1. How does the cost of living really compare with the UK?

Most households find the overall cost of living to be lower in Spain, with local taxes in particular, much lower than UK council tax bills. However, it is worth bearing in mind that if you are totally dependent on sterling income, a fall in exchange rates could suddenly make everything seem much more expensive.

2. Income Tax the Same?

Income tax is on a banded system in a similar manner to the UK,and although the top rate is 43%, most households pay less in Spain than they would in the UK . This is because you are taxed as a household and can utilise your spouse’s personal allowance.

In addition, there are many more bands in Spain than in the UK, with tax allowances for each child also as well as a maternity allowance for children under the age of 3. Taxes fall into two categories: the state tax and also local government taxes. Personal National Insurance Contributions are also much lower in Spain, with a typical employee rate of 4.7% as opposed to 11% in the UK.

3. Do their properties increase in value like ours?

Spain has enjoyed a strong property boom over the last 10 years, with annual increases being similar to those enjoyed in the UK. The last two years have seen corrections in the prices of properties in some areas with a problem being oversupply in some locations. Many property commentators however are espousing that now is a good time to buy in Spain – but to be aware of the golden rule: Location, location, location.

4. How do pensions work?

Some employers, and the Department of Work and Pensions (for your State pensions), will pay your pension income directly to your Spanish bank account in Euros, which you may find simpler, although you have no choice over the exchange rate used.

Alternatively, you can arrange to continue to pay into a UK bank account and arrange a monthly transfer at a fixed rate (for a year or two) via one of the currency dealers. There are a number of currency dealers available who typically offer a superior exchange rate than the banks.

Private pensions are a complex area and advice over the best way to proceed with these is recommended. A savings scheme exists which is tax relievable in Spain and can be drawn as a pension, however other potentially more suitable schemes exist for certain individuals.

If you live in Spain, you are a Spanish tax resident and must declare your worldwide income on your Spanish self assessment form. You will need to arrange for your pensions to be paid gross from the UK.

Public sector pensions only will remain taxed in the UK in the first instance, but must still be declared in Spain, to take into account your total income. You will not pay tax twice. However it must be noted that the value of the unvested fund can be counted as part of your overall assets and fall into the wealth tax calculation.

5. What are the first things I should do when I get there?

There are a number of basic steps that you take in the first week of arriving in Spain, much of which can be done in the UK before arrival:

• Contact the DWP and get form E106 sent to your Spanish Address. Once received take this form to the Instituto Nacional de la Seguridad Social to register for healthcare
• Open a Spanish Bank Account; remember that as a non-resident you will not benefit from the same credit facilities in Spain until you have residency status and also have built up a credit history. Remember that you can not pay bills without a Spanish Bank Account.
• Remember your general insurances (household, motor, pet)
• Contact the telephone company to get a line installed in your property as being without a phone and the internet when trying to sort out issues is frustrating
• Register for your NIE number at the Comisaria de Policia Nacional (Police Station) – this is like your National Insurance Number in the UK. If you intend to stay in Spain for more than 6 months it is obligatory to apply for residency.t

6. Can we still invest in the UK from there and have our income paid into our bank account, as we do here?

You will no longer be able to invest in any UK tax-sheltered investments, such as cash ISAs. In any case, as you are taxable on your worldwide assets and the Spanish do not recognise any existing UK tax shelters, it may be preferable to use investments specifically designed to be tax-efficient in Spain.

This will also allow you to build euro savings, which are generally preferable, as most of your future costs are likely to be in euros.

7. Do they have ISAs and tax-free savings plans?

No tax allowable schemes such as ISAs are available in Spain, however other savings schemes exist for residents which can be suitable for your circumstances in Spain

8. What are the hidden taxes?

Inheritance tax can be a problem if not planned for, especially as the tax can apply on worldwide assets, often with unforeseen and undesirable results. Moreover, the architecture of the tax system in Spain is distinct to that of the UK. Spouses pay Inheritance Tax AND the tax falls on the beneficiary not on the donor. It is also highly advisable to write a Spanish will.

An annual wealth tax is applied on a sliding scale, starting at 0.2% on assets up to the first €167,129 and rises through various bands to 2.5% on assets over €10,695,996. This tax is assessable per household on the value of your worldwide assets.

9. What insurance do I need?

As well as the usual household and car insurances, most Spanish households also take out a top-up health insurance policy. You are obliged to join the Spanish Health service.

The State cover will pay for up to 70% of your medical costs. A top-up insurance policy is important so that you are covered for the balance of your costs.

10. Will you help us with planning our move?

Siddalls specialse in personal financial planning for those planning to live in Spain and will take a complete overview of your personal situation and circumstances to ensure a smooth and tax-efficient move into a country with very different systems to the UK.

Being registered and having offices in both Spain and the UK means we can keep up to date with both countries systems and understand and explain how to protect your assets from tax.

After discussion we can advise you on the most suitable investments, help set-up these investments and continue to help you once living in Spain. Our ultimate aim is to provide you with tax-efficiency, security and simplicity for your new life in Spain.

With our local knowledge we’re always up to date with the latest changes in fiscal systems.