Brexit risk: Five tips for changing pounds to euros when you move to Spain

Do you plan to move Spain this year? If so, you might be aware that Brexit is having a negative impact on the value of the pound. Here are some tips to limit the damage from Peter Lavelle, a foreign exchange broker at Pure FX.

Brexit risk: Five tips for changing pounds to euros when you move to Spain
Photo: jax10289/Depositphotos

Since early May, the pound to euro interbank exchange rate has fallen from a peak of 1.1757, to 1.1151 at the time of writing. That's a decline of over 6 cents, or 5.15 percent.

The biggest factor contributing to sterling's decline is that financial markets don't know what relationship the UK will have with the European Union (EU) after Brexit. This is more than three years after the UK voted to leave the EU. Also, the pound is being weighed down by the fact that both candidates to become Prime Minister, Boris Johnson and Jeremy Hunt, have said that they'd accept a 'No Deal' Brexit.

So, what can you do to minimise Brexit risk, when you transfer your money to your Spanish bank account to move to Spain? Well, you’ll find five easy tips below.

1. Stay up-to-date with the exchange rate

This helps you to avoid Brexit risk, because when you know what's happening to sterling's value against the euro, you can better plan your money transfer to Spain. By comparison, if you don't watch the exchange rate before you buy your euros, then you're in the dark.

To keep track of sterling's value against the euro, you can check the live interbank exchange rates on the Foreign Currency Direct website. Alternatively, you can search ‘live exchange rates’ on Google to find the latest interbank rates. This will help you to plan your euro purchase, even with Brexit.

2. Check what's affecting the pound versus the euro

The second tip to avoid Brexit risk for when you transfer money to Spain is to keep an eye on what's affecting the pound to euro exchange rate. After all if you know that, for example, Boris Johnson has committed to take the UK out of the EU without a deal, and that this might weaken the pound, this can help you to decide when to transfer your money to the UK.

Also, it's worth noting that Brexit isn't the only factor affecting the exchange rate. There are dozens of factors, including the UK's and Eurozone's economic performance, and the Bank of England's and European Central Bank's interest rate outlook. By staying in-the-know, you'll develop a better idea of what's influencing the exchange rate, to help you decide when to buy your euros.

3. Set up a rate alert, for when your target exchange rate hits

Photo: peshkova/Depositphotos

This way, when your target exchange rate hits, you'll receive an email or a phone call telling you. This way, you can take advantage of any unexpected movements in the exchange rate, to buy your euros at the level you want. This is a helpful tool to ensure you get the euro total you're after, even with Brexit.

4. Consider setting up a forward contract

With a forward contract, you fix your exchange rate at today's level, so that even if the pound fluctuates in future versus the euro, you get the exchange rate that you've locked in. This protects you from adverse movements in the value of sterling and guarantees the euro total that you've receive.

To set up a forward contract, you put down approximately 10 percent of the amount that you intend to transfer. Then you can transfer your money at any time you like in the following 12 months.

5. Seek guidance from your money transfer service

They'll be able to tell you what's affecting the exchange rate, what's happened to the value of the pound versus the euro recently, and offer you their guidance based on their years of experience helping people to transfer money. So you can ensure your money transfer goes well, in spite of Brexit uncertainty.

By Peter Lavelle at foreign exchange broker Pure FX, a trading name of Foreign Currency Direct Plc

Please note that the exchange rates within this article are interbank rates and are for indicative purposes only, and are not trading levels which Pure FX offer. For live trading levels contact one of the Pure FX currency brokers on +44 (0) 1494 671800.

This article does not constitute advice to any person on any matter and it is not intended as a recommendation to trade. Pure FX makes every reasonable effort to ensure that this information is accurate and complete but assumes no responsibility for and gives no warranty with regard to any loss arising from actions taken as a result of acting on this information.

READ MORE: Brits remain top foreign buyers in Spain, despite (or because of) Brexit

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The new health and property tax deductions in Spain’s Valencia region

Valencia's regional government has announced tax cuts that could give millions of Valencians rebates on property purchases as well as mental health, dental and sports activity costs.

The new health and property tax deductions in Spain's Valencia region

During the regional election campaign in Valencia in May, Spain’s right-wing Partido Popular (PP) government campaigned, partly at least, on tax cut commitments.

Now the PP President of the Generalitat, Carlos Mazón, has announced a raft of “tax relief” measures for millions of Valencian residents that focus on rebates for property purchases, dental and optician’s expenses, mental health treatment and sports and exercise costs.

This builds on the PP election pledges, and comes after its abolition of Inheritance and Gift Tax in the region.

Mazón, along with regional Minister of Finance, Ruth Merino, will incorporate the further tax cuts into the region’s 2024 Budget. The relief package is based on two main branches of fiscal reform: firstly, deductions in Income Tax (IRPF as it is known in Spain) and, secondly, by applying a new reduced rate for the Property Transfer Tax.

The regional president has been keen to signal a new direction in tax policy in the Valencian Community. “The change has begun and this change is being carried out,” Mazón said when outlining the new measures to the press. The tax cuts will, according to Generalitat estimates, have a fiscal impact of €200 million.

READ ALSO: Why many people in Alicante feel cheated by the Spanish State

Of the cuts, 180 of the estimated €200 million will come from income tax cuts. For IRPF, the PP led regional government has proposed a series of deductions in seven key areas of income tax for individual declarations of income up to €32,000 and joint income declarations of up to €48,000.

In total, Mazón pointed out that taken along with the abolition of Inheritance and Gift Tax, the regional government has made total tax cuts of €365 million: the almost €200 million in deductions and slashing of property taxes, in addition to the previous €166 million in Inheritance and Gift Tax, a measure yet to be approved by the regional executive.

READ ALSO: EXPLAINED: How to pay less Spanish IBI property tax

“It is aimed at those who need it most, at the lowest income brackets”, Mazón said, pointing out that more than two million taxpayers will be eligible for rebates, “almost nine out of every ten” in his words. It should be noted, however, that these proposals in the draft bill are still subject to debate in the Valencian regional Cortes, and Mazón stressed that they present a “draft bill as a proposal open to dialogue” with proposals that can “enrich the text”.

The deductions will also be applied retroactively from 1 January 2023 for the next income tax return and will be cumulative, that is to say, deductions for sporting activities can be added to those for oral health expenses, for example.

Property tax cuts

A main pillar of the reforms focuses on property taxes, especially for young people, and cuts the property transfer tax (Impuesto de Transmisiones Patrimoniales, ITP).

Mazón has announced a “super-reduced ITP rate” of 6 percent, lowering it from the current 8 percent for all young people under 35 years of age who buy a home of up to €180,000. This measure is expected to benefit some 15,000 young people and have an impact of €14.7 million.

READ ALSO: Where are the best and worst places for inheritance tax in Spain?

“The priority is for those who earn the least, those who are currently under the most tax pressure,” Mazón said, adding that the government hopes that tax cut measures will provide incentives for young people to get on the property ladder. In addition, there is also a reduction on this rate for purchases of a main residence that is social housing when the price of the property is below €180,000. 

The super-reduced rate will also apply to large families, women victims of gender violence or people with disabilities wanting to purchase property up to €180,000, who will see their rate reduced from 4 percent to 3 percent on property purchases.

Health deductions

The new rafts of tax cuts also introduce a series of rebates on health expenses.

These deductions will be 30 percent for dental health expenses up to €150, 30 percent up to €100 for optical expenses, 30 percent up to €150 for mental health treatment and support expenses, and 30 percent up to €150 expenses associated with sports.

In the case of sports costs, Mazón gave examples of club and federation fees, expenses and gym membership costs.

This builds on tax deductions of up to €100 for families with someone suffering a chronic illness, which is extended to €150 if it is a large or single-parent family, and deductions of up to €100 for expenses generated by family members with Alzheimer’s disease or brain damage, again extended up to €150 if it is a large or single-parent family.

READ ALSO: Alicante vs Valencia – Which one is better to live in Spain?