UK ISAs and pensions after moving to Spain: what changes for British expats

For many British expats, the ISA and the workplace or private pension are the backbone of their savings. Moving to Spain doesn’t make them disappear, but it changes how they’re taxed, sometimes significantly. Here are the key points to review.

Your ISA stops being tax-free

An ISA is tax-free in the UK. Spain doesn’t recognise the ISA wrapper, so once you’re tax resident in Spain, the interest, dividends and gains inside it are generally taxable here, like any other investment.

What that means in practice:

• You’ll need to declare the income and gains in your Spanish tax return.

• Depending on the value, the account may need to be declared on Modelo 720. See Spanish tax residency and Modelo 720.

• The paperwork of keeping UK investments while living in Spain can be heavy, and some UK providers restrict what non-residents can do.

How UK pensions are taxed in Spain

Under the tax treaty between Spain and the UK:

• UK State Pension and private or workplace pensions are generally taxed in Spain once you’re resident here.

• Government service pensions (for example, former civil servants, teachers, NHS or military staff) are generally taxed in the UK, although they may still need to be declared in Spain.

• The 25% tax-free lump sum from a UK pension may not be tax-free in Spain. Take advice before drawing it if you’re already resident.

Before and after the move

1. Timing matters. Some decisions, such as taking a lump sum or selling investments with large gains, can be taxed very differently depending on which year you become Spanish tax resident.

2. Get a picture of all your assets with values at 31 December.

3. Ask a cross-border tax adviser about your pensions. We don’t advise on transferring UK pensions, and schemes that promise easy tax-free transfers deserve extra caution.

Savings options that work under Spanish rules

For new savings, or money you decide to bring to Spain, Spanish products follow Spanish rules:

• Investment funds marketed in Spain: you can switch between funds without paying tax until you cash in. See our investment funds.

• Unit-linked savings: gains grow tax-deferred and, when you withdraw, you pay tax only on the gain portion. See Fondovida unit-linked savings.

• Spanish pension plans, if you have taxable income in Spain. See should an expat open a Spanish pension plan?.

This article is general information, not tax or pension advice.

How we can help

We help British expats in the Region of Murcia understand their options in Spain, in plain English. Visit our office in central Murcia or book a video call from anywhere.

Talk to us about your savings

Contact us or explore investment and savings in Spain.