Living in Spain as a UK expat: What you need to know about tax, wealth and succession rules

Once you become tax resident in Spain, your worldwide assets come under Spanish tax jurisdiction. This extends beyond income and capital gains to include reporting requirements, potential wealth tax exposure, and succession rules that differ significantly from those in the UK.

A new tax system, additional reporting requirements, and cross-border considerations all come into play, making wealth planning for UK residents alongside cross-border advisory services essential when structuring your move.

Understanding these rules early helps reduce unnecessary tax exposure and avoid avoidable administrative complexity.

Spain’s Modelo 720 reporting requirement

Spanish tax residents must declare overseas assets exceeding €50,000 across three categories: bank accounts, investments and securities, and real estate.

While this is not a tax itself, it is a strict reporting obligation. Accuracy is essential, as non-compliance can still result in significant penalties.

This is an informational reporting obligation rather than a tax in itself, but it is taken seriously by the Spanish tax authorities. While penalties for non-compliance and inaccuracies have been reduced following EU rulings, they can still be significant, making accurate reporting essential for expats with UK-based assets.

Wealth tax in Spain for expats

Unlike the UK, Spain applies tax not only on income but also on wealth, meaning the value of your global assets can be subject to annual taxation.

• Wealth tax: This applies to worldwide assets above certain thresholds, with allowances and rates varying by region.
• Solidarity tax: A more recent measure targeting high-net-worth individuals, this applies to total assets exceeding €3 million.

While regions such as Andalucía have historically offered more favourable wealth tax treatment, national rules can still apply as a backstop, meaning overall exposure depends heavily on where you are tax resident in Spain.

Inefficient UK investment bonds and funds

Many UK-focused investment products (like OEICs or certain insurance bonds) lack the "passporting" rights required to be tax-efficient in Spain.

Holding these as a resident can lead to punitive taxation on notional gains. Switching to Spanish-compliant investment wrappers can often provide much-needed tax deferral.

Spanish inheritance tax (IHT): How succession rules differ from the UK

The Spanish inheritance system is fundamentally different from the UK’s.

• The beneficiary pays: Tax is levied on the person receiving the inheritance, rather than on the estate itself.
• Forced heirship: Spanish law may require a specific portion of your estate to pass to your children, which can conflict with a standard UK will.
• Regional variation: Allowances and rates differ significantly between autonomous regions, meaning where you live in Spain can have a major impact on your inheritance tax exposure and estate planning strategy.

The power of the "pre-move" window

The most effective tax planning takes place before you leave the UK. Once you are registered in the Spanish tax system, your options for restructuring and tax mitigation become more limited.

Planning ahead allows you to organise investments more efficiently, time asset sales strategically, and manage pension withdrawals in a way that helps reduce your overall tax exposure and improve long-term outcomes.

Cross-border tax rules can significantly reshape how your wealth is treated once you move. With the right guidance, you can identify potential exposure early and put a more efficient structure in place before your move. Email us today at [email protected] or give us a call on +44 (0) 20 7759 7519.