domicile and personal allowances are seperate matter.Her personal allowances are not effected if offset against her UK income which is fully taxable. If her Domicile status is confirmed, under current rules any income arising from her offshore bank account is taxable on remittance basis. However the deposits into the offshore bank account if made from UK should be from declared and taxed income before going offshore. Being domiciled in Spain does not mean being resident in spain. Hence the fear is exaggerated. Hope it it is clear & helpful.
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