Living Off Savings Until Pensions Due

The Spanish tax year runs from 1st January and if you spend more than 183 days in Spain in the year then you are automatically tax resident. If you move here in the second half of the year you will continue to be tax resident in the UK until the following year so CGT will not be an issue.

Hi Iain,

We don't know for sure yet (as it depends on what agreement - if any! - is made between the UK and the EU), but as Third Country nationals, UK citizens may be subject to much higher financial requirements in order to obtain residency from 1 January 2021.  It's worth reading Jim's guides on the subject:

Jim's guides - your complete guide to Spain

The tax year in Spain runs from 1 January to 31 December, so tax returns for 2019 have to be completed by end June 2020.  You need to bear this in mind when you're timing your move to Spain as, ideally, you'll want to sell your UK house in the (Spanish) tax year before you obtain residency, otherwise you'll be liable for Capital Gains Tax on the profit in Spain.

If you have assets in excess of Eu 50,000 in any one of 3 categories (bank accounts/savings, property and investments/annuities), you will have to submit a Modelo 720 Declaration of Assets; so if your savings exceed Eu 50,000, you declare the capital sum on the Modelo 720, but you submit only the interest earned (income) on the Modelo 100 Tax return.  Also, you need to know that ISA savings which are tax-free in the UK are not tax-free in Spain. 

Regarding in which country to keep your savings, I looked at this last year and the range of products available were better in the UK - even without knowing how things will pan out post-Covid19, I suspect that will continue to be the case, but no doubt you'll do more detailed research nearer the time of your move.  In whichever country you keep your savings, your tax liability will be in Spain if you are resident here and spend 183 days or more per tax year here.

Kind regards,

Kim

Kimmy11's reply is very good and very comprehensive, so I won't repeat those points.

Once you've sold your house, only interest you earn on your capital is classed as income, and therefore taxable. This is the case in whichever country the interest is generated. You are liable for income tax in Spain on your worldwide income.

 So you're wondering where is the best place to keep your cash. I can tell you there are no worthwhile interest generating savings accounts available in Spain. I know current interest rates in the UK are little more than 1% for easy access, but in Spain they might be a tenth of that at best.

Of course, if you keep the bulk of your cash in the UK, you have to gamble on how exchange rates will move. A slump in the pound will more than wipe out any interest earned in the UK.

I mentioned in another thread regarding gaining residency that it might be best for someone like you to transfer a reasonable lump sum into your Spanish bank account, then start monthly transfers of 700€ from your UK to your Spanish account, to show regular income. Use Transferwise for the best currency exchange service.

Good luck, ask if you want to know more.

EDIT: I should also have pointed out that there is a personal tax allowance in Spain just like in the UK, so chances are until your pensions kick in, you probably won't have enough taxable income to be liable for any Spanish income tax.

..................... it might be best for someone like you to transfer a reasonable lump sum into your Spanish bank account, then start monthly transfers of 700€ from your UK to your Spanish account, to show regular income. 

Would a lump sum (as mentioned above) be liable for any kind of tax and have to be declared on a tax return? For example, when a retired UK citizen who is now resident in Spain transfers 50,000 pounds of their own money (previous savings, not new income) from their own UK bank account to their own bank account in Spain.