review all your UK investments to consider how they will be taxed in Spain. Besides income tax, you will be taxed on the gains when you sell them and you also need to consider Spain’s annual wealth tax and plan ahead for Spanish inheritance tax.
PENSIONS Lump-sum payments from UK pensions are taxable in Spain, so if you have not yet left the UK you may wish to draw the pension before you do.
