Tax on pension lump sums

[gerryh]

You are forgetting the general allowance on earned income (which includes pensions) which is €4080 and possibly the over 65 age allowance of €918, so for a pensioner the total allowances are €10149 which is pretty close to the minimum for declaration.


Sid

Sorry I'm probably being very dense but €4080 + €918 = €4998, so where does the other allowance, of €5151, come from to make the total allowances €10149?

Cheers
Gerry

[El Cid]

It's the standard €5151 personal allowance that you get, irrespective of what type of income you have.

The "General Allowance" applies to earned income, including pensions and varies from €4080 to €2562 on a sliding scale depending on your total income, including savings income. If you earn less than €9181, you get the full allowance. If you earn over €13260 you get the lower allowance - anything in between is on a sliding scale.

This allowance is being changed next year and so are all the personal allowances and tax rates and tax bands.

Sid

[gerryh]

This allowance is being changed next year and so are all the personal allowances and tax rates and tax bands.

Sid

Thanks for the explanation. Temporally forgot about the €5151 personal allowance
Any idea what the changes will be?
I like to start budgeting for next years tax liability at the end of this year.
Cheers
Gerry

[El Cid]

Firstly, the changes are for the 2015 tax year. The tax due next June is not affected. It will be your declaration in June 2016 where it first affects you.

The changes have not been confirmed yet. You can get more info here

http://www.blevinsfranks.com/News/Blevi ... icleID=643

What that doesn't tell you is that the personal allowances have gone up to €5050 and an additional €1150 over 65 and another €1400 over 75.

The "general allowance, which is currently €4080 - €2562 is changing to €3700 on income below €11250 and between €11250 and €14450 it reduces to zero. That is not good news for the many people who have income above €14450 but there appears to be another allowance introduced of €2000 which goes some way of rectifying the loss of the general allowance.

However, at the moment it is not clear exactly who will benefit from this new allowance. The law refers to it being for "trabadores" and it is not clear exactly what they mean by that. My feeling is that it will apply to everyone except those with just saving income. If not, it would mean that the average Spanish state pensioner would be worse off and I am sure that is not what the government intends.

If you want to get a real headache you could try making your own assessment by looking at the details at

http://www.minhap.gob.es/Documentacion/ ... 20IRPF.pdf

Sid