ALEXANDER PETER WEALTH MANAGEMENT
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The recent UK Autumn Budget has introduced changes with potential implications for British expats, especially those already settled in Spain. As fiscal policy shifts in the UK, retirees living abroad may find Spain's tax environment increasingly attractive, given its distinct advantages, particularly for those drawing pensions or managing investment portfolios.
RISING COSTS AND TAXES IN THE UK
The UK’s latest budget includes tax increases that could affect expats with UK-based assets. Notably, changes to Capital Gains Tax (CGT) and new restrictions on pension inheritances may influence retirement planning for those with assets or income tied to the UK.
For those expats who remember the tax perks of living in the UK, the removal of the non-domiciled tax regime marks a significant shift. Meanwhile, rising CGT rates and employer National Insurance contributions could discourage businesses and investors alike, leading to a re-evaluation of where and how to hold assets.
INHERITANCE TAX ON PENSIONS AND FROZEN ALLOWANCES
Under the new budget, UK pensions left to heirs will now be subject to Inheritance Tax (IHT), reducing the tax-efficiency for family inheritances. With the standard IHT allowance frozen until 2030, expats may find their estates subject to even higher tax burdens, especially if they retain significant UK assets. Spain offers an appealing alternative in this regard, as Spanish tax regulations provide options for strategic asset structuring, potentially reducing IHT exposure.
SPAIN’S TAX ADVANTAGES FOR RETIREES
Spain has long attracted retirees with its favourable tax policies, warmer climate, and vibrant lifestyle. Pension income, for instance, enjoys beneficial tax treatment in Spain, particularly private pensions, which are often taxed at rates lower than earned income. For expats relying on investment income, Spain taxes only the gains on withdrawals, potentially halving the effective tax rate for these retirees.
CAPITAL GAINS TAX FOR EXPATS
Spain’s CGT rates compare favourably to the UK’s, particularly for modest to mid-range investments. Retirees in Spain benefit from a CGT exemption when selling their primary residence after age 65. In contrast, UK property sales may now incur higher CGT rates, making Spain a practical choice for those looking to downsize or restructure their assets.
INVESTMENT OPTIONS FOR SPANISH RESIDENTS
For expats living in Spain, Spanish-compliant investment bonds are a tax-friendly alternative to UK ISAs, which are fully taxable in Spain. These bonds defer income tax on gains until withdrawal and simplify tax reporting, as the provider manages all compliance with Spanish tax authorities. This streamlined system is ideal for retirees aiming to optimise their investments while avoiding complex tax filings.
MAKING THE MOST OF YOUR LIFE IN SPAIN
The UK's recent budgetary shifts may prompt retirees to assess their fiscal choices and the advantages of remaining in Spain. With supportive tax policies, a lower cost of living, and a rich lifestyle offering year-round sunshine, Spain remains a compelling option for expats seeking stability and peace of mind in their golden years.
ABOUT ALEXANDER PETER WEALTH MANAGEMENT
Established in 2010, Alexander Peter Wealth Management provide specialist advice to British expats and international employees living around the world.
We provide tax efficient and tax compliant solutions for those that have decided to leave the UK and have found a new home overseas.
Paul Griffiths
Director of Europe
Paul is qualified to EU/UK level 4 standards with a Professional Diploma in Financial Advice (QFA) and the certificate of European Financial Advice.
Jeff White
Adviser
Originally qualified under the Chartered Institute of Banking, Jeff has attained the CISI Level 4 in Investment Advice.
For more information on this please contact us on +34 951 121 880 (between the hours of 8am and 6pm CET), or email enquiries@alexanderpeter.com
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