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Spanish Tax
Moving to Spain: Why Timing Is Everything for Your Taxes
Moving to Spain from the UK? Kelman Chambers can help you avoid tax pitfalls, reduce unnecessary taxes, and ensure a smooth financial transition.
August 15, 2025
From April 2027, for the first time in UK history, pensions will fall within the scope of inheritance tax. The change doesn’t touch public sector or defined benefit schemes, instead, it zeroes in on money purchase pensions: the private savings pots built up over decades.
And the prize is vast. More than £1 trillion now sits in money purchase schemes, part of nearly £3 trillion in total UK pension wealth. For a cash-strapped Treasury, these inheritable pots are an obvious target. Large, visible and inheritable, they are squarely in the government’s crosshairs. For many savers, it feels less like reform and more like a raid on family security.
For those already living abroad, or prepared to look beyond the UK’s borders, the picture can be very different. Tax treatment of pensions varies widely across countries, and in many cases moving overseas can soften, or even remove the inheritance tax burden altogether.
Under double taxation agreements, retirement income or lump sums may be taxed at lower rates abroad, while in some jurisdictions pension pots can fall completely outside the UK’s estate tax regime. In other words, changing your tax residency can change the rules of the game.
For those with significant pension pots, it's no longer just about lifestyle or sunshine, it’s about unlocking capital that would otherwise remain tied up in the UK tax net and securing it for the next generation.
The harsh reality is that a UK pension is always a UK asset. No matter where you live, it remains a UK-situs holding and, from 2027, always within the reach of inheritance tax. Simply moving abroad won’t change that.
The key, therefore, is to change the nature of the asset itself. By accessing pension funds tax-efficiently and restructuring them outside the pension wrapper, savers can transform what would otherwise be a taxable UK pot into capital that can be planned with far more flexibility.
This is where relocation comes into play. Many jurisdictions offer more favourable tax treatment for pension withdrawals under double taxation agreements. In some cases, such as Dubai, withdrawals can be structured to avoid local tax almost entirely. Closer to home, European destinations like Cyprus also offer highly effective regimes that allow pension assets to be drawn at low, flat rates of tax. The result is the ability to move funds out of the pension wrapper at minimal cost, and reinvest them into vehicles that sit outside the UK tax net.
In practice, this first step, getting money out of the pension wrapper efficiently, is the cornerstone of effective estate planning. Without it, pension wealth remains locked in as a future liability. With it, families gain options: how to invest, how to gift, and how to protect capital for the next generation.
The “Great British Take Off” is gathering pace. For many, relocating abroad is no longer just about lifestyle or sunshine, it’s a way to take control of their pensions and protect family wealth. The potential gains are substantial: lighter tax on withdrawals, the chance to move funds outside the UK net, and ultimately passing on more to the next generation.
But it isn’t for everyone. Uprooting your life is a big decision, and some will find the trade-offs outweigh the benefits. Still, with inheritance tax now targeting pensions for the first time, it’s no surprise that more families are considering whether a move abroad could be the smartest step they ever take.
The new long-term residence rules mean inheritance tax exposure now depends on how many years you’ve spent in the UK. Those already living abroad have a head start, time outside the UK is already counting in their favour. For them, the chance to draw pensions more tax-efficiently and restructure wealth may be greater than ever.
And for those still in the UK, a well-timed move overseas could achieve the same. Crucially, it doesn’t have to be permanent exile: even a few years abroad can reset the rules and deliver lasting protection.
The inclusion of pensions in the inheritance tax net marks a turning point. Yet with change comes opportunity. Whether you are still UK-based or already living abroad, there are clear and legitimate ways to protect your family wealth: drawing pensions more efficiently, restructuring assets, and making the most of the new rules on residence.
The “Great British Take Off” doesn’t have to mean uprooting your life forever. For some, it may simply be a short, well-timed move that delivers lasting benefits. The key is to plan early, understand your options, and act before the window closes.
If you’d like to explore how this could work for you, our team is here to help turn possibility into a plan.
Andy is a highly experienced financial services professional and joined Skybound Wealth Management from a major European Wealth Management business, bringing with him considerable industry knowledge and expertise.
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