The real cost of keeping your UK investments after you move to Spain

The real cost of keeping your UK investments after you move to Spain

Sam Kelly DipPFS, EFA, BA (Hons) Managing Partner, Chorus Financial.
Sam Kelly.

By Sam Kelly,
Managing Partner,
Chorus Financial.

Us Brits are a funny old bunch. We spend half our lives dreaming of that move to the sun… then when we get here, we want it to be as similar to the UK as possible! From a Sunday morning fry-up at the local expat bar, to shopping in ‘Iceland’ and even driving a right-hand drive car!

All that aside, there can be some serious consequences to not adapting to life in Spain, particularly when it comes to your finances. I saw a very real example of that this week when a gentleman came to see me about a potential new investment.

The gentleman, I’ll call him William, although that wasn’t his real name, had been resident here in Spain for 10 years but had been holding his UK investment bond this whole time – these investments are very common and offered by companies like Sterling, Aviva and The Prudential.

The products are designed for UK residents only, with all gains and income earned within the bond taxed annually at 20% and paid directly to HMRC in the UK. This means that for basic tax payers in the UK, when they close the bond, there would be no further tax to pay, and higher rate payers would only need to pay the difference.

The issue with this notional tax is that it is not recognised under the double-tax agreement between the UK and Spain, and as you all likely know by now, Spain wants to tax you on your Worldwide income, including on investments.

The sad news for William is that despite the fact he was already paying an effective tax rate of 20% on this product each year (although he wasn’t aware), he now finds himself owing a further £18,000 to the Spanish tax authorities.

This bill was entirely unnecessary and would’ve been avoided if William had moved to the Spanish version of the same product (a Spanish Compliant Investment Bond) when he first moved to Spain. Even if he had changed products after 5 years, he would’ve saved around £9000 on his tax bill.

Chorus understands all too well why people are hesitant to seek financial advice here in Spain. Advice here is often low quality, or full of hidden fees, but the consequences of ignoring it can also be costly.

Chorus will always offer quality investment advice, with transparent charging, using providers you will be familiar with and trust. Whether you’re looking for advice on a pension transfer, or Spanish compliant investment bond, we’ll provide you with the best solutions, and always offer an option with no tie-ins, hidden fees or exit penalties.

To find out more about investing as a Spanish tax resident visit www.chorusfinancial.es or contact me direct to discuss a new or existing investment or pension, on +34 664 398 702 or email s.kelly@chorusfinancial.es

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