UK tax allowance-will it be removed?

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infoseeker
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UK tax allowance-will it be removed?

Postby infoseeker » Tue Aug 05, 2014 3:11 pm

In the UK budget this year there was talk of abolishing the UK tax allowance for people who have moved abroad.
not much has been said since
Is this really going to happen, and when?
If so, imagine all those on hefty government pensions, or will they then be allowed to pay tax on it in Spain?

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Re: UK tax allowance-will it be removed?

Postby Free at Last » Tue Aug 05, 2014 3:50 pm

Press coverage at the time said that this proposal (which the Government said they were going to consult on, nothing more) was unlikely to affect British nationals living in EU countries:-


http://www.telegraph.co.uk/finance/pers ... oners.html

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Re: UK tax allowance-will it be removed?

Postby El Cid » Tue Aug 05, 2014 4:16 pm

As from 2015, UK government pensions will have to be declared in Spain. They will continue to be taxed in the UK, but the effect of declaring them in Spain will result in additional tax being paid on the other income, such as UK state pensions and company pensions.

The exact amount of the increase depends on various factors, but in many cases will result in a four figure increase in Spanish tax due.

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Re: UK tax allowance-will it be removed?

Postby infoseeker » Tue Aug 05, 2014 5:46 pm

I know about that.
I am referring to what was said in the budget about the possibility of removing the UK tax allowance from people living abroad.

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Re: UK tax allowance-will it be removed?

Postby gerryh » Tue Aug 05, 2014 6:42 pm

Perhaps I'm missing something. :think:
What UK tax allowance from people living abroad?
Surely if you live abroad you pay your taxes in the country you are living in and, hence, don't get or need a UK tax allowance?
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Re: UK tax allowance-will it be removed?

Postby infoseeker » Tue Aug 05, 2014 6:51 pm

Err,yes
You still have a UK tax allowance even if you live in Spain
Imagine the tax those with government pensions would pay if this allowance was withdrawn.
Some seem to think it would only affect those outside Europe, but no one has clarified this yet.
Those who are not paying their income tax in Spain, and wrongly continue to pay it in UK, would soon have changed to Spain had they not had a UK allowance!

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Re: UK tax allowance-will it be removed?

Postby gerryh » Tue Aug 05, 2014 7:43 pm

infoseeker wrote:Err,yes
You still have a UK tax allowance even if you live in Spain
Why do I have a UK tax allowance when I live in Spain?
I have no property, assets or anything else in the UK.
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Re: UK tax allowance-will it be removed?

Postby El Cid » Tue Aug 05, 2014 7:49 pm

It seems quite possible that they could take the view that if you are not resident then you don't qualify for UK allowances and personally I would agree with that.

It has always seemed totally unfair that, just because you have a UK Government pension, you should get two sets of allowances, one in the UK and one in Spain, while the rest of us who just get non government pensions end up paying much more tax in total.

At least the new tax treaty means that some of this imbalance will be rectified but I think it should be a level playing field for all of us and that UK Government pensions should get the same treatment as everyone else and be taxed in the country of tax residency.

To answer the Gerry's question, you get the allowances, but they only come into effect if you have UK income. Rental income is taxed in the UK so the allowance applies to that income, but you also pay tax in Spain on that income and can offset the UK tax, if any.

UK government pensions get the allowance, but are not taxed additionally in Spain which, to me, seems totally unfair.

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Re: UK tax allowance-will it be removed?

Postby infoseeker » Tue Aug 05, 2014 8:52 pm

Sid-are you saying that you think it's fair that if the UK allowance was withdrawn, income tax should be payable on the whole amount of government

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Re: UK tax allowance-will it be removed?

Postby CapnBilly » Tue Aug 05, 2014 9:10 pm

The government is not proposing to abolish the personal tax allowance for non-resident recipients of a government pension.

It is intending to abolish it under other circumstances. Examples include for rental income collected by non resident landlords. People who work partly in the UK, but receive the full allowance, even though the amount paid and taxed in the UK is only a small percentage of their earnings.

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Re: UK tax allowance-will it be removed?

Postby El Cid » Tue Aug 05, 2014 10:22 pm

infoseeker wrote:Sid-are you saying that you think it's fair that if the UK allowance was withdrawn, income tax should be payable on the whole amount of government
Irrespective of whether UK personal allowances are withdrawn, I can see no logical reason why government pensions should be treated differently to other pensions.

They should be taxed in Spain like any other income.

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Re: UK tax allowance-will it be removed?

Postby infoseeker » Tue Aug 05, 2014 10:44 pm

I agree, but HMRC state that it must be taxed in the UK, so why haven't they made changes to this rule
Our neighbour has a small Govnt pension, and has now received the state pension, ( declared on tax declaration in Spain)and together they do not come above the tax threshold in the UK.
Is there any point in applying for exemption from UK tax?
Surely, unless the UK tax allowance is withdrawn, there wouldn't be a problem, as he is not paying any tax in UK anyway!

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Re: UK tax allowance-will it be removed?

Postby Chica56 » Tue Aug 05, 2014 10:53 pm

I am a non resident landlady for a property in the UK, when are these changes due to take effect? Does anyone know, I am far from rich and rental income is below the UK personal tax allowance

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Re: UK tax allowance-will it be removed?

Postby El Cid » Wed Aug 06, 2014 7:19 am

infoseeker wrote:
Surely, unless the UK tax allowance is withdrawn, there wouldn't be a problem, as he is not paying any tax in UK anyway!
Whether or not you apply to have the UK state pension exempted from UK tax is down to the individual. It's an option you have which, under the right circumstances, makes your tax situation a lot simpler as it avoids double taxation cross claims.

If the rules about allowances change and it would be to your advantage to have it exempt, then that would be the time to apply.

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Re: UK tax allowance-will it be removed?

Postby Free at Last » Wed Aug 06, 2014 7:23 am

El Cid wrote:
It has always seemed totally unfair that, just because you have a UK Government pension, you should get two sets of allowances, one in the UK and one in Spain, while the rest of us who just get non government pensions end up paying much more tax in total.

At least the new tax treaty means that some of this imbalance will be rectified but I think it should be a level playing field for all of us and that UK Government pensions should get the same treatment as everyone else and be taxed in the country of tax residency.


Sid
I agree with you - and if this were to be introduced, making all pensions whatever the source taxable in the country of tax residency, I think details of all Government pensions in payment should be passed to the tax authorities concerned so that they can ensure that the recipients are paying tax on them. Perhaps they will be, when the automatic exchange of information between countries comes into effect next year.

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Re: UK tax allowance-will it be removed?

Postby fyfin » Wed Aug 06, 2014 9:48 am

CapnBilly wrote:The government is not proposing to abolish the personal tax allowance for non-resident recipients of a government pension.

It is intending to abolish it under other circumstances. Examples include for rental income collected by non resident landlords. People who work partly in the UK, but receive the full allowance, even though the amount paid and taxed in the UK is only a small percentage of their earnings.
We rent out our UK property and declare the income both on our Spanish tax return and our UK tax return. The income is not taxed in UK because we have our allowances and the rent is under that figure. It will be taxed in Spain as part of our income (we have only just sent in our first return so I don't know exactly where we stand).

Surely, if the UK remove the allowances against this rental income (which I assume we will still have to declare to UK) under the double taxation treaty it will just mean we offset the tax paid in UK against our tax situation in Spain, so just making it slightly more complicated, or am I missing something.

The difference in Government pensions, I believe, is that they don't have to declare in Spain at the moment.
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Re: UK tax allowance-will it be removed?

Postby masterob » Wed Aug 06, 2014 10:00 am

El Cid wrote:
It has always seemed totally unfair that, just because you have a UK Government pension, you should get two sets of allowances, one in the UK and one in Spain, while the rest of us who just get non government pensions end up paying much more tax in total.
Can't help wondering if the Green-eyed Monster of envy is behind your statement! :)

Surely the point about the allowances is incidental, the real issue being why are UK Government Pensions taxed in the UK in the first place. I declare my interest because I am in receipt of such a pension. I have always considered the tax situation to be wrong. I do not live in the UK nor do I have any assets there. The tax I pay (however insignificant in the overall Exchequer budget) benefits those living in the UK. It seems illogical and a tad unfair to be paying into UK coffers while not being a beneficiary of UK Government services. In 5 years time I will lose my status as an Overseas Elector and will no longer be able to vote for a UK Parliamentary representative - taxation without representation - but that's an issue for another time!

I'm in favour of paying tax in the Country of residence (for me, Spain). Yes, I would probably pay marginally more but at least I would be able to benefit to some degree from the Services provided from Spanish Government coffers into which I would be paying!

If tax changes bring this about then I would be content.

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Re: UK tax allowance-will it be removed?

Postby El Cid » Wed Aug 06, 2014 10:18 am

masterob wrote:[
Can't help wondering if the Green-eyed Monster of envy is behind your statement! :)
Not in the least. I pay far less tax in Spain on my UK private pension than I would have to pay in the UK if it was a Government pension.

The income from it is in the form of an annuity and because of the Spanish tax laws I pay virtually no tax on it.

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Re: UK tax allowance-will it be removed?

Postby Wicksey » Wed Aug 06, 2014 10:29 am

fyfin wrote: We rent out our UK property and declare the income both on our Spanish tax return and our UK tax return. The income is not taxed in UK because we have our allowances and the rent is under that figure. It will be taxed in Spain as part of our income (we have only just sent in our first return so I don't know exactly where we stand).
The Spanish system seems to be very generous where rental income is concerned and you only have to declare (I think) 40% of the profit .... from my poor memory I'm sure our tax lady said there was 60% discount (or it could be the other way around).
As Sid stated, in Spain annuities also have a huge discount applied to what you need to declare. It would create a lot of extra work if you had to pay tax in the UK on these earnings then claim it back under double-taxation rules if they abolished the UK tax allowances.

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Re: UK tax allowance-will it be removed?

Postby CapnBilly » Wed Aug 06, 2014 1:51 pm

fyfin wrote: Surely, if the UK remove the allowances against this rental income (which I assume we will still have to declare to UK) under the double taxation treaty it will just mean we offset the tax paid in UK against our tax situation in Spain, so just making it slightly more complicated, or am I missing something.
.
No, you're spot on, that's the rationale behind it. At the moment, the UK is losing out. Although you may pay a little more as you only declare 40% in Spain (50% from next year).


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