ISAs, Premium Bonds and foreign savings accounts: tax-free at home, taxable in Spain

A couple from Leeds retired to Caleta de Fuste at the start of 2026 and brought with them the paperwork of careful British savers: two stocks-and-shares ISAs, a cash ISA, a building-society account and £20,000 of Premium Bonds. At home none of it ever appeared on a tax return. An ISA takes up to £20,000 a year, in cash or in investments, and the British government's own guidance says that its interest, income and gains need not be declared. In the spring of 2027 the couple will file their first Spanish return, for 2026, and every one of those products belongs on it. «Tax-free» is a promise made by the country that wrote the rule, and it stops at that country's border. Spain taxes its residents on what they earn anywhere, has no category called ISA, and looks through the wrapper at each interest payment, each dividend and each sale. This note reads the rules as they stand in October 2026: what each product is in Spanish terms, what the convention with the United Kingdom leaves to Spain, why switching funds inside an ISA is a taxable sale here, where Premium Bond prizes fall and what the first return looks like for a £20,000 ISA. One section says the same thing to German and Dutch savers.

Why «tax-free» stops at the border

The Spanish income-tax Act taxes a resident on la totalidad de sus rendimientos, ganancias y pérdidas patrimoniales, the whole of their income and of their capital gains and losses, con independencia del lugar donde se hubiesen producido y cualquiera que sea la residencia del pagador, wherever they arose and whatever the residence of the payer (article 2). Nothing in the Act exempts income because another country exempts it. The ISA is a creature of British tax law: a label the United Kingdom puts on an account so that its own income tax and capital gains tax do not apply. The United Kingdom keeps its side when you leave. Its guidance for savers who move abroad says that you can keep the ISA open and «you'll still get UK tax relief on money and investments held in it». That relief is relief from British tax. It says nothing about the country you moved to.

The Spanish tax directorate does not treat the ISA as a thing of its own either. Its public database of binding rulings, searched for this note on 1 October 2026, returned none that names an ISA or a Premium Bond. That is not a gap in the law. It means that the general rules apply: each payment is classified by what it is, as if the wrapper were not there.

What is inside the wrapper, in Spanish terms

The savings base has a scale of its own: 19 % on the first €6,000, 21 % up to €50,000, 23 % up to €200,000, 27 % up to €300,000 and 30 % above that, with half of each rate in article 66 and the other half in article 76. The general base, where pensions and rents go, has a different and steeper scale, which is why the classification in the middle column matters.

Interest: only Spain taxes it

Interest is the simple case. The convention between Spain and the United Kingdom, signed in London on 14 March 2013, says that interest arising in one State and paid to a resident of the other sólo pueden someterse a imposición en ese otro Estado contratante, may be taxed only in that other State (article 11.1). For a Spanish resident with a British account, that State is Spain. The interest is declared in the year in which it falls due, the year en que sean exigibles por su perceptor, in which the recipient can demand it (article 14.1.a), and the interest of a cash ISA goes on the return in exactly the same way as that of the ordinary savings account beside it.

Dividends: taxed in Spain, with a credit if the United Kingdom took something

Dividends paid by a British company to a Spanish resident may be taxed in Spain. The convention also lets the United Kingdom tax them, but its tax no podrá exceder del 10 % of the gross dividend, may not exceed that figure, or 15 % where the dividend passes on property income that was itself exempt (article 10.2). Whatever the United Kingdom has actually withheld within that limit is credited against the Spanish tax on the same dividend, up to the amount of that Spanish tax (article 22 of the convention and article 80 of the Act). A dividend received inside an ISA with nothing withheld goes on the return in full.

Gains, and the fund switch that is not a switch

The gain on selling shares or fund units is, under the convention, taxable only where the seller lives: such gains sólo pueden someterse a imposición en el Estado contratante en que resida el transmitente, may be taxed only in the State in which the seller is resident (article 13.6). The gain is the difference between what the asset cost and what it was sold for (article 34), and cost means the importe real por el que dicha adquisición se hubiera efectuado, the real amount for which the purchase was made (article 35). The Act has no rule that resets that cost on the day you become resident. A fund bought in 2015 and sold in 2026 produces, in Spain, the whole gain of eleven years.

The surprise for most ISA holders is the switch. In the United Kingdom, moving money from one fund to another inside the ISA is a non-event. In Spain a switch is a sale followed by a purchase, and the sale produces a gain or a loss. The Act does have a regime that lets an investor move from fund to fund with no tax until the final sale, but it is reserved for Spanish funds and for European ones constituidas y domiciliadas en algún Estado miembro de la Unión Europea e inscritas en el registro especial de la Comisión Nacional del Mercado de Valores, constituted and domiciled in a Member State of the European Union and entered in the special register of the Spanish securities commission, and bought and sold through a distributor registered with that commission (article 94.2.a). A British unit trust held on a British platform meets none of those conditions, and exchange-traded funds are outside the regime wherever they are listed. An ISA that its manager rebalances four times a year puts four sets of gains and losses a year on the Spanish return.

The sums are done in pounds and converted at the end. In a ruling of 27 January 2026 the tax directorate repeated its criterion for shares bought and sold in a foreign currency: the gain is calculated in that currency, and the taxpayer must then efectuar la conversión de la diferencia resultante a euros al tipo de cambio vigente en la fecha en la que haya tenido lugar la alteración patrimonial, convert the resulting difference into euros at the exchange rate in force on the date of the sale (V0152-26). Where the same fund was bought several times, the oldest units are treated as sold first (article 37.2). Losses are not wasted: they are set against the gains of the same year and, within limits, of the following four (article 49).

Premium Bonds: a prize, but not a lottery prize

NS&I describes its product precisely: «Premium Bonds don't earn interest. Instead, there's an annual prize fund rate that funds a monthly prize draw for tax-free prizes.» Tax-free, the same page explains, means exempt from British income tax and capital gains tax.

Spain exempts some prizes, and these are not among them. Its special rule for lottery prizes covers the State lottery, the regional ones, the Red Cross draw and the games of the ONCE, together with equivalent bodies establecidos en otros Estados miembros de la Unión Europea o del Espacio Económico Europeo, established in other Member States of the European Union or of the European Economic Area (thirty-third additional provision). A savings bond issued by the British government's savings institution is not a lottery ticket, and its issuer is not in a Member State.

How the prize is taxed is a question the tax directorate has not answered in any published ruling we could find. There are two readings. On the first, the prize is what the holder receives for lending money to the issuer: the Act counts as income from movable capital las contraprestaciones de todo tipo, cualquiera que sea su denominación o naturaleza, consideration of every kind, whatever its name or nature, obtained for letting a third party use one's capital (article 25.2), and the convention's own definition of interest includes las primas y lotes unidos a esos títulos, the premiums and prizes attached to bonds (article 11.2). That puts the prize in the savings base. On the second, a prize decided by a draw is a capital gain that does not come from a sale, and gains of that kind go to the general base (articles 45 and 46), where they are added to pensions and rents. The first reading has the text on its side. Until a ruling confirms it, it is a position to take with advice, and a holder who wins one of the large prizes has good reason to ask the directorate in writing before filing.

Investment bonds and other insurance wrappers

Many British savers also hold an investment bond, onshore or offshore: in law a life-insurance policy whose value follows a basket of funds. Spain taxes the yield of a life policy as income from movable capital, the difference between what is received and the premiums paid (article 25.3), normally when money comes out. Where the policyholder bears the investment risk, the Act orders something else: the change in value is taxed every year, la diferencia entre el valor liquidativo de los activos afectos a la póliza al final y al comienzo del período impositivo, the difference between the value of the policy's assets at the end and at the beginning of the tax year, unless the policy meets the conditions the Act lists, which are built around one idea: the holder may choose among the funds or portfolios the contract names, but not the individual assets (article 14.2.h). A policy designed for British rules has to be read against that article, one by one. The British rules that defer tax on these bonds have no counterpart in the Spanish Act.

A pension is a different chapter. A personal or workplace pension is not a savings account in either country: the convention gives pensions an article of their own, and lump sums have their own rules, which we cover in our guide to foreign pensions in Spain.

The year you arrive, and the Beckham exception

Two things change the picture at the edges. The first is the calendar. Spain has no split year: El período impositivo será el año natural, the tax period is the calendar year (article 12), and a person who is resident for a year is resident from 1 January. Someone who moves in March and spends the rest of the year here declares the ISA's income of January and February too; how residence is decided is in our guide to the 183-day rule. And because the British tax year runs from 6 April to 5 April, the provider's annual statement covers the wrong twelve months. The figures have to be rebuilt by calendar year.

The second is the special regime for workers who move to Spain, the so-called Beckham regime. Those who qualify are taxed, apart from their employment income, only on income obtained in Spain, so the dividends, interest and gains of a British ISA stay outside the Spanish return for as long as the regime lasts, as we explain in our guide to the regime. When the regime ends, everything in this note applies from the following 1 January.

The form before the tax: Modelo 720

Declaring the income is one duty; listing the assets is another. A cash ISA is an account abroad, a stocks-and-shares ISA is securities and fund units abroad, and an investment bond is insurance abroad. Each falls in a block of the Modelo 720, the information return filed between 1 January and 31 March, when the total of its block passes €50,000. The blocks, the thresholds and the penalties are in our guide to the Modelo 720 and 721.

Spain's own account: voted down

For a few days the Spanish Act had an account of its own with a tax deferral, the «Cuenta de Ahorro e Inversión Financia Europa» (article 95 ter, added by Real Decreto-ley 26/2026, in force from 1 October 2026). It was never on sale: the decree itself said that the account no podrá ser objeto de comercialización ni de contratación, may not be marketed or contracted, until a ministerial order was in force (eleventh final provision). Congress repealed the decree on 2 October 2026, and the article went with it. Nor was it an ISA under another name: it took contributions in money only and was to be opened with a provider under Spanish securities law, so the contents of a British ISA could not simply have been moved into it.

German and Dutch savers: the same logic

None of this is about Britain in particular. A German saver's annual allowance, a Dutch box 3 calculation or a building-savings contract with a state bonus are rules of the country that wrote them, and they stop at the same border. A resident of Spain declares what the account actually paid, the interest, the dividends and the gains realised, under the articles described above, and reads the convention with the country of the bank to see whether that country keeps any right to tax and how the credit works. The conventions differ, and so do the products. The starting point does not.

The first return for a £20,000 ISA

Take one of the couple's ISAs, worth £20,000 when they arrived. During 2026 it pays £500 of dividends and £100 of interest on its cash, and in May its holder moves out of a fund bought in 2019 for £6,600: the units are sold for £8,000 and another fund is bought. In the United Kingdom there is nothing to report.

At €1.17 to the pound, close to the European Central Bank's rate on 1 October 2026, that is €2,340 of savings income and, at 19 %, €444.60 of tax, on the assumption that the holder's personal allowance is used up by a pension and that the savings income of the year stays under €6,000. The return itself converts each item at the official rate of its own date. Nothing was withdrawn from the ISA, and nothing needed to be: the tax is on the income and on the sale, not on taking money out.

A checklist for the first Spanish return

• Open the wrapper. List what the ISA holds: cash, shares, funds, bonds. Each has its own line on the return.
• Ask for a calendar-year statement. Income and every sale between 1 January and 31 December, with dates and amounts in pounds; the statement for the British tax year will not do.
• Find the purchase prices. The original cost of everything sold, however long ago it was bought.
• Convert at the official rate. Income at the rate of the day it fell due, gains at the rate of the day of the sale.
• Tell the provider you have left. British rules stop new payments into an ISA once you are no longer resident in the United Kingdom.
• Check the totals on 31 December. Above €50,000 in a block, the Modelo 720 is due by 31 March.
• Then decide what the wrapper is for. An ISA whose every switch is taxed is an ordinary investment account with a British label; whether to keep it is a question about costs and investments, not about a tax-free status that no longer exists for you.

«Tax-free» is a sentence in British law. The Spanish Act has its own sentences, and none of them mentions an ISA.

The tax team at our Caleta de Fuste and Costa Calma offices prepares the first Spanish return of new residents with savings abroad, rebuilds the calendar-year figures from the providers' statements and files the Modelo 720 when it is due. The tax advisory page describes the service and a first meeting can be booked online.

Common questions

My ISA is tax-free in the UK. Do I have to declare it in Spain?

Yes, once you are tax resident in Spain. Spain taxes residents on their worldwide income and has no exemption for ISAs, so the interest, the dividends and the gains go on the Spanish return as savings income, in the calendar year in which they arise, whether or not you take any money out. The UK exemption continues, but it only covers UK tax.

Is switching funds inside my ISA taxable in Spain?

Yes. Each switch is a sale and a new purchase, and the sale produces a gain or a loss measured from the original purchase price. The Spanish regime that defers tax on fund switches applies only to Spanish funds and to European funds registered for sale in Spain and bought through a registered distributor, which a fund held on a British platform is not.

How are Premium Bond prizes taxed in Spain?

They are not exempt: the Spanish lottery rules do not cover them. The tax directorate has published no ruling that names them. On the reading with the better support in the text they are a return on money lent and go in the savings base, at 19 % on the first €6,000; a stricter reading would put them in the general base. A large prize is worth a written question to the directorate before filing.

Can I keep paying into my ISA after moving to Spain?

No, under British rules: once you are no longer resident in the United Kingdom you cannot put new money into an ISA, and you must tell your provider. You can keep the account open, and the British exemption continues on what is already in it. In Spain it is taxed like any other foreign account.

I am under the Beckham regime. Is my ISA taxed?

Not while the regime applies. Apart from employment income, the regime taxes only income obtained in Spain, so the income and gains of a British ISA stay outside the Spanish return during those years. From the first year after the regime ends, they are taxed in full.

Facts verified in October 2026 (Ley 35/2006, articles 2, 12, 14, 25, 33 to 37, 45, 46, 49, 66, 76, 80, 93, 94 and 95 ter and its 33rd additional provision; the convention between Spain and the United Kingdom of 14 March 2013, Official State Gazette of 15 May 2014, articles 10, 11, 13 and 22; Real Decreto-ley 26/2026, eleventh final provision, repealed by Congress on 2 October 2026; rulings V0766-20 and V0152-26 of the Dirección General de Tributos; the British government's guidance on ISAs and NS&I's Premium Bonds page as they read on 1 October 2026; the European Central Bank's reference rate of the same day). The directorate's database returned no ruling that names ISAs or Premium Bonds; a new ruling or a budget law can change the picture, and the figures of the example are illustrative.