An Expat Guide to Living in Spain (Updated 2025)
If you’re a UK citizen living in or planning to move to Spain, it’s essential to understand how your finances will be affected. Spain’s tax system is notably different from the UK, and there are serious consequences for non-compliance.
Alongside our expertise in Retirement and Investment planning and to help you navigate local tax situations and reporting, we’ve partnered with local experts based in Spain who provide on-the-ground insight and support. Our combined knowledge ensures you get practical, compliant, and tax-efficient advice tailored to expat life.
This guide walks you through key areas: residency rules, taxation, pensions (including QROPS and SIPPs), social contributions, and — importantly — the Beckham Law and Spanish-compliant investment bonds that help optimise wealth planning.
Asset Reporting (Modelo 720)
As a Spanish tax resident, you must report all overseas assets worth over €50,000 — including foreign property, pensions, bank accounts, and investments — via Modelo 720l.
Failure to report can result in severe penalties and the assumption that undeclared assets are unearned income.
Spanish Tax Residency
- You spend more than 183 days/year in Spain
- Your centre of economic interest is in Spain (business, income, family)
- Your spouse and minor children live in Spain
Once resident, you’re taxed on your worldwide income and must comply with Spain’s strict reporting and inheritance rules.
Spanish Taxation & Social Contributions
Spain has both state and regional tax bands — so your final tax rate depends on where you live (e.g. Andalusia vs Catalonia).
Below are general 2025 state bands (before regional rates):
- 19%: Up to €12,450
- 24%: €12,451 – €20,200
- 30%: €20,201 – €35,200
- 37%: €35,201 – €60,000
- 45%: €60,001 – €300,000
- 47%: Over €300,000
Tax returns are typically due between April and June of the following year.
- 19%: Up to €6,000
- 21%: €6,001 – €50,000
- 23%: €50,001 – €200,000
- 27%: €200,001 – €300,000
- 28%: Over €300,000
Wealth Tax (Impuesto sobre el Patrimonio)
Spain is one of the few European countries with a wealth tax, charged annually on net worldwide assets. Exemptions and rates vary by region. General structure:
- Exemptions: €700,000 per individual (plus €300,000 for your primary home)
- Rates: 0.2% to 3.5% depending on asset value
- Non-residents only pay on Spanish assets
ISAs, Premium Bonds, and other UK tax-free investments are not tax-advantaged in Spain — and all returns are taxable.
Social Contributions (Seguridad Social)
- Employees: ~6.35%
- Employers: ~30.9%
- Self-employed: Fixed base rising to ~€320–€530/month, depending on income
UK retirees with an S1 form may access healthcare without contributing, but social taxes still apply to certain income streams.
Inheritance and Gift Tax in Spain
Spain has regional inheritance tax laws, which can vary greatly — some regions like Madrid offer major reductions. However, general rules include:
- Tax applies to both assets in Spain and abroad (for residents)
- Allowances depend on your relationship to the deceased:
- Spouses & children: €15,957–€47,858
- Siblings: €7,993
- Unrelated individuals: €0–€7,993
- Tax rates: Range from 7.65% to 34% (can be higher with multipliers for distant relatives or large inheritances)
Spain also has a Gift Tax, often overlooked by expats. Cash transfers or property gifts may be taxable — again, rates and exemptions depend on your region.
Unlike the UK, Spain doesn’t allow joint ownership to automatically pass to a spouse tax-free, making succession planning essential.
UK Pensions & Retirement in Spain
Defined Contribution (DC) Pensions
- Access to flexible withdrawals
- Mitigate currency risk
- Better control over succession
- Local tax optimisation
Defined Benefit (DB) Pensions
May offer security through guaranteed income — but a transfer might be beneficial if:
- Your health or age reduces expected longevity
- You want to consolidate and drawdown
- Your scheme is at risk of being absorbed by the PPF
Pension Transfer Options
- Leave it in the UK: Still an option, but expect less flexibility post-Brexit
- QROPS: EU-based QROPS (like Malta) offer tax advantages, no UK income tax, and flexibility
- SIPPs: FCA-regulated, cost-effective, and compatible with investment bonds — but taxed in Spain
Here’s more information on UK Pension Transfers.
- Private pensions are taxed as general income under IRPF
- Options include:
- Lump sum at marginal rates
- Averaged taxation (if received over multiple years)
- State Pension: Taxable only in Spain (not the UK) under the DTT
Spanish-Compliant Bonds & Beckham Law
Spanish-Compliant Investment Bonds
These bonds offer tax efficiency, currency flexibility, and simplified reporting for UK expats. They’re structured to align with Spain’s tax system and are often used for:
- Deferred taxation: No tax while invested; only on withdrawals
- Favourable treatment: Only the “gain” portion is taxed
- Succession planning: Can bypass probate and simplify inheritance
Key features:
- Multi-currency options (EUR, GBP, USD)
- Withdrawals taxed using the Spanish withdrawal formula (proportional)
- Some providers offer English-language contracts and simplified local reporting
Beckham Law (Special Expat Regime)
Spain’s Beckham Law (formally the Impatriate Regime) allows qualifying expats to pay tax only on Spanish-sourced income for 6 years.
Requirements (2025):
- Must not have been a Spanish tax resident in past 5 years
- Must have a valid employment contract or act as a company director
- Application within 6 months of registering with social security
Benefits:
- Flat 24% tax on Spanish employment income (up to €600,000)
- No tax on foreign income, including pensions and investment income
- Access to public healthcare via social contributions
Note: Capital gains from foreign assets remain exempt, but Spanish capital gains are taxable.
Final Thoughts
Living in Spain as a UK expat can be incredibly rewarding — but without proper planning, you may face unexpected taxes, penalties, or barriers to accessing your income.
We work with trusted financial advisers and legal experts based in Spain to ensure your strategy is fully compliant and locally optimised.
Top tips:
- File Modelo 720 and declare all foreign assets
- Review your pension structure for Spain-specific taxation
- Consider compliant investment bonds to reduce reporting and gain tax deferral
- Explore Beckham Law eligibility early if you’re relocating for work
- Get local advice on inheritance tax planning — regional differences matter
Need help making your move to Spain financially secure?
We specialise in UK–Spain cross-border planning, and work directly with on-the-ground partners in Spain to provide:
- QROPS and SIPP pension transfer support
- Spanish-compliant bond planning
- Beckham Law applications
- Tax residency and inheritance reviews
Contact Us
Contact us now to schedule your free consultation and speak with an adviser who understands both sides of the border.
