Moving to Spain - Taxation and Finance

Personal circumstances vary greatly but you may cease to be liable to UK tax if you cut all ties with the UK and become domiciled abroad. However you will technically be a UK resident if you spend a requisite number of days in the UK and will consequently suffer UK tax on your income.

A.  Obtain more information on tax and your domicile status from the Inland Revenue's document called IR20.

If you do change you residency cash held offshore may still be liable to tax in Spain depending on local tax rules. Please note that Spain imposes a wealth tax on your world-wide assets. However, as Spain and UK have a double taxation treaty you should be given relief for double taxation.

Please remember that if you are proposing to rent out your UK property this will attract a UK income tax charge.

Inheritance tax

It is essential to ensure that you have a Spainsh Will - which should be in addition to a UK will. If you have offshore interests you may also wish to consider a will which is specific to that jurisdiction, for example, Gibraltar. Make sure that your various wills dovetail and do not contradict each other. It is advisable for both the husband and the wife to have wills - please see below.

Liability to UK Inheritance Tax (IHT) stems from your amount of assets you own and your domicile. The Inland Revenue considers that you are domiciled in the country of your permanent home. Domicile is distinct from nationality, residency or your country of birth. Changing your domicile is often difficult as the Revenue is reluctant to accept that your departure from the UK is permanent. To be certain you'll need to obtain from the Revenue written confirmation that they acknowledge that you are no longer domiciled in the UK - if that is your aim.

If you're domiciled in the UK, IHT applies to your assets, wherever in the World they are situated. If you are domiciled abroad, on the other hand, UK inheritance tax applies only to your assets in the UK.

In Spain you may well be liable to Spanish IHT. You should note that transfers between husband and wife (which are exempt from inheritance tax in the UK) are subject to Spanish IHT following the death of either party.

Capital gains tax (CGT) this depends on whether you're retiring abroad permanently or just buying a holiday home. UK residents are liable to CGT on their world-wide assets, so if you sell your holiday home, it will be subject to CGT in the UK and may well be subject to a payment to the Spanish Tax Office or "Hacienda". The effect of this may be to neutralised by double taxation Treaty relief.

Life Assurance

It is prudent to ensure that all UK life assurances are maintained through payment from a UK bank account. In addition, as a change in residency or domicile may constitute a material change it should be disclosed to your life assurance provider in writing.

Investments

Please note that existing investments such as the tax-free status of existing UK investments, PEPs and ISAs, continue to apply, but you in ceasing to be a UK tax resident you will have to reduce contributions into them. You will also need to obtain special local advice to establish whether you will become liable to tax on the income from these investments in Spain.

Generally we would recommend that you should seek the assistance of an expert financial adviser to establish what to do about your investments and the best ways to minimise income and capital gains tax.