Packing up your life and relocating to Spain, France or Portugal sounds exciting and easy enough until the paperwork starts. Most people spend months researching property prices, visa requirements and healthcare options. What tends to get left until far too late are the financial arrangements, and that’s where things can quietly go wrong.
The moment you stop being a UK tax resident, a whole set of rules changes. Your income, assets and estate could all be treated very differently across two jurisdictions, sometimes in ways that directly contradict each other. There’s a lot to unpack here, so let’s look at the three areas where expats most commonly get caught out.
Your Pension Might Not Go as Far as You Think
UK pensions remain subject to UK rules even after you leave. But how they’re taxed in your new country of residence is a separate question entirely, and one that catches a lot of people off guard. Spain, for instance, taxes UK pension income differently depending on whether you’re drawing a state pension, a workplace pension or a QROPS arrangement.
There’s also the question of currency risk. If your pension pays in pounds and you’re spending in euros, the exchange rate becomes a real factor in your monthly budget. A rate shift of even a few pence per euro adds up considerably over a year.
Assets on Both Sides of the Channel Create Problems
If you own property or investments in the UK while living abroad, your estate could fall under two inheritance tax regimes simultaneously. The UK still applies inheritance tax to UK-situated assets regardless of where you live. Spain has its own inheritance tax rules, which vary by region and can apply to both the deceased and the beneficiary.
Since April 2025, a new “long-term resident” test has replaced the old domicile rules for IHT purposes. If you’ve been a UK tax resident for 10 or more of the previous 20 tax years, your worldwide assets remain within scope of UK inheritance tax, not just those situated in the UK. Even after you leave, this exposure can persist for between three and ten years depending on how long you lived in the UK.
Getting this right requires proper planning well in advance of it becoming relevant. This is where expert UK wealth management from a firm that understands both the domestic picture and the cross-border implications becomes genuinely valuable. Having someone who can look at your full asset picture, makes a significant difference to how your estate is structured.
Tax Residency Rules Are Easy to Get Wrong in the First Year
The year you leave the UK is often the most financially complex. You could be a tax resident in the UK for part of it and tax resident in your new country for the rest. Both countries may want a slice of your income during that transition period, depending on timing and the terms of any double taxation agreement between them.
The UK’s Statutory Residence Test determines whether you’re still considered a UK tax resident. It’s based on a combination of days spent in the UK and various other ties, and it’s easy to miscalculate if you’re spending time going back and forth during the first few months of your move.
- Keep a record of every day you spend in the UK during your transition year
- Check whether a double taxation agreement exists between the UK and your destination country
- Confirm your tax residency status in your new country before making any large financial decisions
- Review any UK bank accounts, ISAs or investments, as their tax treatment may change once you’re non-resident
Wrapping Up
Moving abroad doesn’t just change your address. It changes the rules around your money, and those rules don’t always line up neatly between two countries. The expats who run into real trouble are usually those who assumed their finances would sort themselves out once they’d settled in.
Getting proper advice before you go, or shortly after you arrive, will save you considerably more than it costs. If you have assets or income on both sides of the channel, you need people who understand what each jurisdiction expects of you, and how to make both work in your favour.
The value of your investments and the income from them may go down as well as up, and you could get back less than you invested. Past performance should not be seen as an indication of future performance.
