Spain is a popular retirement destination, offering an enviable lifestyle, pleasant climate and lower day-to-day living costs. The Spanish tax regime is complex, however, making it essential to take advice before you move to ensure your finances are structured as tax efficiently as possible. With the right approach, many UK nationals improve their tax position by relocating to Spain, which can have very preferential inheritance tax treatment in certain regions too.
Here are the key points to consider when weighing up whether Spain or the UK would be more expensive for your retirement years. In our experience, many of our clients find they are better off all round in Spain than they were in the UK, both financially and from a lifestyle perspective.
Residence visa costs
When planning the costs of moving to Spain, you need to factor in the requirements for obtaining and maintaining a residence visa. The application process can be difficult and time consuming, so working with a professional firm may be in your best interest.
The most suitable residence permit for British retirees is Spain’s Non-Lucrative Visa (NLV), which has an application fee of £516 per applicant in 2025. More importantly, to obtain a Non-Lucrative Visa you must demonstrate an annual income of €28,800, plus €7,200 for each dependent. A married couple therefore needs at least €36,000 annually.
You cannot work with an NLV, but if you plan to work online while in Spain, the Digital Nomad Visa may be an option. The DNV allows foreign remote workers to reside in Spain while working for non-Spanish companies. You need to evidence a stable income (around €2,500 per month) and meet the criteria.
Property prices
Property in Spain is considerably more affordable than in the UK. Of course, Spain has a wide range of prices across cities, regions and property types, but, on average, the cost of buying an square metre in Spain can be 40%-50% cheaper than in the UK.
So if you sell your home or other UK property as part of your move to Spain, you can buy a similarly sized Spanish home with the proceeds and have capital left over to invest for income and long-term growth. The timing of the sale is crucial so that the capital gains do not become taxable in Spain. It is essential to seek advice well ahead of your move.
Cost of living
Spain offers a significantly lower cost of living than the UK, especially for day-to-day expenses such as housing, groceries, public transport and dining out. Your income can go considerably further in Spain, allowing retirees to enjoy a very comfortable lifestyle.
According to data from Numbeo, living in the UK is noticeably more expensive: rent is around 42% higher, groceries cost about 27% more, and overall, including rent, the cost of living is approximately 37% higher than in Spain. This will vary depending on the regions of the UK and Spain.
Healthcare
Spain offers a universal and typically very affordable healthcare system.
UK nationals of state pension age can apply for Form S1, which provides the same healthcare rights as those paying into Spain’s social security. If you have or can obtain Form S1, you are eligible for free healthcare in Spain and can add family members to your application (spouses, partners, children).
Form S1 is available online from NHS Overseas Healthcare Services to those living in an EU country or moving to one within 90 days and who receive a state pension.
Without an S1, once you’ve been resident in Spain for a year, you may be eligible for the Convenio Especial. This voluntary scheme allows access to the Spanish public healthcare system for a monthly fee (typically €50–€150). Alternatively, private health insurance costs are typically €100–€250 per month.
Annual taxes
Tax regimes vary across Spain’s regions, making it imperative to understand and plan for the tax implications of your move. It is equally important to look beyond the headline rates of tax and explore the planning opportunities that Spain offers.
While those on high salaries and/or holding significant assets may face a higher tax burden in Spain, if you are retired, Spain offers legitimate tax planning opportunities. With suitable planning, you can enjoy a low tax environment in Spain, in many cases lower than the UK’s.
Income tax
In Spain, personal income tax is divided into two categories: the general income base (which includes employment income, pensions, rental income and business profits) and the savings income base (which covers dividends, interest and capital gains).
Tax rates for general income vary by region. For example, Madrid applies a rate of 18% for the lowest income bracket, the Community of Valencia starts at 18.5%, and Andalucía and Cataluña’s lowest rate is 19%. For higher income, the tax rates also differ: Andalucía and Madrid have a top rate of 47%, Cataluña reaches 50%, and the Community of Valencia tops out at 54%. However, the tax rates on savings income are consistent across all regions of Spain: starting from 19% on income up to €6,000 to 30% on income exceeding €300,000.
In the UK, the personal allowance is £12,570 (€14,300), meaning this amount is tax-free. In contrast, Spain offers a basic personal allowance of €5,550, which increases to €6,700 for those aged over 65 and €8,100 for those aged over 75. Unlike in the UK, where the personal allowance simply exempts income from taxation, Spain’s allowance works by applying the lowest applicable tax rate (18-19%, depending on the region) to this amount and then reducing the final tax bill by that figure.
Pension income will generally be taxed only in the country of residence, under the terms of the UK/Spain Double Taxation Treaty. As a retiree in Spain, therefore, you’ll only pay tax on your pension in Spain, not in the UK. UK government pensions, however, will continue to be taxed only in the UK, as the source country.
Before moving to Spain, it’s essential to assess your overall financial situation and income sources. This will allow you to restructure your assets and income streams as needed to optimise your tax situation in Spain. For example, in the UK, you can withdraw up to 25% of your pension pot tax-free (the PCLS). However, once you become a Spanish tax resident, that 25% will be subject to Spanish tax. Similarly, income from a UK ISA is tax-exempt in the UK, but in Spain it will be taxed as savings income.
These are just a few of the key differences between the UK and Spain’s tax systems. With the right guidance and planning, you can optimise your finances to make the most of Spain’s favourable tax structures.
Wealth taxes
While Spain imposes annual wealth taxes, whether this will impact you depends on your level of wealth and the region.
In Andalucía and Madrid, only wealth over €4 million is affected. This is per individual, potentially doubled for couples owning assets in joint names. In Murcia and the Balearics, it affects individual wealth over €3,700,000 and €3,000,000 respectively. In other regions it is usually €700,000, though it is €1,000,000 in the Valencian Community and €500,000 in Cataluña. An additional main home €300,000 allowance per owner is available in all regions.
While wealth tax is certainly a consideration for high-net-worth individuals and families, don’t let this discourage you from making Spain your home. With strategic financial planning and restructuring your assets, it is often possible to reduce your overall Spanish tax burden to much more welcome levels.
UK inheritance tax vs Spanish succession tax
Beyond the cost of living and annual taxes, don’t forget to weigh the cost of dying – specifically, how much of your estate could be lost to inheritance tax.
Both Spain and the UK levy inheritance taxes, and while both have undergone recent reforms, their approaches differ significantly. In the UK, changes have largely focused on increasing government revenue, thereby reducing the amount of wealth passed down through generations. In contrast, many Spanish regions have introduced reforms aimed at preserving family wealth, particularly within the immediate family.
The UK’s complex domicile-based inheritance tax system was abolished in April 2025 and replaced by an advantageous residence-based approach. This reform has created unprecedented opportunities for individuals considering long-term relocation to Spain. Put simply, if you move from the UK to Spain, after 10 years you’ll cease being liable to UK inheritance tax on worldwide assets – from this point, only UK assets would be assessed for IHT. You can plan to keep any UK assets you do retain to below the threshold.
And as certain Spanish regions now offer significant inheritance benefits, effectively eliminating succession tax between spouses, parents, children and grandchildren, moving to Spain permanently and relocating your assets could protect your wealth from most or all inheritance taxes.
Given that UK inheritance tax is charged at 40% on estates (soon to include pension funds) exceeding the allowances, the potential savings for your family are potentially vast.
The importance of tax planning when retiring in Spain
While Spain offers a favourable cost of living along with many lifestyle benefits, its tax system can be complex and without proper planning may prove less favourable than expected. That’s why strategic tax and wealth management is essential for anyone considering a move. Your planning should ideally be done well in advance of your move, before you start selling UK assets or winding up a business. With the right advice, you can structure your affairs to optimise your tax position in both Spain and the UK and avoid unnecessary liabilities.
Timing is everything. The point at which you become a Spanish tax resident can have a significant impact on how your income and assets are taxed, as we’ve highlighted in this article.
Another important factor is choosing the right investment structures. Tax-efficient solutions that comply with Spanish regulations can help reduce exposure not only to income tax, but also to inheritance taxes. When tailored to your personal circumstances, these structures can make a meaningful difference to your long-term financial wellbeing.
With careful preparation and expert guidance, ideally before you become a Spanish resident, you can arrange your finances in a way that supports a smooth and tax-efficient transition. Such financial planning ensures you can enjoy all the benefits of retiring in Spain without the surprise of unexpected tax bills.
As with many aspects of retiring abroad, success lies in early planning and informed decision-making. Taking expert advice will prove invaluable, providing many tax advantages and peace of mind.
Supporting your move to Spain
Blevins Franks has been helping UK nationals move to Spain for 50 years now. This long-standing experience gives us deep insight into the financial and tax complexities involved in cross-border retirement planning.
We offer strategic financial planning that covers every stage of your journey: from the early steps in the UK, ensuring key decisions are made at the right time, through your retirement years in Spain, and if you choose to return to the UK in the future. Our guidance covers selling UK assets and businesses as part of a move to Spain, to help keep taxes to a minimum. We review your savings, investments, pensions and other assets to ensure they’re aligned with your current needs and structured to be as tax-efficient and estate-friendly as possible.
If you’re considering retiring in Spain, get in touch with us today. With the right advice and preparation, you can enjoy your Spanish retirement with confidence.
