To pay tax in UK or Spain?

Hi everyone,
My husband and myself are coming back to Quesada in September to hopefully buy a house and retire. Our income will come from my very small pension (less than half the basic state pension), and rent from three small houses in UK.

I know what the UK personal allowance is and what percentage tax we have to pay. But as yet do not know the Spanish allowances and rate of tax. We fully intend to seek professional advice when in Spain, but if anyone can give any info at this stage I would appreciate it.

To keep matters simple we would prefer to pay taxes in UK but don't know what we have to do! Also we don't want to be paying tax in both countries. Help please!

Where you pay taxes is not a matter of choice, it's decided by the length of time you spend in a country in any one twelve-month period. So if you come to live in Spain, as soon as you're here for more than 183 days in any twelve month period, you are deemed to be fiscally resident here, and will need to declare your worldwide income to the Spanish tax authorities. They will issue a certificate confirming (in English) that you are now registered with them, and you will send this to the UK HMRC, who will then stop deducting UK tax.
So far as regards whether you will pay more, or less, in Spain, the way they calculate your liability is complicated, so I would advise you to give your figures to an accountant here and ask for an estimate of your liability.
Geoff.

UK rental income is taxable in both countries, with tax paid in UK being offset against any Spanish tax due. Depending on your Spanish tax burden this Spanish tax may be at a much higher rate than UK. The good thing is that the Spanish do not include the full net rental income in their calculations as it is perceived that you are providing a service to your tenants.

Oh dear! None of that sounds good, we thought we would perhaps enjoy a better lifestyle in Spain. But if we're going to be taxed through the nose, I'm not so sure. Can anyone recommend a Spanish Tax advisor please, that we can speak to now before we jump in at the deep end!

Pipsyspup wrote:Oh dear! None of that sounds good, we thought we would perhaps enjoy a better lifestyle in Spain. But if we're going to be taxed through the nose, I'm not so sure. Can anyone recommend a Spanish Tax advisor please, that we can speak to now before we jump in at the deep end!

You won't be taxed through the nose. You will get a tax allowance, you will get an age related allowance, you will get a married persons allowance and other things. You will pay tax in UK on rental income and this will be offset against any liability you declare in Spain.
Our solicitors handle all our details including tax returns, contracts with utility companies, recording SUMA (local taxes like council tax and car tax etc) and charge us 170 euro a year (that's for 2 of us, not each).
The only thing you may be liable for extra tax is your pension which is tax free in UK but not in Spain.

Offset all that against the (probably) £140 a month in council tax in UK compared to about £200 a year council tax in Spain and you can see where the savings are.

marcliff wrote:

Pipsyspup wrote:Oh dear! None of that sounds good, we thought we would perhaps enjoy a better lifestyle in Spain. But if we're going to be taxed through the nose, I'm not so sure. Can anyone recommend a Spanish Tax advisor please, that we can speak to now before we jump in at the deep end!

You won't be taxed through the nose. You will get a tax allowance, you will get an age related allowance, you will get a married persons allowance and other things. You will pay tax in UK on rental income and this will be offset against any liability you declare in Spain.
Our solicitors handle all our details including tax returns, contracts with utility companies, recording SUMA (local taxes like council tax and car tax etc) and charge us 170 euro a year (that's for 2 of us, not each).
The only thing you may be liable for extra tax is your pension which is tax free in UK but not in Spain.

Offset all that against the (probably) £140 a month in council tax in UK compared to about £200 a year council tax in Spain and you can see where the savings are.

My UK council tax £2500 a year
Spain Council Tax €200 a year (Priceless!)

I thought pensions (all income actually) is liable for tax in the UK ?

amiller wrote:I thought pensions (all income actually) is liable for tax in the UK ?

It is, but there is no system in place for deducting tax at source from UK State pension payments.
A person living on just basic State pension won't pay any tax anyway, as ther income will be around £3,200 below their personal allowance threshold.
A person receiving state pension and an additional income such as an occupational pension would have both sources of income taken into account when the tax code for the occupational pension is calculated.

Pee.