UK Ex-Pat Savings Tax

Are you talking about income tax, or capital gains tax on your UK house sale?

The tax year in Spain is the calendar year, not April to the following March like in the UK. If you move to Spain, you become a tax resident if you first arrived with more than half the calendar year to run. In that case, all of your income for the WHOLE year is taken into account by the Spanish tax authorities. If you arrived with less than half the year to run, you become tax resident from Jan 1st of the following year.

If you are also paying income tax in the UK, you can offset some or all of this against your Spanish tax liability.

You ask how tax works in Spain. The key thing to realise is that ALL your worldwide income is taxed here in Spain, it doesn't matter in which country it was generated.

After your first Spanish tax return, you can disengage from the UK tax system and be taxed only in Spain. I recommend any British ex pat to do this if you can, it makes your tax affairs a lot less complicated.

HI JC2021,

The first thing to know is that the tax year in Spain runs from 1 January to 31 December each year (as opposed to 6 April in the UK).  Also, whilst the UK operates a "split year" tax system for citizens moving in and out of the UK tax system in each tax year, Spain does not.  This means that you have to bear in mind the timing of your house sale alongside when you become tax resident in Spain.  The primary factor that Spain uses for deciding when you become fiscally resident here is the number of days you live here in the Spanish tax year, i.e. 182 days (6 months) and you would not be tax resident here, but 183 days (6 months + 1 day) would make you tax resident here.

Spain taxes you a year in arrears, so if you moved to Spain in the first 6 months of 2023, you would become tax resident here in 2023.  However, if you move to Spain much later in 2023, i.e. less than 6 months here, you would become tax resident in 2024.  Ideally, you would sell your UK house prior to becoming tax resident in Spain and pay any Capital Gains Tax owing to the UK.  If you become tax resident in Spain the same year as your house sale, you will still have to pay any CGT in the UK (which must be declared within 30 days of the sale), but you would also have to declare the sale in Spain.  I'm not aware whether the Dual Taxation Agreement covers CGT - if it does, Spain would discount any CGT owed here by what you've already paid in the UK, but you should check.  There are also national and regional laws regarding discounts on Spanish CGT subject, for example, to you spending all the proceeds on a property in Spain, but this would depend on the region where you buy, your age, etc.  You really must speak to a professional tax advisor (fiscal asesor) to ensure the advice you receive is accurate, current and specific to your complete fiscal situation.

Kind regards,

Kim

Hi Kim,

We are in a similar process with our uk house likely to complete early 2023. As we don’t have any CGT liability on primary residence in the UK, so no tax to pay, would, if we were to move to Spain face a CGT liability under Spanish tax law?

I’ve heard of folk coming unstuck with CGT on primary residence sales when moving to Spain. 

Hi Garyandros,

Having no CGT liability in the UK does not necessarily mean you will have no liability in Spain.  Even though there is a DTA between the UK and Spain, it states on Gov.UK, "Double taxation agreements do not apply to tax on gains from selling UK residential property."  This is why I, and several other members, always recommend that any UK (or other overseas) property sale is completed before you become tax resident in Spain.  If you don't think that can be achieved, I highly recommend that you take professional tax advice, as there may be oportunities  available for you to mitigate any tax liability if you plan ahead.

https://www.gov.uk/tax-uk-income-live-abroad/taxed-twice

Kind regards,

Kim

Many thanks Kim

Regards Gary & Ros