The real cost of keeping your UK investments when you live in Spain.

By Sam Kelly

Managing Partner & Financial Planner

s.kelly@chorusfinancial.es +34 664 398 702

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 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 Aviva and The Prudential.

The products are designed for UK residents, 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 had already paid an effective tax rate of 20% on this product, 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 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. We’ll also guarantee to beat any like-for-like offer in terms of fees on the common products used by British investors living here in Spain, including those offered in QROPs, and Spanish bonds from Old Mutual International and The Prudential.

If you’d like to discuss a new or existing investment or pension, please contact me direct on +34 664 398 702, email s.kelly@chorusfinancial.es or complete the Contact Form on this page.

Contact Sam Kelly