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Living in Spain after BREXIT

By Chris Burke - Topics: Barcelona, BREXIT, National Insurance Contributions, Spain, UK Pensions
This article is published on: 27th August 2020

27.08.20

After the results from the UK’s General Election, it seems we are closer to Brexit than ever before, so are you prepared for it living in Spain?

Documentation to remain in Spain

There are many rumours among non-Spanish people of what you need to do to stay in Spain should Brexit happen. The response from the Council recently has been, should you hold a NIE and an Empadronamiento, you are proving you are resident in Spain, so for now these should suffice. However, if Brexit does go ahead, Spain could draw a ‘Stay in Spain’ line in the sand which would then need adhering to. In the worst case scenario, a renewable 90-day tourist visa would give you time to adhere to whatever the new rules are. Spain has said publicly it will reciprocate what the UK does, and the UK knows there are far more British people living in Spain than the other way around in the UK.

UK Private and Corporate Pensions

The current HMRC rules state that if you take advantage of moving your UK pension abroad it must be to either where you are resident OR in the EU (due to the UK being in the EU). If this is not the case, you would have to pay 25% tax on the pension amount. Therefore, it is very likely that as the UK would be leaving the EU, these rules would not be met and the 25% tax charge would start to apply to pension movements outside of the UK. This could be the last chance to evaluate whether it’s better for you to move your pension or not and take advantage of the potential benefits, including being outside of UK law and taxes.

National Insurance Contributions

If you were to start receiving your State pension now, you would approach the Spanish authorities and they would contact the UK for their part of the contribution, taking both into account. Before the UK joined the EU, you would contact each country individually and receive what they were due to pay you. If this becomes the case again, for many British people the UK part of their State pension would potentially be more important, as it is likely to be the bulk of what you receive. We don’t know how Spain will act with regard to state pension benefits to foreigners; therefore it would make sense to manage the UK element well if this is your largest subscription.

I recommend two things here; firstly check what you have in the UK so you know where you are. You can do that here:

www.gov.uk/check-national-insurance-record

You can contact the HMRC about contributing overseas voluntary contributions at a greatly discounted rate, from £11 a month: you can even buy ‘years’ to catch up:

www.gov.uk/voluntary-national-insurance-contributions/who-can-pay-voluntary-contributions

I have mentioned this in Newsletters before, but it really is a great thing to do, both mathematically and for peace of mind. Many people I meet living away from the UK have ‘broken’ years of contributions which is leaving themselves open to problems in retirement.

TIP: If you have an NI number, you do not necessarily have to be British to do this.

Investments/stocks/shares/savings

Time apportionment relief

Statistically, in 75% of British expat couples living abroad, at least one of them will return to live in the UK. It remains to be seen whether this changes if the UK leaves the EU, however, you can easily save yourself some serious tax if you have this in your plan of eventualities.

You can, in effect, give yourself 5% tax relief for every year you spend outside the UK by positioning your investments/savings correctly. Then, upon your return, you can take this tax relief when you are ready, such as in the following example:

Mr and Mrs Brown invested £200,000 ten years ago when they were living in Spain.
After this time, it is now worth £300,000
They returned to the UK and have been resident there for the last year (365 days)

They decide, after being back in the UK for 1 year (365 days) to cash in the investment, taking advantage of ‘Time Apportionment Relief’ which will be calculated the following way:

£100,000 (total gain)
multiplied by the number of days in the UK (365)
divided by total number of days the investments have been running i.e. 10 years (3650 days)

Resulting in a £10,000 chargeable gain (that is what you declare, not the tax you pay).

There are other potential tax savings as well, but they depend on other circumstances. If you have your savings/investments set up the right way you can take advantage of this.

If you have any questions or would like to book a financial review, don’t hesitate to get in touch.

Investing After a Stock Market Crash

By Chris Burke - Topics: investment diversification, Investment Risk, Investments, Spain, Stock Markets
This article is published on: 25th May 2020

25.05.20

The question on any investor’s lips at the moment is, ‘Will the stock markets crash again in the near future, say in the next 6 months?’ The main reason for this question is, even if the world starts to get back to normal after this pandemic, when furloughing and all the other methods that have helped people economically are finished, soon we shall see the realisation of the following:

  • Profound job losses and companies going out of business
  • Some entire sectors (e.g. aviation) taking years to recover, some even never recovering
  • Company results being published for the 2nd quarter of 2020, when they have been effectively shut the whole time. How will the markets react?
  • Unemployment at an all-time high
  • People losing their homes, unable to obtain mortgages

What’s really unclear here is, and this is the BIGGEST question, has all of this already been priced in to the stock markets? That is to say, have all these considerations and more been valued and taken into account by people buying and selling stocks?

50% of the reason why stock markets go up or down has nothing to do with the actual value of those stocks; it’s the perception of the people buying and selling that influences it. If people are optimistic and there is some bad news, the markets might not be affected by this. However, if people are worried/pessimistic and there is some small bad news, this could be ‘the straw that breaks the camel’s back’ sending the markets tumbling. So, what is the best approach to take when investing after a stock market crash?

upward stockmarket trends

The answer to this question depends on your risk/reward profile. If you are a more aggressive investor, then using all your allocated investment money in one go would probably be your choice. However, this equates for less than 20% of us; the most common approach

of people investing their money is balanced.

Most people understand that not being invested means you could miss out if the markets shoot up, but also, if they crash lower you would lose out. However, if you believe yourself to be aligned with the following criteria, then there is a strategy you can follow which statistically should give you more safety, with a lower chance of your money being negatively impacted at the beginning:

  • You are prepared for your money to be invested for the medium to long term (5 years plus)
  • You do not want access to this money for at least 5 years
  • You understand there could be some volatility during this period
  • You want your money to grow above inflation and actually increase in its value
  • You are a balanced investor, meaning you are prepared to invest with the knowledge that the value of your money will go down, as well as up

After every stock market crash, analysts try to label what kind of a recovery it is. Is it a ‘U’ shaped recovery, meaning a sharp drop, period of downturn and then a sharp upward recovery? Or is it a ‘W’, where there is a crash, then a recovery, then another crash followed again by a recovery? The truth is, each stock market crash is different; no two are the same. Each day it’s 50/50 whether the markets will be up or down. Therefore, taking this reasoning into focus, and wanting to limit any losses and maximise any gains, let’s look at this as if it’s a business opportunity.

If you were opening up a new business, and needed to borrow money to finance it, would you either:

  • Borrow all the money you needed in one go and spend it
  • Borrow some of the money you needed, review periodically and then borrow more as and when necessary
  • Borrow some of the money you needed, review periodically and have instant access to more when necessary

Whilst Option 1 could work for you, that money needs to have interest repaid on it, and if the business didn’t go well, that’s more money lost.

Option 2, as long as you don’t have any cash flow issues, could also work well, meaning you are repaying less money and only borrowing what you need as and when. If anything happened to the business you were not putting everything in.

Option 3 gives you the same as option 2, as well as having access to a cash injection instantly should the time arise.

crystal ball David Hattersley

These options are all a matter of opinion, but in relation to investing, there is no future knowledge of what the stock markets will do. What we do know for certain about investing is this:

  • Historically, inflation has doubled approximately every 24 years
  • Unless your money is keeping up with inflation, in real terms you are reducing the value of your money
  • There is hardly any interest being paid by bank accounts
  • One day you will stop working, and the only income you will have is what you have built up

Therefore, taking into account these main known points, it’s clear that money needs to be managed effectively but in a risk averse way as possible. To be able to minimise risk, and to try and gain on any stock market rises and minimise any falls, the safest short-term approach would be to ‘drip feed’ your investments. However, to make sure you don’t miss out on any upswings in the market, you need to have your investment money aligned in the following way:

Example – Investment value €250,000:
Starting with €50,000, add to this €20,000 per month moving forward until one of the following occurs:

  • You have invested all your money
  • There is a large enough stock market downturn

In this second scenario, you would then decide to add much more of your uninvested money immediately; depending on how much is left and the scale of the market drop.

By using this approach, if markets took a sudden upward turn your money is already partially invested to take advantage of any gains moving forward. However, and more importantly, if the stock markets took a sudden dive, you are limiting losses and are in a position where you can take advantage of lower prices.

financial review

As I stated above, no one knows exactly what will happen or when after a stock market crash, but by investing in tranches to make your money grow, this will give you some protection against a stock market crash in the near future, and even the ability to even take advantage of it.

Two last points I would add, and those are, even if stock markets crash again, after a recent previous crash, there is more likely of a quicker bounce back. And secondly, money invested over time is the safest way to achieve long term growth of your money and create that income for when that day finally comes when you are no longer working.

My job is to help people plan their finances, managing their money in as painless and risk-averse approach as possible, at all times having their best interests as our common goal. Don’t hesitate to contact me on the details below if you would like to discuss any of the points in this article or arrange a meeting with me.

Modelo 720 Reporting Time – 2020

By Chris Burke - Topics: Barcelona, Modelo 720, Spain
This article is published on: 26th February 2020

26.02.20

Just a reminder that time is running out for submitting your Modelo 720 declaration for 2020. The deadline this year is the 31st March and is fast approaching.

All those tax resident in Spain (those living in Spain for more than 183 days a year or where Spain is the main base for your business) should be aware that as a result of legislation passed on 29th October 2012, residents in Spain who have any assets outside of Spain with a value of €50.000 (or alternative currency equivalent) or more, are required to submit this declaration form to the Spanish authorities.

This declaration can be made online, through the Tax Office`s web page www.agenciatributaria.es where the Modelo 720 formcan be located (type in Modelo 720 into the search block on the top right hand side of the page). It must be filed between January 1st and March 31st of the first year of residence to avoid being investigated or fined by the Spanish authorities. I would personally recommend speaking with your accountant / Gestoria to avoid mistakes.

    1. Property
    1. Bank accounts (cash)
    1. Investments

To warrant a declaration the total value of assets should exceed €50.000 in each or any one of the categories; e.g. if you have 3 bank accounts and totalling up all the balances it exceeds the €50.000 limit you are subject to making the Modelo 720 declaration. However, if you have a bank account at €30.000 and, say, investments valued at €30.000 then there would be no reporting requirement as they are in separate categories and each individual total value does not exceed the €50.000.

A declaration must be submitted individually, regardless of the percentage of ownership (in joint accounts). For example, if you have a joint bank account with a value exceeding €50.000, although your particular (say €25.000) share is below the threshold, each owner would still be required to submit an individual declaration based on the total value of the account.

Although this declaration of assets abroad is solely informative and no tax is charged, failure to file, late filing or false information could result in fines.

For this reason, we recommend that everybody arranges to declare their assets. Once you have made your first declaration it is not necessary to present any further declarations in subsequent years, unless any of your assets in any category increases by more than €20.000 above the initial value declared.

Inflation is the killer

By Chris Burke - Topics: Barcelona, Inflation, Spain
This article is published on: 12th February 2020

12.02.20

Tip 1 – Maximising your savings – inflation is the killer
In the UK, ‘Stealth Taxes’ are the normal weapon governments use to raise taxes now. These are taxes that don’t affect everyone on a daily basis, or maybe not today, but could do significantly at some point. For this and other reasons, these taxes don’t usually cost them votes and raise a good level of tax money.

I argue one of the biggest Stealth Taxes is inflation, and the two reasons I believe this are: because of my 90-year-old father, and also because I need proof, to be shown something before I believe it.

inflation

As you can see from the above graph which dates back to the beginning of the eurozone, inflation has generally fallen. Up until 2008 it was perhaps on average 3%; from the crisis at the end of 2008 more likely 2%. So, what if a glass of wine goes up by 2% a year, I hear you say, or the menu of the day as well, that’s nothing. Well, yes it is. When you compound that over a period of years it makes a big difference. For example, people have come to see me with some money sitting in a bank account earning nothing. They know this, but they don’t know what else to do with it. They like the security of a bank account for the value of the money, and the security of having access to it if they want it. So 6 years later, they come back to see me again and say ‘Yes, we have definitely decided we want this money to do something for us (let’s says its 100,000). Can you help us, please?’ There are two things that immediately come to my mind here, firstly, not everyone is disciplined and hasn’t spent some of that money by then. Secondly, and perhaps more importantly, they don’t actually have 100,000 anymore, they have 88,000 in real terms. So, each year they have lost 2,000: imagine every year you draw 2,000 out from your bank account and flushed it down the drain; how painful would that be? That’s exactly what you are doing by not managing your money effectively. We are also in an incredibly low inflation environment at the moment. Imagine if it went up to 3 or 4%?

My father, in his latter years of retirement, does not stop commenting on how prices have increased, what they used to be and how expensive things are (don’t worry; he is not destitute, just astute). We don’t really notice this on a daily basis, the main reason being we are still working and earning an income. We can always replace what we spend within reason. However, when you finally have no more income and only savings and investments, it really hits you.

Action Point 1 – make sure your assets, no matter what they are, are being managed effectively for you, bearing in mind that one day your income will stop, alongside giving you access to emergency funds should you need it.

Tip 2 – Brexit – last chance saloon for moving UK pensions
Last month I attended seminars bringing us financial types up to date with everything going on in 2020, including Brexit/UK pensions and one of my worst fears was confirmed. When Brexit is officially rubber stamped, you will be charged 25% if you want to transfer your UK private or company pension outside of the UK. This means your pensions freedom of choice will have effectively ended, as who would want to pay that tax to move it? So moving forward, your pension would remain in the UK. What would that actually mean? Well, it would have to adhere to UK rules moving forward, which in essence are starting in real terms to reduce the benefits you could receive (another stealth tax). It could be the best place to leave your pension anyway, but what we suggest is detailed analysis of what you have and what your options are, before you don’t have a choice. We conduct this on a complimentary basis for you, giving you the knowledge to make a decision. For many people the right advice is to leave their pension where it is, but for some moving it is by far the best thing to do.

Action Point 2 – Check whether your UK pension should take advantage of the last potential chance to the European freedom of pensions movement.

Tip 3 – Investments outside Spain tax
Not many people are aware that assets they have outside of Spain are/can be taxed differently to those inside it. In essence, most assets outside Spain held by a Spanish resident need to have tax paid each year on any gain made, regardless of whether you access them or not. The reason why this is important, is that deferring tax until a time when you can reduce/mitigate it is one of the biggest ways to increase your wealth.

There are options similar to UK ISAs and other asset planning available that can help you be Spanish compliant and potentially save you taxes.

Action Point 3 – Try to have your assets Spanish compliant. Evaluate what assets you have, how they are taxed and make sure they are tax efficient moving forward.

Tax return and other reporting dates for Spain 2020

By Chris Burke - Topics: Barcelona, Form D6 Spain, Modelo 720, Spain, Tax
This article is published on: 13th January 2020

13.01.20

Whether you have lived in Spain for a while, or are new and trying to understand when you need to submit to the various deadlines, including taxes and overseas assets, I have listed below in an easy to read format what you have to declare and when, to help make your life more simple. These have been the same for the last few years and so should remain moving forward. If you would like help in understanding, declaring and any other questions don’t hesitate to get in touch:

Firstly, an important reminder regarding UK Driving Licences that MUST be exchanged by the 31st January 2020:

In the case of a No Deal Brexit, The Spanish Government has agreed to exchange, renew or replace your driving licence guaranteed by this date. All traffic agreements within the EU will cease to be valid for UK citizens with a No deal Brexit, and therefore UK valid licences will only be legal to use for 9 months after Brexit. Until the 31st January, you can exchange your UK licence for the Spanish equivalent under the same conditions pre-Brexit, without having to wait for the signing of a new agreement between countries, or obtain a new Spanish driving licence.

Otherwise, after these 9 months, you will have to go through the process of passing a Spanish driving test (please, no)! To do this, you must visit the DGT website www.dgt.es and arrange an appointment. Alternatively, your gestor may do this for a fee for you.

End of January 2020

FORM D6
Stocks, bonds and investment funds that are outside of Spain and are not Spanish compliant. (this is to compliment and not replace Modelo 720). Failure to comply with the obligation to submit this Form D6, can lead to a fine of up to 25% of the undeclared amount, with a minimum of €3000. Late declaration entails penalties ranging from €300 in the first 6 months to €600 after that deadline.

End of March 2020

MODELO 720
This is a declaration of assets outside of Spain value of €50,000 or more. Once declared you only need to do this again if the value of any asset (e.g. a bank account) has risen by more than €20,000). The authorities can fine you anywhere between 100 and 10,000 euro for failure to meet the requirements (as of 2019, the European Union considers Spain to be breaking EU law with these sanctions for people who file the Modelo 720 late).

End of June 2020

Declaración De La Renta
Your annual tax return, showing all assets and worldwide incomes, must be declared for assessment by this date. Not all assets will be taxable, depending on how they are structured. In Spain the financial year runs from January through to December, and in June you are declaring for the previous calendar year’s finances.

Wealth Tax declaration – Catalonia
Wealth tax is applied if your worldwide assets are more than 500,000€ with an additional allowance of up to 300,000€ for your main residence. The tax is based upon your net wealth: assets minus liabilities. In Catalonia the rates of tax start at 0.21% and rises to 2.75% depending on your wealth each year and is taken from the 31st December the previous year. There are ways of mitigating this tax by having your assets structured correctly.

What role do Chris and The Spectrum IFA Group perform?
I am a financial planner/Wealth Manager and we specialise in optimising clients’ assets, including strategies to minimise taxes both now and in the future. We manage clients’ savings, investments and pensions whilst understanding what these are and the role they will play in their lives. I do my best to continually keep clients informed of anything they need to know in respect of these topics.

UK Pension transfer – most common questions asked

By Chris Burke - Topics: Barcelona, pension transfer, QROPS, Spain, UK Pensions
This article is published on: 8th November 2019

08.11.19

Without even mentioning the ‘Brexit’ word, if you have a private or company pension scheme in the UK but reside outside, it’s a good idea to understand what your options are in managing and having access to them. There are a handful of subjects I am regularly asked about regarding this:

UK pension currency
If you transfer your pension outside of the UK, it does NOT have to remain in sterling; all major currencies are usually available. It can also be changed at most times and be held in different currencies. Of course, at the moment this is an even more important thought process for your retirement savings.

Access to pensions
From age 55 you can have access to as much of your UK pension as you like, although bear in mind that in Spain pension money will be subject to personal income tax, after any allowances. Therefore, you might want to arrange this so as to not incur higher taxes (there are several ways to do this).

Pensions from a previous employer
These pensions are known as dormant or frozen, and at the very minimum you should know what you have, where they are and how they work. We help clients track these down, explain how they work, what your options are and start planning to make them either more ‘healthy’ or easier to access. Some pensions may have high charges, or the pension scheme could be financially in trouble. Having all this knowledge as well as the options available will help you make an informed decision.

Can I transfer any pensions I have myself?
In short, if you are abroad, no, since the process is complex and not easy to understand if you are not in the financial world. Also, HMRC won’t allow it unless you have received advice. We have clients with different levels of experience in finance and pensions, and we work alongside them all closely, giving them the knowledge to make their decisions and managing the process for them.

If they are UK pensions and you want to keep them in the UK, then yes, you can usually do this yourself depending on the value involved.

You cannot transfer a pension to another person, although there are ways you can pass it on effectively.

Pensions transfer charges
When overseas pension transfers were started many years ago, the costs were a lot higher than running a UK pension scheme, although the benefits were greater. Now, with increased competition from providers, the charges for moving and maintaining an overseas pension are a lot lower. However, this does depend on who you perform the transfer with and what advice you are given. I still come across clients where the charges are so high it is almost impossible for the pension to grow. There are ways of helping these people, but usually by then they have lost out on many years of growth, which is really frustrating as it didn’t need to be that way. It’s so important you work with a Financial Advisor who is working for you, at your pace and advising in your best interests, not theirs.

Selecting a Financial Advisor to work with when investigating moving a UK pension
There are several points/questions you should check when deciding whom to seek advice from. These are:

1) Recommendations, you cannot beat them. Does anyone you know work with a Financial Advisor and they are happy with them?
2) Does the Financial Advisor have the necessary qualifications to give you advice?
3) How are they remunerated? Ask them how much and when.
4) Do they have any long-standing clients you can speak to? If they do and you manage to speak to them, ask them specific questions so you know they are both genuine and how it worked for them.
5) Look into their eyes… meet them several times, get a feeling for them as a person, their morals and actions.
6) Research them on the internet, or ask around and see what’s said about them.

I do know clients who have done most of this and still not had a great experience. The only additional advice I can give is to look at the pensions and companies they are recommending. If you haven’t heard of them before or you don’t get the ‘spider sense’ that they purely have your best interests at heart, then look elsewhere. Remember, they are going to be looking after your retirement. For years I have helped people evaluate their pensions, and as well as looking to help new clients, the main reason I write these articles is to help people avoid potentially working with someone that doesn’t have their best interests at heart.

Inheritance Tax in Catalonia

By Chris Burke - Topics: Barcelona, Catalonia, Catalunya, Inheritance Tax, Spain
This article is published on: 11th October 2019

11.10.19

*UPDATED 1st January 2020

In the circle of life, it’s an unfortunate occurrence that parents or relatives pass on from this world we live in and leave an inheritance, whether that is property, money, investments or other assets. The value of this inheritance may or may not be the kind you are used to having or looking after, and that is where we/ I come in, to make sure this your inheritance is safe and looked after, taking into account your life situation both now, and in the future.

How is this inheritance taxed in Catalonia though? I hear many stories or ideas among people I meet but no one seems to know for sure, or get it right anyway. One of the reasons for this is that it depends on where the money comes from, i.e. which country and what asset is being received. Many of my clients are from the UK, how does it also work there? In the UK it is usually very simple, if someone dies being resident in the UK and leaves you assets up to £325,000,there is usually no Inheritance Tax (Paid by the estate); anything over this is taxed at 40%. However, in Catalonia it is not that simple (Surprise surprise, I hear you say!) and alongside what is declared and maybe tax payable in the UK, you must also declare and pay the relevant tax here

Firstly, Inheritance tax in Catalunya is paid for by the receive, not the estate, and very importantly, you have 6 months to declare this inheritance, EVEN if you haven’t received it yet (this is from the date of decease) or you will be fined the following way, on the amount of tax you are liable to pay:

  • 5% in the following 3 months (i.e. months 6-9 since death)
  • 10% from 3 months to 6 months
  • 15% from 6 months to 12 months
  • 20% plus interests after 12 months

The good news is that there are discounts on inheritance tax in Catalonia, and most people are surprised by the amount of tax they have to pay, in a good way. To start with, there is usually no tax to pay on the first €100,000 being received if you are a child or spouse of the deceased. If you are a parent of the deceased, the allowance is €30,000 and any other relative receives a €50,000 nil tax amount including grandchildren.

From this point on, there are further reductions between 97-99% and there are also other factors to be taken into account, such as are the children under 21, disabled or if from a family business. The quickest and simplest way, I feel, to give you an idea of what tax you would pay is if I use the most common example, of a parent living outside of Spain, leaving their child whom is living in Catalonia an amount of money/asset not including property (there would potentially be extra tax deductions for receiving this):

Example (guideline) of someone tax resident in Catalonia, inheriting from a parent in the UK:

Amount to be inherited Tax due in Catalonia
€100,000 €0
€250,000 €383.82
€500,000 €4,300.05
€750,000 €16,866.68
€1,000,000 €40,473.29

These are approximate and we always suggest getting in touch to confirm exactly what the amount would be, and for help declaring it. For the assets themselves, it is worth knowing that many assets overseas are not always efficient to have while living in Catalonia. For example, investments or Isas in the UK are declarable and tax payable on any gain in Spain annually, EVEN if you do not take any of the money, unlike in the UK. This is where we help our clients to get organised efficiently and manage the assets if needed.

If you have any questions relating to any of these points, or anything similar, don’t hesitate to get in touch.

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Tax Advice in Spain for Expats

By Chris Burke - Topics: Barcelona, Spain, Tax, tax advice, Tax Relief
This article is published on: 24th September 2019

24.09.19

Whenever someone gets in touch with me, the first, most important thing I suggest they do is to make themselves and their family as tax efficient as possible, i.e. tax planning. There is no point having a ‘leaky bucket’: their money earning interest but more than needs to is pouring through the ‘tax holes’ they haven’t plugged or planned for.

So, apart from the obvious reason of minimising the current tax you pay, why is it important to review your tax situation? It is to make sure you are aware of ‘stealth taxes’. Stealth taxes are those which are not easy to detect and that many people are not aware of.

If you are a government, you want to win as many votes as possible to be elected (or re-elected). You need money to spend, but raising taxes on the upper echelons will damage your votes, raising taxes on the working classes will also damage you votes, and both will be very vocal. Therefore, what has become increasingly popular with governments is to increase taxes that won’t necessarily hurt voters’ pockets on a day to day basis, but which could do in the future.

A good example of this is something called the lifetime allowance. This is the ‘ceiling’ under which the value of your UK private pension will be in the regular tax bands. However, if your pension pot overshoots this limit, you will pay increased tax of up to 55% on anything over that ceiling. Never heard of this tax? Well, I can assure you there are some very normal, everyday, hard-working people who are not in the upper echelons of society and who, due to long pension contributions and having good investment advice, will reach this limit in their lifetime.

To explain this a little more, the lifetime allowance ceiling was introduced in 2006 and was £1,800,000 at its maximum. Over time, it has been reduced and reduced to its present rate of £1,055,000. During that same time inflation has increased, people’s earnings have increased, contributions to pensions have increased; so why should the ceiling go down? Stealth tax.

Moving forward, stealth taxes are likely to be the most popular way for governments to increase their income without the majority of people noticing.

Let’s think about this. What else could the government do along these lines to increase revenue? How about tax those British people living outside of the UK more? They don’t live there, they don’t have the same rights as everyone that does, so are they not an easier target? So, what could they do? Tax UK state pensions (currently they do not tax non-UK residents, although they are taxable in Spain)? Or how about tax those with UK private pensions a ‘non-resident tax’? Or tax those who move their UK pensions outside of the UK and not into a place where the UK government has an agreement with? In fact, the last one they do already!

What can you do? Well its quite simple really; plan now so that should any of the above or anything like this happen, your assets or monies are arranged to be as tax efficient as possible to mitigate these circumstances. If your assets are working just as effectively as they are now, but are much more tax efficient, it could save you and your family a lot of money in taxes in the future.

Perfect preparation prevents P*** P*** performance I believe is the phrase!

Moving to, or living in Spain after Brexit – What do you need to do?

By Chris Burke - Topics: BREXIT, Residency, Spain
This article is published on: 20th August 2019

20.08.19

*UPDATED 1st January 2020

If you have been living in Spain lawfully for at least five years, you will be able to apply for indefinite permission to reside there, which is termed ‘permiso de residencia de larga duración’ simply meaning ‘long term residence permit’. Note that you cannot apply until the UK has ‘potentially’ finally left the EU.

Apart from this, there are four main conditions to be able to remain in Spain after Brexit:

  1. No criminal record
  2. That you have not been ejected from Spain OR from a country which Spain has a verbal agreement with
  3. You have private health insurance
  4. You have a net monthly income of at least €799 for a family of two, and a further €266 per month for each additional family member

However, if after Brexit you have not been in Spain for 5 years but are living there legally, there is no great need to worry. The time you have spent there will count towards the 5 years and as long as you meet the above criteria, you will then be able to apply for the ‘permiso de residencia de larga duracion’. What you might have to do though, is apply for permission for what you will be doing in Spain. For example, if a retiree, you might need to ask to be that in Spain. Or, if you wish to work (see more about this below) you will need to apply for this also. If you wish to holiday for less than 3 months at a time, then you should not need to apply to remain in Spain for this. Before Brexit, obviously none of this was required.

Working, or not working, in Spain – after Brexit
If you wish to move to Spain after Brexit, but NOT work in Spain, you will need to apply for a ‘permiso de residencia no lucrativa’ meaning essentially a ‘non profit visa’. You will also have to prove you have money to live on, such as a regular permanent income (a salary would not count for this) or through bank statements showing that a minimum balance has been maintained over at least the last year, with your name and account number.

If you are an employee of a company in Spain, then they should be taking care of your application to stay.

Moving to Spain after Brexit as self employed
If you are looking to move to Spain and work for yourself, you can apply to be self employed, or ‘Autonomo’. You will need to be able to demonstrate the following, as well as applying for permanent residence as set out above, i.e. ‘permiso de residencia de larga duración’. The commercial activity you will be doing must comply with Spanish rules and you must:

  1. have the relevant qualifications
  2. have sufficient funds to invest in the activity to make it viable
  3. give the number of people you will employ, if any
  4. have sufficient funds to support yourself, on top of the funds for the activity (see above)
  5. Provide a business plan which makes sense to the Spanish Authorities
  6. not be suffering from a serious illness

Retiring in Spain after Brexit
When looking to retire in Spain after Brexit, there will be several criteria to fulfil and adhere to in your application. Those are:

  1. No illnesses that are a serious public risk (eg smallpox, SARS)
  2. €2130 monthly income for the main earner in the family, and an additional €532 for each dependant
  3. Proof of ability to sustain this income for one year

Note, after you have resided in Spain for 5 years, you can then apply for ‘permiso de residencia de larga duración’ as mentioned above and will only need to adhere to those criteria moving forward from that point.

The process – what happens when you are accepted?
When you have been accepted, you will be issued a visa within 1 month and you must enter Spain within 3 months for this to remain valid. If you have permission to work and you do not register with the social security office within three months of your arrival, your right to remain will lapse.

Where to apply when moving to Spain, after Brexit
To apply for permission to live in Spain, you go to your local Spanish Consulate, even if you are not living in your country of origin. The process is thus: the Spanish consulate confirms whether all the relevant documents are in order and that everything has been provided that needs to be. They, in turn, send this to a Spanish Government office who will decide if they will give you permission to move to Spain.

If your application is successful
If applying to live in Spain without working and you are successful, you can then pick up your visa within one month. If applying to work, you will then be asked to make this application, again within one month, once you have been given the ok to reside in Spain.

The visas are valid for one year, when it needs to be renewed for periods of two years moving forward. During this whole time, you need to abide by the rules mentioned above including having the required income to live/run your business. Then, after you have lived in Spain for five years you can apply for ‘permiso de residencia de larga duración’ and solely adhere to those rules, again as mentioned above.
Once you have moved to Spain legally, your rights, taxes and your families rights will be the same as any citizen of the EU. Like everyone else, having lived in Spain for 10 years, you can, if you wish, apply for Spanish residency. To do this you need to demonstrate that you have integrated into Spanish society, including speaking the language and understanding the culture.

If you would like to receive further important updates on living in or moving to Spain, as an English speaker, sign up to Chris’s Newsletter here:

Tips on Moving to Spain before Brexit

By Chris Burke - Topics: BREXIT, Spain
This article is published on: 24th July 2019

24.07.19

*UPDATED 1st January 2020

With the UK likely to leave the EU in 2019, many people are making the move and leaving the UK whilst it is arguably still easier to do so than it will be after Brexit. But what are the key things you need to do in order to be organised from a personal financial advice point of view? Here I have listed my ‘Top Tips on moving to Spain’, the main areas I point people in when making the move, or having just arrived in Spain. This could save you a lot of time, money and headaches, and is only a small example of the way I help clients living here in Spain.

  • Confirming Non UK Resident Status with the HMRC
  • Potential Tax Rebate
  • National Insurance Contributions Whilst Abroad
  • Checking Your National Insurance Contributions
  • Becoming Tax Resident in Spain
  • Existing Investment Organisation
  • Inheritance
  • Healthcare
  • Life Insurance
  • Wills
  • Property
  • Private Pensions
  • Banking
  • Why Move to Spain Before Brexit

Please click on each link below to find out more regarding that area of expertise:

Confirming Non UK Resident Status with the HMRC
Tell the HMRC that you will no longer be a UK resident by filling in form P85, informing your local council and the UK state pensions department. This is important for the following reasons:

Potential Tax Rebate

In many cases you could receive a tax rebate, depending on which part of the tax year you leave in. Tax is taken from your wages and worked out on what you are paid each month, starting with the first month. Therefore, if your final UK salary payment is in September having been earning £4,000 per month, for example, that means the following months until the end of the tax year, in March, you won’t be paid anything. Therefore, because the HMRC would have been taxing you on the basis of completing that financial year, the tax you owe could well be reduced and in many cases a rebate will be applicable.

National Insurance Contributions Whilst Abroad

You can apply for Non Resident relief when living abroad, meaning that you can pay National Insurance contributions in the UK at half the cost, so around £11 per month (which mathematically is worth doing, considering life expectancy in Europe of 84). You can also backdate these up to 6 years if you have been out of the UK that long and haven’t been paying.
www.gov.uk/national-insurance-if-you-go-abroad

Checking Your National Insurance Contributions

You can see how many years National Insurance contributions you have by entering your number on the link below:
www.gov.uk/check-national-insurance-record

Becoming Tax Resident in Spain

It is important that when you move to Spain you choose the right tax regime to be part of. For example, if you are working for a Spanish entity, you may be able to apply for The Beckham Law, which means all worldwide income will be taxed for 5 complete tax years at least, at a flat rate of 24% (as opposed the normal rate of up to 46%).

Or, if you live in Spain, work for a Spanish company and spend up to two weeks of the month outside of Spain on business, you may be able to deduct tax for every day you are away proportionally. So, that could mean up to half the tax payable.
IMPORTANT – Some of these tax regimes only give you a limited time to apply for them. For example, within 6 months of paying tax here you have to apply for the Beckham Law.

It may also be of benefit to set up a Spanish company instead of becoming self employed, the main rule of thumb here being if your income is likely to be consistently over €60,000 per annum.

Existing Investment Organisation

Any investments you have when you become tax resident in Spain (that is, spending more than 6 months a year in Spain and having your economic centre of interests there being the deciding factors) will be reportable in Spain and might not be as tax efficient as they should be. For example, many asset classes such as ISAs or stock/share/fund investments (unless structured in a certain way) are declarable each year and tax is payable on any gains, whether you take any of that money or not. In some cases, you can have your assets organised so this is not the case, and the tax can potentially be reduced when you do withdraw any money.

Inheritance

In Spain, rules on giving away your assets are very strict and you are limited in what you can give away per year without incurring any tax. This is an area that is worth considering and organising before you leave the UK. In the UK there is usually no inheritance tax to pay on small gifts you make out of your normal income, such as Christmas or birthday presents. These are known as ‘exempted gifts’. There’s also no inheritance tax to pay on gifts between spouses or civil partners. You can give them as much as you like during your lifetime, as long as they live in the UK permanently. However, other people you gift to will be charged inheritance tax if you give away more than £325,000 in the 7 years before your death. See the sliding scale below:

In Spain, gift tax depends on the age of the person and their relationship to you. In many circumstances you receive a €100,000 exemption, following which a sliding scale up to 20% is applied in tax. Spouses can claim up to 99% relief. It is imperative to look at this before you move.

Years between gift and death Tax paid
less than 3 40%
3 to 4 32%
4 to 5 24%
5 to 6 16%
6 to 7 8%
7 or more 0%

Healthcare

When you first arrive in Spain, registering at your local health centre should be a priority in case of illness. The requirements can change, but at present the following should be sufficient for you to acquire an individual health card (Tarjeta Sanitaria). This will enable you to register with a doctor, visit a health drop in centre (in Barcelona a Capsalut) and purchase prescription drugs:

  • NIE (tax number/residence certificate)
  • Rental contract of your apartment
  • Social Security number
  • Empadronamiento (document from the town hall confirming where you live)

Life Insurance

Insurance in Spain, in general, can be much more expensive than in the UK, and life insurance is an example of that. Many insurance companies will allow you to carry on with the life insurance you have in the UK, but you must get this confirmed in writing by them. To give you an example, I have seen an insurance cover in the UK at £22 per month, costing over €100 euro per month in Spain, and the cost is not fixed for life like it generally is in the UK.

Wills

Foreign residents of Spain are not permitted to give away more than the freely disposed part of their estate (one-third) as the rest is reserved for the ‘obligatory heirs’. If an international or Spanish will is made stipulating that the laws of a person’s home nationality apply, however, no aspects of Spanish inheritance law will apply to either Spanish or worldwide assets. In layman’s terms, if you are British, you can choose UK law and therefore leave your assets as you see fit without having to adhere to Spain’s rules.

If your estate is dealt with under Spanish inheritance law, ‘forced heirship’ rules apply (known as the ‘Law of Obligatory Heirs’ in Spain). This means there are restrictions on how you distribute your estate, as a certain percentage needs to be set aside for certain relatives.

The Law of Obligatory Heirs states that if the deceased was married at the time of death, the spouse keeps 50 percent of all jointly owned property. The remaining 50 percent is put towards the estate. The estate is divided into three equal portions:

  • One-third is divided between surviving children in equal shares
  • One-third is reserved for surviving children but can be distributed equally or unequally according to instructions in a will. The surviving spouse retains a ‘life interest’ (usufruct) in this part of the estate and the children do not inherit until the spouse dies
  • One-third can be disposed of freely in a will
  • If there are no children, then surviving parents are entitled to one-third if there is a surviving spouse, or 50 percent if not

Property

This is currently a very popular asset to buy in Spain. Key points to be aware of compared to the UK are the extra taxes/costs (approx 13% costs on top of the purchase price of a property in Barcelona) and that the market is not as regulated as the UK, which means that there are estate agents out there that are just interested in their commission. You MUST make sure you purchase a property with a Cedula (certificate that the building has passed health and safety required by Spanish law) and certificado de habitabilidad (this means the property meets the minimum standard for living in), otherwise, you might not get a mortgage and also it will be difficult to sell later as it is not a legal place to live.

If you have never lived in the place you are moving to, I strongly suggest renting an apartment for a period of time, maybe even a couple in different Barrios/areas. That way you will get a feel of what works for you. In many cases, renting actually works out cheaper than buying somewhere, even taking into account the recent rental price increases.

Private Pensions

There are sometimes tax implications on moving your pension outside of the UK, which many people have done for the resulting benefits. In the last couple of years, 25% taxes have been implemented depending on where you move your UK pension to. There are opinions that this charge could apply to the EU, should Brexit go ahead. If you are planning to move abroad, either before or after Brexit, looking into this possibility will give you the options and knowledge to assess and make an informed decision.

Banking

Banks in Spain can be very ‘charge’ friendly and don’t always fully explain how your account works. Usually when you arrive banks will give you a ‘Non resident’ account, incurring extra costs and charges. However, you can quickly open up a ‘Resident’ bank account with no everyday running costs, such as bank transfers or costs for withdrawing money from their own ATMs. To qualify for a ‘Residents’ bank account and bypass potential costs you need to transfer in €600-€700 per month.

Why Move to Spain Before Brexit?

There will be certain criteria to meet to be able to move to Spain after Brexit, in particular if you are self employed or own your own business. This is expected to include a year’s cash flow in the bank, private medical insurance, proof that your business is viable and if retiring, a minimum income of around €2,200. I have a much more in depth article you can read if you wish to know more about this.

If you have questions relating to these points, or anything similar, don’t hesitate to get in touch.