seasideman

Hi, we were due to start living in Spain this year but we have come across a lot of problems. First of all, we were going to albir every two weeks to try and find an apartment to rent but due to the time of year, and due to having two dogs we found it very difficult.

A lot of landlords did not want to have pets in their property, and we have now decided to look at moving to Javea. It was always a choice to moving to Albir or Javea and now we have chosen Javea because there is more choice of property.

The biggest problem we have faced this year is the selling of our house. We were due to pack up everything and sell our house and start a fresh in spain and put the money of our house in the bank. We do not want to buy a property in spain and only want to rent. However, we had a house fire which was very scary and a huge shock and derailed our plans.

Our house will not be ready now until around April time, but the fire changed our thinking. We have now decided to keep hold of the house and rent it out to cover the mortgage and keep it as an investment for the future, as the rent of the property will cover the mortgage.

So what I am trying to find out, with trying to be realistic is how much money should we take over to spain so we can be secure.

Our situation is, my wife will be taking early retirement, she has to wait five years to receive her pension from the government and will only receive a £100 a month private pension which is rubbish with what she has paid into it. We are not sure what pension from the government she will receive due to finishing work five years early, but she has worked all her life.

I will be self employed, earning around £1,600 before tax and other fees that i have to look into. So i am just wondering 1) is this amount going to be enough to live on each month to live in Javea, and 2) we are thinking of taking with us £12,000 and need to know if that is enough to keep us secure. We plan to sell our house in about ten years time.

Any help and advice would be great.

DaveT11

we are hoping to find somewhere in Albir and we have a dog, how many places did you try and do you have large dogs ?

Pulaski

If you sell your home within 18 months of moving out you will not pay CGT in the UK, but if you owned and lived in it for say 15 years, and sold it 10 years after you moved out, then you will pay CGT on 10/(15+10) x (sales price - purchase price) x indexation allowance - less any capital improvements you made.

10/(15+10) is 40%, after indexation allowance (in other words the adjustment for inflation) you'll probably be paying CGT on approximately 25% of the gain in value if you owned it for 25 years but only lived in it for 15 years.

I do not know if Spain might also levy CGT on the sale?

FWIW IMO £1,700 mth and £12,000 savings seems to be cutting it fairly fine - it's doable but you'd have to love faorly frugally. £12,000 isn't much of a safety net either. For example what happens when you need to replace your car? You're unlikely to save much on £1,700/mth and a used car would take a substantial bite out of your savings.

ETA I just noticed that your £1,600 is your gross income - personally I wouldn't want to try to live on the income level you report having.

Have you budgeted for health insurance costs?

Dondurma

That sure ain't the way I understand CGT laws, but I live and learn!!!

Pulaski

That's how CGT works - the gain is apportioned on a straight-line basis over the period you owned it, then you divide the time between the period which is exempt from CGT (the periods when you lived in it or were deemed to have lived in it) and the periods that are taxable (when you did not live in it).

Under certain circumstances a period when you are working overseas may be "deemed residence", but for that to make a difference you are required to move back into the house as your home, even if only briefly, after the period of deemed residence but before you sell.

Dondurma

I see
I am talking about selling in UK to move to Spain-the sale is then subject to Spain's CGT rules

Certainly in Spain there's no allowance in relation to years lived in the house it's simply purchase price deducted from selling price times 25%

Pulaski

As a result of changes in the UK operation of CGT in April 2016, sales of property in the UK after October 2017 will be chargeable to UK CGT even if the owner lives outside the UK.

Dondurma

Not if you move to Spain and become tax resident there
The sale of your UK house will be subject to Spain's tax rules if you sell your UK house in same year you are Spanish tax resident.

If it's your main residence in UK there's no CGT due there BUT it will be owed in Spain if become tax resident there in the same year you sell it

Fred James

Yes, it will but that doesn't mean it won't be taxed in the UK as well.

There is nothing specific in the tax treaty to allow for this, so you would have to pay it in the UK and deduct if from the tax paid in Spain.

Dondurma

But if it's your main residence in UK there's no CGT due in the UK, therefore you must pay in Spain ( if you become tax resident in the year you sell the house)

Pulaski

As I explained above, in some detail, that ceases to be true if you continue to own it after you have moved out of it, and this will impact sales after October 2017 for those people living outside the UK.

Dondurma

Sorry see what you mean.
What I have been saying is if you sell up TO MOVE TO Spain, you don't pay in U.K. because you have sold your main home. However you will be liable in Spain if it is in the year you become tax liable there

Pulaski

Well for whatever reason the OP anticipates keeping his home in the UK for ten years after leaving to live in Spain. I was only meaning to point out that he will land himself with a CGT bill in the UK, and from what you said, an even larger bill in Spain. The only mitigating factor will be that the UK tax paid can be deducted from the Spanish tax due.

Dondurma

Yip if he's keeping on a house in Uk he's getting into CGT hassle there

Of course in the scenario I have given the way around it is make sure you don't move to Spain until after start of July in the year you sell your UK house ( accepting you haven't had any other trips to Spain that year)

seasideman

Hi, i would be paying into the system. A lot of people I have spoken to have said they took with them when they moved to spain enough to last them four months and now live on around £1,300 for two people. These are people who work in bars. I have also spoken to people who are retired who have said they live on around £1,200 including rent etc. So I thought my amount would be ok, but it seems that i could be wrong.