suffering succotash

My wife and I are getting ready for the big move and trying to get our heads around the way it works in Spain.

I’ve read that you can’t add to the ISA’s once you leave the UK and will be taxed on any monies drawn-down from them every tax year. This I think could be right.



But I’ve also read that you will be taxed on a UK Isa’s gains even if you don’t draw down any money from them…

Could someone put me right on this?

Many thanks

SS

bobd22

Are you talking about cash ISA,s if so then you declare the income from interest on the annual Spanish tax return. You don't pay tax on money you withdraw. They are very limiting as far as UK is concerned once you are not UK tax resident. I have just closed 2 as the interest was something like 0.1%. New Isas are around 3% I queried transferring into different ISA with same bank, not allowed . So I withdrew my money and invested with NS&I in a savings bond at 4.2% interest. little benefit with cash ISAs as not tax free in Spain.

suffering succotash

Sorry not sure what cas is

Barriej

Yep the ISA is just another savings account and its money you have already paid tax on.
They dont exist here and I think you have to be a UK resident to add to them (dont quote me as Ive never had one)

Here in Spain you have to declare ALL interest earned, including 'winnings' from premium bonds on the annual return, its classed as income here.
You will only pay tax on them if, once added to your other income (which if you are on the NLV you will be) you are over a set amount.
If working again they add to your income and this gets added to your return..

If you have more than €50,000 in cash or shares or a pension pot you are drawing from and these are left in the UK, these will also have to be declared via the modelo 720, there is no tax on this its just a reporting tool for assets outside of Spain..

Rosemary

Only part of the post was visible earlier but now it is complete.

Rosemary

bobd22

Yes you are correct only UK Res dents can add to ISA,s. As I said you can't even transfer to newer ISAs to take advantage of better interest rates. They are basically zombie savings accounts with the lowest of low interest rates. Again you are correct re 720 which was one reason I retained mine. However I saw I could get around 10+ times more interest by moving out of ISA into NS&I saving bond. So even after paying tax in Spain will still earn way more interest than the ISAs. It's easy enough to remove them from the 720 once account closed and next year do new 720 for the new account. Unless one has a new fixed rate ISA on good interest rate when becoming Spanish tax resident I don't see them being worth keeping in the ISA wrapper as no tax benefit once Spanish tax resident. Even more annoying when like me main pension income crown pensions so still pay UK tax but can't take any of advantages such as ISA tax free. But as always my choice that become Spanish resident so it's what it is .

suffering succotash

Thanks for all your replies. I don’t think I explained myself properly, the Isa’s we hold are stocks and shares and bonds 60/40, no cash Isa’s.

I was thinking of leaving as is and drawing down when I needed a top-up for our living expenses.

What I’m struggling with is do I get taxed on what I draw down on in a tax year, or do I get taxed on shares that have done well even if I haven’t taken any money out in the tax year.

Thanks,

SS

bobd22

Sorry I don't know about stocks and shares/ISAs.

Barriej

My private pension is held in stock and buildings and it had to go on the 720 as its value is over the €50,000 reporting amount..
Now my pension is slightly weird as there are only trades within the cluster of companies I have shares in. There are never any new accounts opened or closed..
So all I did was report the breakdown on the 720 and will only do another one if the value goes up or down by more than €20,000 in the tax year.

If yours are buying and selling etc I'm not sure if you are taxed on these.. Someone with more info may be along soon.

BUT I do know any and all drawings, cashing in etc is subject to income tax here. My 'income' from the pension is my only income and gets taxed here.
Like many others I am now ONLY taxed here in Spain even though my pension drawings are above the UK tax threshold as we have a NT coding. (you can get this if you qualify after you have made your first Spanish return).

The easiest way is to just expect to be taxed on everything and if not, well its a bonus...
Spain is nothing like the UK, here the rich (and not so) get taxed on anything and everything....

The biggest mistake people make when moving countries is to compare apples with oranges........

I would suggest that you find a good Gestor or a solicitor that has a Spanish accountant on hand and talk to them.. (not an english one or even an english speaking one) as these are not important points..
We did this and its made everything alot easier, our accountant (oo get me) speaks no english at all (our solicitor is the translator) he has been doing tax returns and advising business's for years.

EU.flag

If you hold UK stock&shares ISA and you leave UK to become non-UK resident residing somewhere else, your ISA provider will most likely close your account and send cheque to last known address.
However, few large ISA providers will keep your ISA open but in limited mode. You can only sell all or part of holding and withdraw cash. You will not be allowed to do anything else.

If you were to resume UK residency, ISA will be switched back to normal operation mode.

suffering succotash

Great thanks everyone, I think I will keep the ISAs going and just take money out/draw down when needed.
And be careful filling in the modelo 720... Better still pay someone to do it for me.

olivefarmer

You may well have hoops to jump through proving you are you despite the ISA manager posting statements to your Spanish address. Getting someone “official” annotating copies of various documents eg passport, Resident documentation. Of course you will be charged maybe 50 euros per document depending on who you ask.

Barriej

Pay for it and use the same company to do your annual tax returns, its not that expensive for what it is.
As long as you check them before they are filed.
Make sure you keep copies of everything

PoloMarco

My understanding on S&S ISA tax in Spain (note I am not a financial expert and you should discuss with a professional advisor)

• Are taxable in Spain as the ISA UK tax free wrapper is not recognised by Spain
• Not taxed on the overall value, unless value breaches wealth tax limit
• Not taxed on growth whilst remain invested
• Taxed as capital gain only when selling units based on difference between original purchase and selling price **
• Taxed on dividends ***
• Not taxed on the value withdrawn except as above
• Should be declared on Modelo 720 if value is sufficient in asset class

** If you have held units for sometime your gains maybe considerable so seek professional advice before becoming Spanish tax resident

*** I understand whether dividends are reinvested or not. I took the view that even dividends “paid” into Accumulation funds maybe taxed so switched to Income funds to make reporting easier and to create an income stream. This was a personal decision and not necessarily required.

rbs_gb

Hmm, some food for thought there as amongst my savings is a stocks and shares ISA that was started in 2001 with £3000 and currently values at £7400. If I take that to Spain and subsequently decide to cash it in, that would count as a gain of £4400 ? Any thoughts on whether doing an ISA transfer to another S&S ISA would remove that gain so far as Spain is concerned? If not, sounds like one to cash in before I go.