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10 Things You Should Prepare for as a British Expat Before Moving to the Iberian Peninsula Image

10 Things You Should Prepare for as a British Expat Before Moving to the Iberian Peninsula

January 09, 2023

Everyone dreams about living the perfect expat lifestyle in a warm place somewhere in southern Europe, be it Spain, Portugal or Gibraltar. Here’s what you need to do first.


It’s easy to see the appeal of moving to the Iberian Peninsula. Countries such as Spain, Portugal and Gibraltar offer year-round balmy weather and temperatures, and a quality of life that’s hard to beat, from stellar beaches and resorts to vibrant cities, delicious cuisines and welcoming communities. It’s the reason why many UK citizens choose to move, work and retire there every year.


A new life abroad as a British expat is an exciting prospect, but it’s important that you do not neglect the vital financial planning and logistical organisation that accompanies a big move like this. From visas to UK pensions and retirement planning, here’s what you should prepare for.


1. Cost of living – can you afford to move?


In general, the Iberian Peninsula offers a lower cost of living compared to other places in Europe, but you should still check you can afford life as an expat there, whether you’re moving to Spain, moving to Portugal or moving to Gibraltar. Remember Gibraltar has a marginally higher cost of living then the UK.


Major cities such as Lisbon, Madrid and Barcelona, or areas popular with tourists, such as the Costa Del Sol and Algarve, for example, will be more expensive than other regions in those countries. Gibraltar residency offers numerous tax benefits, but life on the Rock can be more costly than elsewhere in Spain or Portugal.


Before you make any commitments, sit down and draw up a budget for your new expatriate lifestyle to ensure your incomings will exceed your outgoings. Research online to compare the cost of living in your current home versus where you’ll be moving to abroad. Be certain that you can afford the lifestyle that you envision in your new home.


When budgeting, it’s worth adding a generous financial cushion for unexpected costs during the moving and settling in process so you can cope with unexpected outlays.


2. Removals



Moving home is always complicated but the logistical challenges increase exponentially when you’re moving abroad – any experienced expat will tell you that transporting your possessions to another country is one of the most challenging aspects of relocation. Seek quotes from removals firms with experience of international removals who can advise you on different aspects of your move. Ensure you plan and book this far in advance to avoid any last-minute disasters.


When it comes to deciding what to bring with you, think long and hard about whether you will need absolutely everything in your current home. All of your furniture and possessions may not fit in or suit your new residence, and it’s better to sell or make donations to a charity shop rather than lug items across to Spain, Portugal or Gibraltar that you ultimately don’t need.


3. Housing and Accommodation


Whether you’re moving to Spain, planning to retire in Portugal or want to gain Gibraltar residency, do as much research and preparation as possible when it comes to securing accommodation.


Speak to local estate and rental agencies to get a sense of how the housing market works and what prices are like. Consider making at least one short trip in advance of the big move so you can explore different regions and neighbourhoods. You may even be able to view properties and potentially secure accommodation ahead of your relocation.


If you’re looking to rent, investigate the process for renting apartments, negotiating with landlords, fees and deposits, and rental laws. For those purchasing a property, research mortgage rates for expats, property taxes and how the buying process works.


If you have more flexibility – such as if you’re planning on retiring in Spain, Portugal or Gibraltar, rather than working – consider starting with a short-term rental for six months before putting down any permanent roots. That way, you can see if you like where you are based and if you can comfortably afford to live there before making a longer commitment. Serviced apartments are a great choice for ease and convenience in those first few months.


4. Financial Planning - How will you pay for everything?



When it comes to financial planning during relocation there are several factors to consider – from taxes to UK pensions – more of which you can read about later in this feature. One thing to start with first are the practical aspects of how you will access your money and pay for things as a British expat.


Using your UK bank account to pay for things abroad will be costly thanks to transfer rates and currency exchange rates. Opening an international bank account designed for cross-border payments and transfers, in different currencies, will help with this.


As an expat you’ll also need a local bank account to pay for essentials like utility bills as well as day-to-day costs. Research which banks seem most suitable in your new country and what steps you need to take to open an account.


You may want to consider keeping your UK bank account if you have ongoing transactions in the country – such as rental payments if you’re keeping your UK home – or if you plan to return to the UK in the future.


5. Language



While places such as Spain, Portugal and Gibraltar are extremely accommodating for English-speaking expats (Gibraltar being the easiest as English is spoken fluently by almost everyone living there), obtaining even beginner skills in Portuguese or Spanish will make your move much easier.


Simply learning basic greetings and standard phrases will smooth day-to-day life (such as shopping, meeting new people, seeing the doctor, for example). Self-study and/or language classes can be very helpful in this regard and it’s worth starting in advance of your move.


Naturally though, learning a new language can be incredibly challenging, so it’s worth ensuring that any professionals you’re working closely with ­have multilingual abilities so they can help facilitate your transition.


Picking a financial or wealth management advisor with this in mind is especially important as you will need help negotiating the complexities of tax laws and local bureaucracy in another language.


6. Healthcare


Living in another country as an expat means you should plan for every possible outcome to protect you and your family. Healthcare is a vital part of this.


Obtaining health insurance will ensure you are covered for all eventualities. This is especially important for retirement planning, as old age brings with it the increased likelihood of illness. Private healthcare can also be a requirement for certain visas and residency permits. For example, obtaining Gibraltar residency on self-sufficiency grounds or with a Category 2 certificate is contingent (amongst other requirements) on obtaining private health coverage.


Consider also different forms of protection insurance – the likes of life insurance, income protection and critical illness cover will ensure peace of mind that your loved ones will be taken care of should the worst happen.


7. Investments



Many wealthy and high-net-worth British expats rely on investments to provide a stream of income while they’re living in Portugal, living in Spain or living in Gibraltar. It’s important, then, to make sure that your investment strategy is right for your new expat life.


This may mean swapping from your usual UK-based financial advisor to a wealth management and financial advisory firm based in your new home country who is well-versed in advising British expats and with experience in cross-border financial planning, retirement planning, tax planning as well as wealth management advice. It’s always advisable to engage the services of a wealth management firm with regulatory authorisations and permissions both in the UK and in your new country of residency that understands the nuances and differences between both tax regimes. Make sure you use an independent advisor from a reputable wealth management firm who will offer bespoke, customised solutions, rather than a one-size-fits-all approach.


Even if you have no desire to embark on a new investment plan, remember that it may not be possible to continue using certain UK products. ISAs, for example, require you to have a permanent UK residential address for tax purposes so if you move abroad you will not be eligible to pay into it.


8. Pensions and Retirement Planning



Whether you’re still working or planning to retire abroad, becoming an expat will naturally affect your retirement planning. Seek expert advice on what will happen to your UK pension once you move abroad, how you will manage it and what tax you may have to pay.


If retirement is imminent, moving your pension assets to an overseas pension scheme can offer significant tax planning advantages. For example, a QROPS (Qualifying Recognised Overseas Pension Scheme) or a QNUPS (Qualifying Non-UK Pension Scheme) can minimise your tax liability and offer tax-planning benefits when living abroad. Just ensure you consult a qualified financial and wealth management adviser beforehand, as pensions is a complex, difficult to understand area.


Whether you are retiring in Portugal, Spain or Gibraltar, ensure you have an end-of-life plan that covers practical details such as a funeral and how your relatives can accommodate your wishes.


You should also speak to a financial advisor about any UK inheritance tax liability. Even if you obtain permanent residency in your new country, UK domicile is very hard to change (especially if you still retain links to the UK), and you should speak to an expert who can advise you on minimising your potential UK inheritance tax liability.


9. Tax Residency


One of the most important factors in your financial planning when moving abroad will be your tax residency. Before you move, educate yourself about what will trigger tax residency in your destination country and whether there are any issues surrounding double taxation – an important point to consider if you plan to retain property or business interests in the UK. Portugal, Spain and Gibraltar all have double taxation agreements with the UK, but it is your responsibility to educate yourself on any possible liabilities as the financial penalties for not paying tax can be severe.


You will also need to carefully plan your exit from the UK to ensure you do not pay more UK tax than you need to. The 2013 UK Statutory Residency Test lets you pick the date from which you become non-resident and determines how much time you can spend in the UK without triggering tax residency. Unless you leave at the end of the financial year on 5 April, you will need to check if any split year rules apply that will help reduce your tax liability – such as starting full time work overseas; your partner or spouse starting full time work overseas; or you ceasing to have a UK home.


You should also advise HMRC when you plan to depart the UK by filling out Form P85, available at www.hmrc.gov.uk.


When it comes to choosing where to move in the Iberian Peninsula, research which country will best suit your needs. For example, Portugal’s Non-Habitual Residency (NHR) tax regime offers a range of generous tax planning benefits for new foreign residents in their first 10 years of living in Portugal.


Gibraltar’s tax system is particularly appealing for British expats, with no local inheritance or succession taxes, no wealth or capital gains taxes, no VAT and no taxes on savings and investment dividends (although the latter has changed recently for self-sufficient expat residents).


You should also pay attention to regional differences in taxation. Spain’s autonomous communities can range widely in their approach to Spanish tax. Andalucia, for example, recently introduced 100% relief on wealth tax (although this situation is in flux thanks to the central government’s introduction of a solidarity tax on wealthy residents that is yet to be approved).


Regardless of what choice you make, consult a qualified, experienced financial advisor from a reputable wealth management firm to ensure you are tax compliant and avoid making any costly mistakes.


10. Visas and Residency Permits


Anyone who is not from an EU/EEA country will need a visa/residency permit to live and work in the Iberian Peninsula. There are a range of options for obtaining residency in Portugal, Spain or Gibraltar and the best choice for you will depend on your individual needs and circumstances. Wealthier expats, for example, may find Spain’s Non-Lucrative Visa and Portugal’s D7 Visa (combined with Non-Habitual Residency) schemes of interest. There are also visa options for retirees living self-sufficiently on pensions and other streams of income, visas for high-level executives, specialist workers and more. Consult a relocation expert who will be able to advise you on the best routes to residency for you.

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