Take control of your finances in an uncertain world
They say the only certainties in life are death and taxes – this has never seemed more true!
However, there are some things you can be sure of and control to your benefit today.
Taxation of assets
The way you structure your assets and wealth can make a difference to your tax bill.
There are Spain-compliant investment opportunities that offer tax efficiency while also providing benefits like currency and income flexibility. Meanwhile, expatriates who favour UK-centric assets and investments are more likely to see increased taxation with Brexit, as some non-EU/EEA assets are treated differently. For example, if you sell a Spanish home to buy a British property once the UK leaves the EU/EEA, you may no longer be eligible for capital gains tax relief.
At any time, the UK can potentially increase the tax burden for non-residents, as we have seen recently with UK property. Tougher tax rules may also follow a change in government, including the possibility of a new wealth tax on higher-value UK assets.
A locally-based adviser can advise about asset protection and taking advantage of tax-efficient opportunities in Spain.
Taxation of pensions
A similar threat hangs over pensions. Today, UK pensions can potentially be accessed by Britons abroad without UK taxation, but the recent 25% ‘overseas transfer charge’ may indicate things to come. Currently, EU residents are only affected if transferring UK pension funds to Qualifying Recognised Overseas Pension Schemes (QROPS) outside the EU/EEA, but the scope may increase after Brexit.
Once you no longer live in Britain, you may find fewer advantages to keeping UK pensions where they are. Take regulated pensions advice to establish the most suitable approach for your circumstances and goals now, before the tax-free window potentially closes.
Diversification is the key to minimising risk. A portfolio made up of a mixture of asset types from different countries, regions and market sectors is best placed to ride out turbulence and produce positive returns over time. Conversely, if you mainly hold UK assets, your returns will be more vulnerable to the fortunes of sterling and the British economy.
Of course, you need to make sure your investments offer the right balance of risk and return for your peace of mind. An experienced financial professional can use the appropriate tools to create a clear and objective risk profile for you.
Death is unavoidable, but with good estate planning we can control who receives our legacy and when.
Even after Brexit, you can override Spanish ‘forced heirship rules’ by applying the law of your nationality to your estate through the EU regulation, ‘Brussels IV’. While this would ensure your legacy is distributed according to your written wishes, beware the potential tax implications.
If you are seen as UK-domiciled, your estate may be liable to UK inheritance tax as well as succession taxes in Spain and wherever you own assets. Explore how you can restructure your wealth to reduce tax liabilities while ensuring your chosen heirs receive your gift at the right time.
With careful tax, pensions, investments and estate planning, you can steer your financial future in the right direction. Cross-border financial planning is complex and needs to be designed around your specific circumstances and wishes, so take specialist advice for the best results.
Summarised tax information is based upon our understanding of current laws and practices which may change. Individuals should seek personalised advice.