Expats warned against leaving debts in the home country

With Brexit coming closer by the minute, increasing numbers of older Britons are rushing to join the exodus to Spain for its sunshine and lower cost of living.

During the chaos of getting belongings together, selling the house and booking a rental property or buying a new home, many may well forget to pay a final bill, cancel a regular payment or rearrange their banking procedures. Statistics show the average UK household is mired in over $9,000 of debt, and it seems a fair proportion of those emigrating leave some of it behind either deliberately or accidentally.

For those heading to an EU member state, it’s not possible to renege on a debt simply because you’re not living in your home country any more. The UK and EU have, at least at present, arrangements whereby creditors can track down even unintended offenders and force them to pay via a European Enforcement Order. The best way forward is to carefully list every company you owe money to, provide your future contact details and arrange payment of outstanding amounts. Since the cost of living in Spain is some 28 per cent cheaper than its British equivalent, cutting a debt out of pension income shouldn’t be that tricky.

The good news for those who’re simply not financially competent is that, if your credit score in the UK is a problem, it won’t affect your being able to take out a loan in Spain. The bad news is that you simply must keep on top of your tax liability in your new country. Introduced five years ago, the Spanish equivalent of the wealth tax forces residents with overseas assets of over €50,000 who stay in the country for more than 183 days per year to declare and pay tax on them. Non-compliance results in a fine of €10,000 – not exactly a drop in the ocean for the average British pensioner. Should you ever want or need to return to the UK on a permanent basis and you’ve left a few debts unpaid, your credit score will prevent you from borrowing again. It’s tough to rebuild the score once it’s taken a dive south, but if you need to have a credit card or borrow to cover a major expense, it’s necessary to clear the decks of negative reports if at all possible.