With Tracy Storer, Senior Partner, Chorus Financial
This week we received the following question from Mrs Sandra W. from Altea.
I am in the process of becoming a Spanish resident and have a question about my savings and investments. I have several ISAs, premium bonds and fixed rate bonds in the UK and wondered whether I will still be allowed to keep these when I become a Spanish resident? They are all with NS&I.
Great question and one that I get asked a lot!
The short answer to this is yes, you can keep these products open, however typically you cannot add to them and in most cases make any changes to them.
Another question is, should you keep them?
ISAs and Premium bonds are tax free products in the UK so the growth you make on your ISA or the coupons you win from your premium bonds are tax free, however the minute you become a Spanish tax resident, all gains or wins become taxable.
If your returns are modest then this might not appear to be too problematic, you’d add it to your tax return and complete a Modelo 720 (if the value is above €50k). The bigger the investment the larger the potential returns, so paying tax on the gains could mean that an ISA is no longer the best tax solution for your investments.
The other consideration is that if you are unable to make changes to the investments within your ISA, then essentially you are stuck with the investments you have on the day you become a Spanish resident.
This might not be a massive problem right now, but we live in a world where change is happening every day and the investments you hold need to reflect this. The classic example is if you looked at a portfolio from 5 years ago, it would probably have large exposure to some of the big oil companies and high street chains, if no changes had been made to that portfolio, then I would be concerned about the opportunity for growth.
It’s one thing being invested, it’s another making sure that those investments are making the most of current opportunities, so not being able to make changes to your investment could be very detrimental.
Thankfully, there are solutions here in Spain where you can invest in a tax efficient manner, which allow you, working with your adviser, to make appropriate changes as and when necessary.
If you have any questions about finance, tax or money matters here in Spain please email them to me on firstname.lastname@example.org with subject ‘Money Matters’. All emails will get a response, and some may even appear in our column!