This communication is for informational purposes only and is not intended to constitute, and should not be construed as, investment advice, investment recommendations or investment research. You should seek advice from a professional adviser before embarking on any financial planning activity. Whilst every effort has been made to ensure the information contained in this communication is correct, it is subject to change and we are not responsible for any errors or omissions.
As a British national preparing to move to Spain, relocating overseas involves more than just packing your suitcase. It is also essential to get your legal and financial planning “ducks in a row”, especially if you are planning to work or retire in Spain. Below, our Alicant financial planners here at Scottsdale offer a short financial planning checklist to help expats who are hoping to move to Spain.
We hope this content is helpful. If you want to discuss your financial plan with us, please get in touch to arrange a no-obligation financial consultation, at our expense:
+34 966 460 407
info@scottsdale.eu
Healthcare
As a UK resident, you likely will have enjoyed free healthcare at the point of use via the NHS. Once you move abroad, however, this might change. If you relocate to an area outside of the EU or Switzerland, then you may not be covered for healthcare paid by the UK (e.g. if you have an accident in the UK during a family visit).
Fortunately, for British people moving to an EU country – which includes Spain, you can still claim treatment on the NHS if you visit the UK. However, if you need medical attention, you are more likely to need local treatment.
The next steps can vary depending on your needs (e.g. how long you intend to stay in Spain). With an EHIC or GHIC, you can get medically necessary treatment in Spain on the same basis as a Spanish citizen (it is also a good idea to have travel insurance if you are making a short visit). For longer stays – which may change your residency to Spain – you will need to register to access local healthcare.
Registering provides free basic state services but many still need to be paid for (e.g. prescriptions). If you make social security contributions to the Spanish system, perhaps via employment or self-employment as an expat, then this can give you access to Spanish healthcare. However, consider whether you may want access to private care in Spain. If so, it is a good idea to research private healthcare insurance ahead of your move abroad.
Pensions
If you plan to move to Spain for work, how will you continue to build up your retirement fund during your time abroad? If you hope to move there for retirement, how will you access your pension(s) in the most efficient way to support your lifestyle?
If you are hoping to retire to Spain, pay particular attention to your tax-free lump sum. UK residents are normally allowed to withdraw up to 25% of the value of their pensions once they reach age 55. However, the Spanish system does not have this concept of a tax-free lump sum.
As such, we recommend you speak to a financial adviser about whether it is best to take your 25% tax-free lump sum before moving abroad and becoming a Spanish resident (for tax purposes). If you still want to build up your UK State Pension whilst living overseas, you could also speak to your adviser about the suitability of making voluntary Nationa Insurance contributions.
Tax planning
How will your income and wealth be taxed once you move to Spain? If you are a non-resident in Spain, then you generally only need to pay Spanish tax on income and capital gains earned from within the country – such as a salary from local employment.
However, once you become a Spanish tax resident, your worldwide income becomes subject to Spanish tax (UK tax income earned from the UK – e.g. from the State Pension – can be claimed back under the terms of the UK-Spain Double Taxation Convention, or DTC).
Managing your tax obligations to both the UK and Spain can be challenging for many expats, particularly since there can be a delay in repayment of tax (e.g. due to differences in the “financial years” of the two countries). To account for this and cushion your finances, it can help expats to have a healthy store of emergency funds – with some set aside for tax.
Budgeting, safety net and more
It is generally wise to draw up a list of expected monthly costs once you move to Spain. What are your total expenses likely to be? Will your income and/or savings cover them? Make sure you factor currency conversion into your calculations, as well as differences in living costs.
Unexpected costs often arise when moving to a new country. Various administrative costs accumulate when applying for various permits, visas or state support. Maybe problems arise with your accommodation and your belongings need relocating to a new property. Perhaps your job does not work out and you need to live off savings until you can find new employment. Having a healthy emergency fund (e.g. 3-6 months’ worth of living costs) available in easy-access savings can help you through these scenarios.
Finally, consider the longer-term view if you plan a long stay in Spain as a British expat. How might this affect your will and estate plan? In particular, be careful not to make assumptions about inheritance tax (IHT). For example, even if you become a resident in Spain for tax purposes, you will still need to pay IHT on your UK assets – e.g. property – upon your death.
Invitation
If you are interested in discussing your own financial plan or inheritance tax strategy with us, please get in touch to arrange a no-commitment financial consultation at our expense:
+34 966 460 407
info@scottsdale.eu