Staff Reporter
BRITISH nationals living in Spain with financial links to the UK are being urged to prepare for likely tax increases in the Autumn Budget, as government spending commitments continue to mount without a detailed plan to fund them.
According to deVere Spain, part of the world’s leading independent financial advisory firm, a growing number of clients are now reviewing their exposure to UK tax authorities—particularly where they continue to hold British pensions, property, or investments.
“The fiscal direction is obvious,” says Oliver Wilcox, Senior Wealth Adviser at deVere Spain.
“The government is under pressure to raise revenue, and capital is the next lever. That includes assets, income, and gains that still have a UK connection, even if the individual is based in Spain.”
Chancellor Rachel Reeves’ Spending Review outlined billions in new commitments—from transport and energy infrastructure to school meals and defence spending. Yet there was no corresponding revenue plan.
With income tax, VAT and National Insurance increases ruled out, tax policy attention is turning to capital gains, pensions, and inheritance.
In the October 2024 Budget, the annual capital gains tax exemption was cut to £3,000. CGT rates were raised to 18% and 24%. From 2027, pension funds will become part of the inheritance tax system. While no wealth tax has been formally introduced, options to raise substantial revenue from higher earners are actively being explored.
“There is no ambiguity anymore,” says Wilcox.
“Capital is the target. This includes investment portfolios, property in the UK, and pensions—especially defined contribution schemes. Expats in Spain who hold any of these should expect tighter tax treatment.”
The potential alignment of capital gains tax rates with income tax bands would have a significant effect on British investors, particularly those relying on asset sales for retirement income.
Trusts may also be affected if exemptions and reliefs are scaled back or removed, as has been discussed in recent policy circles. Inheritance tax thresholds have been frozen until 2030, pulling more families into the net year by year.
Wilcox notes that the recent abolition of the non-dom regime, which takes effect in April 2025, further signals HM Treasury’s willingness to tighten the rules around offshore income, international asset structures, and pension transfers.
“Even without new legislation, people are paying more tax in real terms due to frozen thresholds and bracket creep. But there is more coming. If the government wants to fund its plans without touching income tax, it will have to look to wealth.”
deVere Spain says its clients increasingly want clarity on where they stand. Many still receive income from the UK or retain property there.
Others draw from UK pensions or maintain investment accounts linked to UK custodians or platforms. Each of these can trigger tax liabilities—under current rules and under any new measures introduced this autumn.
“We’re not dealing in hypotheticals,” says Wilcox.
“There are identifiable financial arrangements that will become more expensive under the types of tax reforms now being considered. And those with UK ties are exposed, whether they live in London or Madrid.”
One area of growing concern is the risk of retrospective or immediate application of new rules. In past Budgets, HMRC has moved swiftly to limit planning windows and reduce available allowances before most taxpayers could respond.
“People assume they’ll have time to act after the Budget is published,” Wilcox says. “In practice, many of the changes that raise the most revenue are designed to take effect immediately. By then, many strategic options could be off the table.”
Spain’s tax regime already requires extensive reporting of overseas assets. For UK nationals living in Spain, complexity arises when pensions, property income, or trust distributions from the UK are subject to inconsistent tax treatment between the two jurisdictions. Without a coordinated strategy, liabilities can accumulate in both systems.
“The point isn’t panic,” Wilcox says.
“It’s preparation. If you haven’t reviewed your position since the last Budget—or worse, since you left the UK—then now is the time. Otherwise, you’re sitting on unknown exposure at exactly the wrong moment.”
Discussions of a formal wealth tax continue to circulate in policy think tanks and within the governing party. Several models have been proposed, including one-off charges and annual levies on global assets above certain thresholds.
Wilcox notes that whether or not such a policy materialises, the groundwork is already being laid for broader, more aggressive capital taxation.
“You don’t have to call it a wealth tax to understand the effect,” he says. “Reduced exemptions, higher capital taxes, pension rule changes, and the end of long-standing reliefs all point in the same direction.”
With the Autumn Budget approaching, Wilcox says British nationals in Spain should not wait for confirmation.
“The trend is established. The government needs revenue. If you have UK-based income or assets, you should expect the rules to change, and act accordingly with cross-border financial advice.”
Click here to read more Business & Finance News from The Olive Press.
