Income Tax

[jane grant]

My husband is rapidly approaching the age when the UK government is going to start paying him for not working - not that he has worked for the last 5 years anyway. My question is how much tax allowance does a pensioner get in Andalucia? We have heard many conflicting amounts bandied about, and am sure that we need to speak to a fiscal wizard before the event so we can make an informed decision as to whether or not to pay his tax at source in the UK or in Spain. We live here permanetly so we may not have the option of where to pay, but it would help us with our financial planning if we knew how much his allowances would be. Also can anyone recommend a fiscal advisor? (Preferably one who speaks some english - my spanish is good but maybe not that good - and could be reached in less that 1hour from Casariche.)

[peteroldracer]

One of the decisions has been made for you: if you live here (are here for more than 183 days) then you must pay Spanish taxes on your income. If you choose to not inform the UK tax people and carry on paying UK taxes, then that is up to you, but eventually Spain will want its money, and a fine for not paying them, and you will not be able to claim years of UK tax back.....Are you prepared to pay twice?
It is a bit like those telephone "quizzes" - if you ring after a certain time you will be charged but win nothing!

[El Cid]

Jayne, the first question is what sort of pension are we talking about? Obviously he will get the state pension but when you say that the government will be paying him, does he have a work related government pension as well?

If so the government pension will be taxed in the UK and the state pension, plus any other income, will be taxed in Spain.

The tax allowances in Spain are 5050 plus an extra 900 if you are over 65.

You can opt to be taxed jointly and you would then get a total of 11000. In addition you get a "wage earners" allowance (which does apply to pensions) of between 4000 and 2600 depending on the income. If the income is not more than 9000 you get the full amount. It then decreases to the lower figure when income reaches 13000.

So you will get a minimum allowance of 13600, possibly more. You will still need to make a tax declaration even if no tax is payable unless your total joint income is below 9000. Even then it is advisable to make a nil return just so that you can prove tax residency if you should ever need to.

If you do have a qualifying government pension that will be taxed in the UK but you will get all the normal UK allowances even though you are non resident.

You can make an appointment at your local tax office and they will do your declaration for you - free of charge. You can also do it yourself using the program supplied by the tax office.


Sid

[k]

A form is required to be completed by HRMS to ensure you are not taxed in UK

http://www.hmrc.gov.uk/cnr/form_spain.htm


If you are interested in starting the reading from the begining http://www.hmrc.gov.uk/cnr/app_dtt.htm

hope it helps.

[jane grant]

El Cid
It's basically the OAP with a small amount of company (private) pension as well.
Reason I was questioning the allowances is some friends (who to be fair usually get hold of the wrong end of the stick) are going round telling all and sundry that the allowance is 18,000€ - which I thought was a bit generous! So weill be off to do my best with the Hacienda in due course.
By the way, with the company pension there is the option of a tax free lump sum, which I believe is not tax free in Spain. Any advice on that please.

K
We've sorted out the UK tax bit - did that when we came over, so that's not the issue. By=ut thanks anyway.

[El Cid]

They, like countless others, are referring to the threshold at which you are obliged to make a tax declaration IF YOU HAVE ALREADY PAID YOUR TAX VIA PAYE. I think the figure is now nearer to 20000 but it certainly doesn't apply to you. For non PAYE payers the figure is 9000 as previously stated.

Lump sum? What lump sum?

You only really need to worry about the income part which you should have declared on your Inland Revenue form. I don't think this mentions lump sum payments.

On the subject of pensions, remember that if you have a pension from an annuity which you purchased yourself these are taxed extremely favourably in Spain as you only have to declare about 25% of the income.

Sid

[campo babe]

I have been searching on the net for confirmation of your figures Sid, and they don't mention the "wage earners allowance". Can you confirm that this relates to private pensions.

Obviously I will need to contact the local tax office or a tax consultant, but would prefer to know that I don't need to pay tax before doing so!

[El Cid]

It depends what you mean by a "private pension". If you mean an annuity bought personally from a private pension plan, then you do not get this allowance but you do get the huge discount that I mentioned earlier.

If you have an employment based pension then this does qualify for the "Reduccion for rendimientos del trabajo" which is line 490 on the tax declaration.

Sid

[campo babe]

Thanks Sid.

Yes it is an employment based pension. We were under the impression that we didn't have to declare this as it was below the level to make a declaration, but it looks as if we have to. However, we will be able to claim back the tax we have been paying in the UK. I struggled to fill in the UK form and gave up, but will now make another effort.

[jane grant]

El Cid
Thanks. Now we are able to make a better assessment of what we'll have to spend!