Retirees in two minds about moving to Spain for a better, more affordable way of life may well have been nudged into packing their bags by March’s Budget.
Article written by The Overseas Guides Company
Osborne did bring forward the introduction of the new £144 flat rate pension rule to 2016 from 2017, to benefit women who would otherwise have missed out on a full pension, but for others the new rules remain disadvantageous. And despite getting rid of the planned rise in fuel prices in September, the UK still remains one of the most expensive places in Europe to fill up a car or enjoy a drink.
“It’s normal for expats to compare the UK’s rates of tax and living conditions with those in Spain, where austerity measures are also being implemented,” said Kieran Byrne, MD of leading Costa Blanca estate agency HomeEspaña. “In Spain, the effects are being felt more by Spaniards in areas of the country with high unemployment, and less by retired expats who are financially secure and living with other expats, not only from the UK but other countries, in established tourist resorts.”
“Looking at some everyday prices, petrol is around £1.40 a litre and diesel £1.45 in the UK, while in Spain, they’re around €1.54 (£1.32) a litre and €1.41 (£1.21) respectively,” added Byrne. “Wine, beer and spirits, both in bars and supermarkets, remain considerably cheaper in Spain. As a comparison, on 19th March, the cheapest bottle of Campo Viejo Rioja from a British supermarket was £6.00, while in a Costa Blanca supermarket the same or equivalent bottle would cost €2.99 (£2.55).”
Relocating Brits should note some of the other differences in taxation between the UK and Spain:
Council Tax
This is a key difference between living costs in the UK and Spain, where it is considerably cheaper. In the UK, many councils have frozen rates for the past two years but hopes that George Osborne might force them to do this for another year did not materialise in his Budget.
Council tax in Spain, known as IBI, or SUMA in some parts, did increase slightly in 2012 but it still remains comparatively cheap. Homeowners in Spain also pay an annual garbage collection tax. As a guide, annual council tax for a typical three-bedroom villa in Costa Blanca will be around €450 and garbage collection €80, making a total of €530 (£453) payable to the council annually. In the UK, annual council tax for a three-bedroom semi-detached home in the South-east is three times that, namely around £1,500 (€1,755)!
Stamp Duty (SDLT)
The last stamp duty holiday in the UK ended in March 2012 and applied to first-time buyers buying under £250,000 – pressure on Osborne to re-introduce this did not happen, although he did announce a scheme to help first-time buyers get finance. Stamp duty rates in the UK are currently nil for property costing £125,000 and less, 1 per cent from £125,001 to £250,000 and rise on a sliding scale to 7 per cent for properties over £2million.
In Spain, tax payable on a resale purchase is known as Transfer Tax, or ITP, and since January 2013 is levied at 8 per cent of a property’s price up to €400,000, 9 per cent on the value from €401,000 to €700,000, and 10 per cent of value over and above €701,000. In Spain, VAT (known as IVA) is levied on new-build property at 10 per cent, as well as AJD tax (often referred to as Stamp Duty) at 1.5 per cent. In the UK, new-build property attracts no VAT.
Added Kieran Byrne at HomeEspaña: “Despite the taxes to buy property being higher in Spain, prices per square metre in the Costa Blanca are so much lower than in most of the UK that even once you’ve factored in the higher taxes, Spanish property still remains very affordable. On lower value property, such as those around €100,000 or less, buying taxes remain relatively low – in fact, they can often cost you less than the effect a swing in the £/€ exchange rate can have on your purchase. Buyers just need to ensure they budget properly by adding on 10-11 per cent to any purchase price.”
One example of such a property, currently available through HomeEspaña, is this two-bedroom apartment in Las Ramblas Golf (pictured), just south of Torrevieja in the southern Costa Blanca and on the market for €100,000.
For details of more property for sale in Spain, visit the listings on Rightmove Overseas. One way to save money when buying in Spain is to use a currency exchange specialist when transferring your pounds into euros to complete the purchase of your property. For more information on this, contact Smart Currency Exchange or visit the Currency Zone.
To understand the full step-by-step process to buying a property in Spain, collect The Overseas Guides Company’s ‘Spain Property Buying Guide’
The views and comments herein are those of the author and do not necessarily reflect the views or opinions of Rightmove Overseas, Rightmove Group Ltd or Rightmove Plc