Staff Reporter
Expats in Spain with property, pensions, or investments linked to the UK are being urged to act after the Bank of England cut interest rates to 4%, its fifth reduction since last August, in a move that signals growing weakness in the British economy.
Oliver Wilcox, Senior Wealth Adviser at deVere Spain, part of one of the world’s largest independent financial advisory organisations with 120,000 expatriate clients worldwide, says the cut should trigger immediate reviews of cross-border financial plans.
“This cut will bring relief for UK mortgage holders and some businesses,” says Wilcox.
“However, make no mistake, this is a defensive action by a central bank trying to shore up a stagnating economy.
“If you have financial ties to the UK, you should be thinking right now about how this affects your income, your savings returns, and your tax position.”
The rate now stands at its lowest level since March 2023, at a time when inflation has already cooled, highlighting the Bank’s concern about faltering growth.
The UK economy failed to expand in either April or May, and second-quarter GDP figures due next week are expected to confirm that momentum remains weak.
For savers, many of whom are retirees in Spain relying on UK interest income, the news is especially troubling. Deposit rates, which averaged 3.9% last August, have already slipped and are expected to fall further towards 3.5%, eroding returns and increasing pressure on household budgets.
“This is another hit for savers,” warns Wilcox.
“For expats living in Spain, currency movements, cross-border tax rules, and declining UK savings rates can combine to eat away at your income faster than you expect. Sitting still is not a strategy, you need to be proactive in protecting and growing your capital.”
The Bank also downgraded its growth forecasts, warning of persistent slack in the economy. That weakness is already translating into lower tax revenues for the UK government, raising the prospect of fiscal tightening in the Autumn Budget.
“There’s now a real risk of tax increases coming later this year,” says Wilcox.
“If you own UK assets, receive UK rental income, draw a UK pension or have other taxable links, these changes could directly impact you. Planning ahead can help you mitigate the effects, but waiting until after the Chancellor’s announcements will leave you with fewer options.”
With UK government borrowing running above forecasts and debt servicing costs still elevated, market expectations for a tougher tax regime are building. The combination of falling interest income, weak growth, and possible tax hikes means expats could face a double hit in the months ahead.
Wilcox also notes that the pace of rate cuts will likely slow, making it harder for monetary policy alone to revive growth. “We’re entering a period where interest rate moves won’t be enough. Fiscal measures will take centre stage, and that means the tax burden will be in the spotlight. British expats in Spain should be reviewing their full financial position now, not after the changes arrive.”
For those with sterling-denominated investments, UK property, or pensions, the latest cut is a reminder that the UK’s economic trajectory will continue to influence financial outcomes abroad.
“Act now,” says Wilcox. “The worst position to be in is unprepared, especially when both interest rates and tax policy are moving against you.”
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