5 Key Financial Planning Questions You Need to Ask Yourself, If You're a British Expat in Spain
Relocating to Spain can provide a wealth of exciting opportunities from a career, lifestyle and retirement planning perspective – but with opportunity comes regulatory complexity; from navigating tax residency rules and succession law to managing currency exposure and cross-border pensions, so the financial stakes are high.
Navigating Spain’s tax system, managing currency fluctuations, and ensuring your investments and pensions are working as hard as possible for you requires a robust, integrated approach. Even small oversights in your financial strategy can lead to costly mistakes.
How can you protect your wealth, reduce tax liabilities, and get the most from your move? It begins with asking the right questions. Below, we outline five essential financial planning questions every British expat in Spain should consider. These insights will help you consolidate control of your finances, avoid potentially costly pitfalls, and set you on the path to securing your financial freedom.
1. Am I Managing My Tax Position Efficiently as a Spanish Resident?
Tax planning as an expat demands more than just filing paperwork. Once you spend over 183 days in Spain during a calendar year, you are classified as a Spanish tax resident, subject to income tax on worldwide earnings and, in some regions, wealth tax. Without strategic planning, you risk paying significantly more tax than is necessary.
Key Considerations:
- Understand Your Worldwide Income Tax Exposure: UK pensions, property rentals, and investments may all become taxable in Spain. It’s important to assess how these income sources are treated under Spanish law with the help of an international financial advisor to identify potential liabilities early.
- Utilise Tax-Efficient Investments: Discussion of your specific circumstances with an international financial planner and the potential use of tax-efficient investment structures (such as Spanish-compliant bonds) can offer tax deferral and simplified reporting, making financial administration easier.
- Optimising reliefs under the UK-Spain Double Taxation Treaty: To avoid double taxation, it’s important to review how your income is structured and sourced across both jurisdictions. A consultation with an international financial advisor who understands the UK and Spanish tax frameworks, including the application of the UK–Spain Double Taxation Agreement, can help you optimise your position and reduce unnecessary tax liabilities.
- An Opportunity for New Arrivals: The ‘Beckham Law’: Professionals relocating to Spain for work may benefit from the ‘Special Expat Tax Regime’ (commonly now referred to as the ‘Beckham Law’). This regime allows eligible individuals to pay Spanish income tax only on income sourced in Spain, exempting most foreign income (such as UK pensions or rental income) for up to six years. Strict eligibility criteria and deadlines apply, including applying within six months of registering as a Spanish tax resident.¹ Work with a cross-border financial advisor to help you structure your tax position from day one.
2. Have I Protected Myself Against Currency Risk?
If key elements of your income or future income, such as UK pensions, dividends, or rental earnings, are held in GBP sterling, but your living costs in Spain are (and in the future will be) in euros, then you are exposed to ‘currency risk’ that may reduce your income’s purchasing power, depending on market conditions. For example, as a British expat moving to Spain in January 2001, you would have enjoyed an exchange rate of 1 GBP: 1.58 EUR for income generated in sterling and spent in Euros. That compares with 1 GBP: 1.16 EUR on 8 July 2025, a reduction of 27% over that period.
Key Consideration:
- Align your retirement savings with your future currency needs: A key strategy to reduce currency risk is to hold and invest your retirement funds in the currency of the country where you plan to retire. This helps protect your purchasing power and aims to reduce the impact of exchange rate fluctuations on your long-term financial security. Holding your retirement funds in GBP while planning to retire in the Eurozone, for example, may expose you to long-term fluctuations that could significantly erode your purchasing power. By structuring your pension and investment portfolio in the currency of your future expenses, help to protect your financial security and minimise the impact of unpredictable exchange rates.
Forth Capital offers access to a range of multi-currency, risk-rated investment strategies developed in partnership with Morningstar. These portfolios are available in euros and other major international currencies, supporting clients in managing currency risk as part of a diversified retirement plan. By aligning your investments with the currency of your future spending, we can help you reduce the impact of exchange rate fluctuations and support the long-term purchasing power of your pension.
3. Is My Estate Plan Aligned with Spanish and UK Laws?
Estate planning can be more complex for expats and internationally mobile families as your estate may be liable for taxes under both UK and Spanish tax systems. Careful consideration of your tax exposure in both countries, and how this could impact the value of the assets that you pass on to your loved ones, is extremely important if you are to avoid significantly diminishing your family's inheritance.
Key Considerations:
- UK Inheritance Tax (IHT): It’s important to understand how the new UK residency-based tax regime (which came into effect on 6 April 2025) will potentially impact your IHT liability and also to be able to calculate the potential benefit of establishing and maintaining Non-Long Term UK Resident (Non-LTR) status..
- Spanish Succession Tax: Spain taxes inheritances based on regional law and family relationships, and rules vary widely across the country. While there is no nationwide automatic spousal exemption, some regions (such as the Balearic Islands) may offer significant reductions or even 100% exemptions for spouses and children. Succession planning in Spain is a complex area and should be approached with specialist cross-border advice to ensure your estate is passed on as tax efficiently as possible.
- Mitigating exposure to both the Spanish succession tax (ISD) and UK IHT requires a holistic, cross-border plan. Speak to an international financial planner to explore how we can help you pass on your wealth tax-efficiently - contact us today.
4. Is My UK Pension Set Up for Tax Efficiency in Spain?
UK pensions are a key source of income for many British expats in later life. However, once you become a Spanish tax resident, this income is typically taxed in Spain rather than the UK. Without careful planning, this change can significantly impact your net retirement income.
Key Considerations
- If you leave your pension in the UK: If your pension funds are left in the UK, they could be subject to income tax, when you start to make withdrawals, which could be up to 45% depending on your personal circumstances and if held or received in GBP could expose you to currency fluctuation risk.
- Transferring your UK Pension(s): Depending on your residency status and long-term plans, transferring your UK pension to an alternative arrangement, such as an International Self-Invested Personal Pension (SIPP), may offer greater flexibility, more control over currency exposure, and access to a wider range of investment options.
The impact of a pension transfer will depend on your personal circumstances. It may affect how your pension income is taxed, when you can access your funds, the lump sum options available, and how your remaining pension benefits can be passed on to your beneficiaries.
To understand whether a pension transfer aligns with your financial goals, it is important to seek advice from a qualified international financial planner with experience in cross-border retirement planning.
5. Do I Have a Holistic Financial Plan Suited to My Life in Spain?
Financial planning isn’t static. Life events, tax reforms, and global economic changes mean that today’s plan may not meet tomorrow’s needs. For British expats in Spain, optimising your financial future requires an integrated strategy that considers both UK and Spanish financial regulations, while also aligning with your personal goals. The right plan supports long-term growth, protects your wealth, and helps you stay on track to achieve financial independence.
Key Considerations
- Define your ‘Financial Freedom Target’ and find out whether you are on track
- Optimise your UK and Spanish tax position as a Spanish Resident
- Protect yourself against currency risk
- Align your estate plan with Spanish and UK law to mitigate succession tax and IHT
- Consider transferring your UK pension assets
- Establish whether you are ‘Retirement Ready’.
By taking steps to prepare for your financial future you can make key life choices on your own terms, without compromise - from funding your children's education, to having the means to step back from work when you choose to, with confidence and resilience.
With a holistic financial plan in place, you can focus on living in the present, with greater confidence that you're prepared for whatever tomorrow may bring.
Making the Complex Simple for Expats in Spain
My dual qualifications and dual licence allow me to navigate the complexities of both UK and European financial planning, providing tailored advice that addresses the unique challenges faced by British executive expats living and working in Europe; from optimising the value of your pensions and retirement assets to managing currency risks and ensuring that you don’t fall foul of potentially costly mistakes leaving you exposed to unnecessary taxes and punitive penalties.
I work closely with my clients to navigate the complexities of transatlantic financial planning, optimising their pensions and investments. My comprehensive approach ensures that all aspects of your financial landscape are considered, allowing for integrated and effective planning across both the UK and EU jurisdictions.
If you’d like to schedule an initial consultation with me to discuss your financial planning, wealth management or pensions please get in touch today.
Niamh Aitken DipPFS
International Financial Planner
As a dual-qualified and dual-licenced Financial Planner, I offer tailored financial planning services to international private clients. I help them understand their options, optimise their UK pensions and investments, and create a robust financial plan for their future lives. If you want to discuss your financial planning needs, please contact me here.
Frequently Asked Questions
Once you spend more than 183 days in Spain within a calendar year, you are classified as a Spanish tax resident. This means you must pay tax on your worldwide income, including pensions, rental income, and investments. Additionally, some regions levy a wealth tax on global assets above certain thresholds. To help you manage your potential tax liabilities and prevent you from being taxed on the same income twice, strategic planning is essential. For example, using the UK-Spain Double Taxation Treaty can help you prevent double taxation on the same income.
Living in Spain while earning income in GBP may expose you to currency risks that can reduce your spending power. Working with an international financial advisor will help you to identify and implement the most appropriate strategies to minimise exposure and optimise income stability.
The Beckham Law, officially known as the ‘Special Expatriate Tax Regime’, is available only to individuals who meet specific conditions, including relocating to Spain for employment and applying within designated timelines. Where eligible, it may offer preferential tax treatment for up to six years, including the option to pay tax only on Spanish-sourced income while most foreign income may be excluded.
Once you become a Spanish tax resident, your UK pension income is generally taxed in Spain rather than the UK. Depending on your total income and the regional tax rates, your pension could fall into higher tax bands, with top marginal rates reaching up to 47 percent in some cases. It’s important to note that this applies to your total taxable income, not just your pension.
Spain does not automatically recognise the UK’s tax-free Pension Commencement Lump Sum (PCLS) in the same way as HMRC, meaning lump sum withdrawals may be fully taxable unless carefully structured.
Depending on your personal circumstances, some of the key strategies to help manage the tax efficiency of your pension income include:
- Transferring your UK pension to a Recognised Overseas Pension Scheme (ROPS), which may offer greater control and flexibility depending on your residency status and retirement plans.
- Exploring phased drawdown options, allowing you to withdraw income gradually and potentially stay within lower tax brackets.
- Structuring withdrawals in line with your broader income, taking regional allowances and deductions into account.
- Exploring International SIPPs (Self-Invested Personal Pensions), which may offer multi-currency flexibility and the potential for more favourable tax treatment, depending on your situation.
¹ This information is correct as of July 2025 and is subject to change. Tax legislation may be amended or interpreted differently depending on your individual circumstances or the region of Spain in which you reside.
This communication is for information purposes only and does not constitute financial, legal, or tax advice. All content is based on current UK legislation and is subject to change. All planning arrangements should be regularly reviewed in consideration of legislative updates. Pension regulation and tax treatment vary between jurisdictions. Any reference to UK or international pension rules is portrayed in general terms and are not intended to reflect individual circumstances. The examples provided are hypothetical and for illustrative purpose only. Outcomes will differ based on individual circumstances and local law and regulation. Pension transfers carry specific risks and may not be appropriate for everyone. The suitability of any transfers or investments should be assessed on an individual basis. Past performance is not a reliable indicator of future results. The value of investments can fall and rise, and you may not get back the amount originally invested.
Last updated 11 July 2025
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