After Brexit, moving from the UK to Spain as an expat involves several considerations regarding your investment portfolio. Your lifetime ISA, fixed-interest investments like premium bonds, and other UK-based investments may no longer be tax-compliant or recognized in Spain. There are important things and tips you need to keep in mind ahead of your move.
UK Investments and Tax Implications
Firstly, it's important to understand that UK tax-advantaged investments, such as ISAs and Premium Bonds, are not tax-free nor tax-compliant in Spain. Their benefits are simply not recognized by the Spanish tax authority. They may even be viewed unfavourably as they are not EU-based investments.
Once you have a Spanish address, UK providers may no longer allow you to contribute to their products and often encourage you to close your account altogether.
Transitioning to Spanish Compliant Investments
To ensure tax efficiency and compliance, you should consider utilising EU-based investment vehicles that are tax-compliant in Spain. This includes not only the investment platforms but also the underlying investments, which should be EU-based and regulated. More importantly, you'll be ticking all the boxes with the Spanish tax authority in terms of reporting and legality.
Spanish compliant investment bonds can also be effective tools for succession and estate planning, allowing for seamless ownership transfer between spouses and distribution to named beneficiaries upon the policyholder's death.
Modelo 720 and Overseas Asset Declaration
It's crucial to remember the Modelo 720, a form that needs to be completed to declare your overseas assets once you become a Spanish tax resident. This declaration is a snapshot of your non-Spanish assets as of December 31st in the year you become a tax resident and must be reported before March 31st of the following year.
UK Pension Lump Sum Treatment
If you've reached the age of 55, you may be eligible for the 25% pension commencement lump sum (PCLS) from your UK pension. While this lump sum is tax-free in the UK, it is not tax-free in Spain. You might want to take the PCLS before becoming a Spanish tax resident, if possible.
Spanish Will and Estate Planning
Setting up a Spanish Will is crucial upon your arrival in Spain. This ensures that your estate is not caught in the forced heirship rules, where your assets are divided according to Spanish rules rather than your preferences.
A Spanish Will clearly states that you wish for your assets to be treated as they would in your home country, helping you avoid lengthy and expensive probate processes. Clearly, there are many moving pieces that you need to consider before moving to Spain.