Should you keep hold of UK investments in Spain?
However well we have settled into our new way of life in the Canary Isles, many UK nationals living here continue with some British lifestyle habits. Whether it is a Sunday roast or watching UK sport etc., there are some ties we do not like to lose and comfort in familiarity.
The same applies for UK investments. You may, for example, have accumulated Premium Bonds, Individual Savings Accounts (ISAs), etc. over the years, or bought shares in UK companies, and prefer to hang on to them because they are familiar. But are these suitable investments for your new life in Spain?
Premium bonds and ISAs
One key attraction of premium bonds is that they have always been tax-free in the UK – but they are not tax-free if you live in Spain. As a Spanish resident, any winnings are taxed as general income. They are added to your general income for the year and taxed at the scale rates of tax of up to 46.5% in the Canary Isles (as rates stand today).
ISAs too are fully taxable in Spain in the hands of Spanish residents at the corresponding savings income tax rates (19%, 21% and 23%). This applies to income and gains from cash and share ISAs.
Some expatriates mistakenly think that since they are UK investments they do not need to be declared in Spain. In fact they do if you are resident in Spain, and with Automatic Exchange of Information taking place under the Common Reporting Standard, the Spanish tax authorities are informed about UK investments.
Other UK investments
You should also look at your other UK investments, such as shares, unit trusts, and investment bonds and evaluate if these are the most tax-efficient way of holding your capital in Spain.
In the UK long-term residents benefit from a 5% tax-deferred allowance when making withdrawals from UK investment bonds. This does not extend to Spanish residents. In many cases the Spanish tax treatment of such investments is not particularly beneficial, so seek advice.
Worldwide bank interest is taxed as savings income in Spain, at rates of 19%, 21% and 23%.
UK rental income
If you are resident in Spain and rent out property in the UK, the income could be taxable in both countries, though the UK tax paid can be offset against the Spanish liability. In Spain it is taxed at the scale rates of income tax and a 60% reduction is available against the net rental income for long-term lettings.
It’s not all about tax
There are tax-efficient investment vehicles available to residents of Spain. With specialist advice, you could enjoy favourable tax treatment on your capital investments. Speak to an adviser who can guide you on both UK and Spanish taxation, the interaction between them and tax planning opportunities.
Taxation is not the only reason to review your savings and investments, however. You need to ensure they are suitable for your life in Spain (for example, what currency should they be in?), your objectives, time horizon and risk tolerance. Many people have portfolios which are no longer suitable for them today. Take personalised advice from a cross-border adviser who provides integrated advice covering investments, tax efficiency and estate planning.
The tax rates, scope and reliefs may change. Any statements concerning taxation are based upon our understanding of current taxation laws and practices which are subject to change. Tax information has been summarised; an individual is advised to seek personalised advice.