Tax Rebates When Moving From The UK To Spain

When you leave the United Kingdom to live in Spain, HM Revenue and Customs (HMRC) works out your final tax position for the year. Stop working in the UK part way through a tax year and you have usually paid more income tax than you owed.

You tell HMRC you are going on form P85. It closes your UK tax record for the year and pays any refund into the bank account you name.

You can send it online with your Government Gateway sign in, but only once you have actually left. If you have not gone yet, print it and post it. You do not need a P85 at all if you are sending a Self Assessment tax return for the year you leave.

How UK Tax Residency Is Determined

Whether the UK can still tax you comes down to your residence status under the Statutory Residence Test. The UK tax year runs from 6 April to 5 April. Spend 183 days or more in the UK in that year and you are resident automatically.

You are usually treated as not resident if you spend fewer than 16 days in the UK, or fewer than 46 days if you were not UK resident in the three previous tax years. The year you move is normally split into a non-resident part and a resident part, which GOV.UK calls split year treatment.

Leaving does not end everything. UK income such as rent from a UK property is still taxed in the UK, and you keep the Personal Allowance only if you qualify, for example as a British citizen.

Avoiding Double Taxation Between the UK and Spain

The fear for most British movers is paying twice on the same money. The double taxation convention between the UK and Spain prevents that. It has been in force since 12 June 2014, and covers UK income tax from 6 April 2015 and Spanish income taxes from 1 January 2015.

The treaty gives each kind of income to one country. Where both may tax it, the country you live in gives credit for the tax already paid in the other. You can still pay the higher of the two rates overall.

The calendars do not line up. Spain taxes the calendar year and you file the following spring: for 2025 the window ran from 8 April to 30 June 2026. Our guide to filing an income tax return in Spain takes you through it.

Tax Rebates for UK Employment Income

Your employer gives you a P45 showing your pay and the tax taken so far. Send it with the P85, or tell HMRC why you do not have it. Keep a UK bank account open until the money lands, because HMRC will not pay currency conversion costs.

Do not plan around a fixed waiting time. HMRC posts the current one on its check when you can expect a reply tool. Working remotely from Spain for a UK employer is a separate question, and that work is normally taxed in Spain.

Pension Income and UK Rebates

Pensions cause the most confusion, and the treaty is clearer than people expect. A pension paid from the UK to someone living in Spain is taxable only in Spain. That covers the State Pension and, in the ordinary case, workplace and personal pensions too.

Pensions for government service are the exception. A pension for past service to the UK government or a local authority stays taxable in the UK, unless you are resident in Spain and a Spanish national.

The UK lets you take up to 25% of a pension pot as a tax free lump sum, capped at £268,275. Spain has no matching exemption, because Spanish law counts pensions and pension scheme payments as earned income. Where UK tax has been taken on income the treaty gives to Spain, you reclaim it from HMRC.

What About ISAs, Savings, and Investments?

An Individual Savings Account (ISA) is tax free in the UK and nowhere else. Once you are resident in Spain, the interest, dividends and gains inside a UK ISA are taxable in Spain and belong on your Spanish annual return, the Declaración de la Renta.

Assets held outside Spain also bring a reporting duty. If any one category of foreign accounts, investments or property is worth more than 50,000 euros, you report it on form Modelo 720 between 1 January and 31 March. Cryptocurrency abroad has its own form, Modelo 721.

Steps to Take Before and After Moving

1. Tell HMRC you are leaving, by post before you go or online once you have gone.

2. Keep your P45, payslips, P60s and pension statements in one folder.

3. Register with the Agencia Tributaria in Spain and ask for a certificate of tax residence.

4. Check whether a UK bank or pension provider is still deducting UK tax, and ask them to stop.

5. Diary the Spanish dates: Modelo 720 and 721 by 31 March, the annual return from April to the end of June.

You are tax resident in Spain if you spend more than 183 days of the calendar year there, or if Spain is the main base of your work or business interests.

Seek Professional Advice

Cross border tax is one of the hardest parts of a move. A bilingual adviser who works in both systems will keep you compliant and reclaim what you are owed. Ask for their registration details and a written fee quote first.

Need Health Cover When You Move?

A Spanish residence visa asks for health cover as well as money. Consulates ask for a policy from an insurer authorised to operate in Spain, matching what the public system covers, with no co-payments and no payout limit.

We are an authorised Sanitas agency in Marbella and our own team speaks English. Start with our guide to Sanitas health insurance, compare cover on our Sanitas plans page, or see what a visa policy has to include.

Sources:
GOV.UK - UK tax residence
GOV.UK - Form P85
GOV.UK - UK and Spain tax treaty
GOV.UK - Lump sum allowance
Agencia Tributaria (Spain)