Tax on state pension

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Tax on state pension

Postby Solcam » Sat Jan 30, 2021 11:25 am

Good morning.am looking to move to andalusia..my main only income would be my state pension an a couple of private and savings.could anybody give me an idea on the tax implications please...how much I'd pay for if anybody knows where I could get advice about the best way to utilise pension etc.

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Re: Tax on state pension

Postby peteroldracer » Sat Jan 30, 2021 1:29 pm

Read the FAQ section on this forum - sound advice and facts.
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Re: Tax on state pension

Postby Paddy Pumpkin » Fri Feb 05, 2021 3:32 pm

Everyone's circumstances are individual....but as a quick guide. If your total income is below 18k EUR then you will be taxed roughly as follows.

First 5.500 is tax free
Everything else will be 19%

So it might look higher than the UK, but council tax (the equivalent) is much less in Spain.

CAVEAT....above is only a rough estimate to help you and it doesn't go in to the how and the why. Savings interest and capital gains are taxed separately from pension income....but below 18K then you won't be taxed above 19% on either type of income.

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Re: Tax on state pension

Postby Free at Last » Fri Feb 05, 2021 4:29 pm

Paddy Pumpkin wrote: Fri Feb 05, 2021 3:32 pm Everyone's circumstances are individual....but as a quick guide. If your total income is below 18k EUR then you will be taxed roughly as follows.

First 5.500 is tax free
Everything else will be 19%

So it might look higher than the UK, but council tax (the equivalent) is much less in Spain.

That isn't accurate. There is also the €2k general allowance against earned income (which includes pensions), plus anyone receiving a UK state pension (which the OP states they will be) has a higher Spanish personal allowance for those over 65 - €6,700 not €5,500.
In addition to that there is a low income allowance - see the following extract from the thread Spanish Income Tax for Residents in the FAQs on this site, written by El Cid:-

RENTA 2018 UPDATE April 2019

There has been a major increase in allowances for low incomes.

Up until now, there was a special allowance (detailed above) for earned income (including pensions) of €3700 for incomes in the range of €11250 to €14450. Incomes between those two figures were reduced pro rata so that incomes above €14450 got no extra allowance.

For 2018 these figures have been revised upwards. The allowance is now €5565 and the band is increase from €13115 to €16825.

This is a major increase and will affect a lot of residents with the UK state pension with other small private/company pension income.

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Re: Tax on state pension

Postby Paddy Pumpkin » Fri Feb 05, 2021 4:42 pm

Jeez.....Read what I wrote...it was a rough idea for the original poster who didn't give full details of their situation.

I could have blinded him with all the exact details and he would have been none the wiser as to what his bill will be. Think about the audience...if someone is posting on here chances are they have zero knowledge of the tax system. Hence I kept it simple. Also the fact that his tax bill will actually be maybe 500 EUR less than the guide I gave won't make or break whether they move to Andalucía.

It was only a rough idea if they can't understand all the jargon. If you want to get super technical and pay someone like me 1000s of EUR there are ways to basically pay no tax in his situation but the costs involved will far exceed the tax bill.

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Re: Tax on state pension

Postby El Cid » Fri Feb 05, 2021 4:59 pm

If you are going to post information on this forum please get it right. Wrong or inadequate information doesn’t help anyone. This forum is generally respected for giving accurate answers. Please respect that.

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Re: Tax on state pension

Postby Paddy Pumpkin » Fri Feb 05, 2021 5:19 pm

Please tell me how it was inaccurate?

I gave a worst case scenario. Additionally it had rough estimate written all over it and stated that without knowing personal circumstances it was impossible to give a fully accurate answer. Will the max 500 less they pay in tax actually make a material difference?

I didn't see anyone writing anything useful for 5 days that the OP might understand...go read the tax manual is of zero use to most people.

I am the first person in the world to pick up on inaccurate information as we see a lot of it from certain people in this forum, but in this case my information was not inaccurate as it was only ever stated to be a rough guide

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Re: Tax on state pension

Postby El Cid » Fri Feb 05, 2021 6:17 pm

Paddy Pumpkin wrote: Fri Feb 05, 2021 5:19 pm
I didn't see anyone writing anything useful for 5 days that the OP might understand.

The second post in the thread advised him to read the FAQ section which is why that section is there.

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Re: Tax on state pension

Postby Paddy Pumpkin » Fri Feb 05, 2021 7:08 pm

I still don't understand how my post was inaccurate?

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Re: Tax on state pension

Postby El Cid » Fri Feb 05, 2021 7:13 pm

As Free at Last pointed out, you did not give the correct information on allowances, as detailed in the FAQs.

Inaccurate or incomplete? I do not wish to discuss the semantic differences. The information you posted was not complete.

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Re: Tax on state pension

Postby Paddy Pumpkin » Fri Feb 05, 2021 7:46 pm

You are correct my information was not complete. As I pointed out in my original post it was it was a quick guide and was dependeant on individual cicumstances. Hence by definition it cannot be a complete guide.

The information Free at Last posted was also incomplete as there are ways to lower the tax bill from what was suggested in his post. For example nobody brought up whether the OP private pensions could be used as annuities which change the picture completely.

We could go on ad infinitum and no post will ever be a complete answer unless it is personalised to the OP. Even then one tax adviser will give you a different answer to another, and both can be right, especially in the poorly drafted Spanish tax laws.

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Re: Tax on state pension

Postby El Cid » Fri Feb 05, 2021 7:50 pm

Annuities are well covered in the FAQ

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Re: Tax on state pension

Postby Paddy Pumpkin » Fri Feb 05, 2021 8:20 pm

My reply was after Peter recommended the FAQ and I did not suggest not reading the FAQ or state the FAQ are not 100% complete.

Free at last was also incomplete as he didn't bring up annuities. I didn't pick that up and go on about it

Are you sure the FAQ are absolutley complete in every way and they feature every way to lower your IRPF bill? I can anwer that question for you...they are not complete and don't feature every single way to lower your tax bill. They are however good enough to get you very close to your tax bill. It can be further reduced but as I said the cost and trouble exceed the tax bill and some of the methods are proprietary.

I am not picking up the incompleteness there for the same reason as my original reply was incomplete (as I acknowledged in my original reply)

.....the OP now knows roughly the tax bill and will be at most 500 EUR off. That will be accurate enough for the OP to make a decision of moving to Andalucia

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Re: Tax on state pension

Postby El Cid » Fri Feb 05, 2021 8:38 pm

OK iI am happy to delete the incomplete Tax FAQ. Perhaps you would be kind enough to rewrite it.

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Re: Tax on state pension

Postby Beachcomber » Sat Feb 06, 2021 7:25 am

Please, no! Not if ends up being as incoherent as his posts.

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Re: Tax on state pension

Postby Paddy Pumpkin » Sat Feb 06, 2021 10:38 am

El Cid wrote: Fri Feb 05, 2021 8:38 pm OK iI am happy to delete the incomplete Tax FAQ. Perhaps you would be kind enough to rewrite it.

Sid
To quote myself

I am not picking up the incompleteness there for the same reason as my original reply was incomplete (as I acknowledged in my original reply)

.....the OP now knows roughly the tax bill and will be at most 500 EUR off. That will be accurate enough for the OP to make a decision of moving to Andalucia.


I have no desire to over write or disregard the FAQ as you can see from my original post. The FAQ can never be complete they, like my original post, are a good guide.

I will however defend myself if somebody tells me I am inaccurate in tax matters.

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Re: Tax on state pension

Postby Free at Last » Sat Feb 06, 2021 11:04 am

Paddy Pumpkin wrote: Fri Feb 05, 2021 3:32 pm If your total income is below 18k EUR then you will be taxed roughly as follows.

First 5.500 is tax free
Everything else will be 19%



CAVEAT....above is only a rough estimate to help you and it doesn't go in to the how and the why. Savings interest and capital gains are taxed separately from pension income....but below 18K then you won't be taxed above 19% on either type of income.
.
So, using your "rough guide", on an income of 14k (and you referred to incomes below 18k, remember) the OP would do the sums and come up with a tax liability of €1,615 - which would no doubt be alarming to someone with that level of income.

However, because of the real personal allowances for someone aged 65 (€6700), the general allowance (€2,000) and the low income allowance detailed in El Cid's FAQ, their actual income tax liability would be zero.

My own income from occupational pensions (I don't receive a UK state pension yet and am not entitled to the higher personal allowance) is a bit higher than that yet my tax bill for last year was €168.

So I believe your assertion (repeated more than once) that the worst case scenario would result in a difference of no more than €500 is not correct either.

By the way, you have made an (erroneous) assumption that I am a man, by referring to me as "he" more than once in your replies to El Cid. You should at least consider the possibility that a poster may be female since we make up half the world.

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Re: Tax on state pension

Postby BENIDORM » Sat Feb 06, 2021 11:20 am

Thank you for your information Miss/Mrs Last . :D

Regards,
Gordon ( Mr )

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Re: Tax on state pension

Postby Paddy Pumpkin » Sat Feb 06, 2021 4:39 pm

Free at Last wrote: Sat Feb 06, 2021 11:04 am
Paddy Pumpkin wrote: Fri Feb 05, 2021 3:32 pm If your total income is below 18k EUR then you will be taxed roughly as follows.

First 5.500 is tax free
Everything else will be 19%



CAVEAT....above is only a rough estimate to help you and it doesn't go in to the how and the why. Savings interest and capital gains are taxed separately from pension income....but below 18K then you won't be taxed above 19% on either type of income.
.
So, using your "rough guide", on an income of 14k (and you referred to incomes below 18k, remember) the OP would do the sums and come up with a tax liability of €1,615 - which would no doubt be alarming to someone with that level of income.

However, because of the real personal allowances for someone aged 65 (€6700), the general allowance (€2,000) and the low income allowance detailed in El Cid's FAQ, their actual income tax liability would be zero.

My own income from occupational pensions (I don't receive a UK state pension yet and am not entitled to the higher personal allowance) is a bit higher than that yet my tax bill for last year was €168.

So I believe your assertion (repeated more than once) that the worst case scenario would result in a difference of no more than €500 is not correct either.

By the way, you have made an (erroneous) assumption that I am a man, by referring to me as "he" more than once in your replies to El Cid. You should at least consider the possibility that a poster may be female since we make up half the world.
I refered to you as he as I understood that to be the language of this forum as you can see above people also refer to me as he with no indication that it is the correct pronoun. However I haven't taken offence as I feel it would take away from the discussion.

You left out the bit that you don't get the low income allowance if you have more than 6,500 in investment income. Also maybe the OP is over 75, there is an additional 1,400 extra allowance.

They are also in the FAQ. I never said the FAQ was incorrect or asked the OP to disregard it. I also never informed the OP that actually they could pay approximately 2% income tax on a pension in Spain by using a structure to mimic the Singapore CPF system. We could play this game all day.

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Re: Tax on state pension

Postby Paddy Pumpkin » Sat Feb 06, 2021 4:44 pm

Beachcomber wrote: Sat Feb 06, 2021 7:25 am Please, no! Not if ends up being as incoherent as his posts.
A post that is incoherent, because of a grammatical error, commenting about someone else being incoherent. The irony.


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