Living in Spain after Brexit

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.