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Income tax - UK and Spain

Re: Income tax - UK and Spain

Postby Janetg » Tue Jun 30, 2020 1:32 pm

Hi all
Anyone know if my OH fire fighters pension would be taxed in U.K. or Spain ?
Just asking for when we are looking to move to Spain in a couple of years
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Re: Income tax - UK and Spain

Postby Ginger » Tue Jun 30, 2020 1:51 pm

Sorry Johnno you don’t have a choice really, you pay income tax in your country of residence. If you live in ?Spain and have your residencia you pay tax in Spain, without residencia your property in Spain is a holiday home or second residence,with all its restrictions and non residents tax, your main home is the U.K. and that is where you pay tax.
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Re: Income tax - UK and Spain

Postby Sage » Tue Jun 30, 2020 2:40 pm

Nikkifinca wrote:Steve4878. To clarify you can only claim back tax paid in Spain on Uk income if it is double taxation. As taxes are higher in Spain Spanish tax can be due on Uk income but the amount already paid in the Uk is taken into account. This can leave you with a Spanish tax bill which is not reclaimable from hmrc. Add to this the mismatched taxation years (jan-Dec in Spain and Apr-Apr in Uk) and it tends to get complicated!


So, if I understand this correctly, if you are a Spanish resident & have lots of assets/income in the UK &/or are a 'high net worth' individual, you are going to pay UK taxes + more taxes in Spain.
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Re: Income tax - UK and Spain

Postby Espanabums » Tue Jun 30, 2020 3:49 pm

Janetg wrote:Hi all
Anyone know if my OH fire fighters pension would be taxed in U.K. or Spain ?
Just asking for when we are looking to move to Spain in a couple of years



Simply put, your OH Fire Service Pension is ONLY taxed in UK as it is classed as a so called Government Pension or Crown pension.

Having said that, you do need to declare it in Spain as exempt income (rentas exentas), this has the effect of increasing your income bracket so that if you have any income that is taxable in Spain, it will have some of it taxed at a higher percentage.

There are 3 types of income that are included in your Spanish tax return,

1 Income taxed only in Spain, private pensions, ordinary earned income (Spanish or UK) interest on savings, including ISA's which are tax free in UK but you pay tax on them in Spain, also premium bond wins and any lottery wins over a certain amount.

2 Income taxed only in UK, these are the so called Government Pensions or Crown Pensions, Fire Service, Police, Civil service, Local authority pensions etc. As mentioned above, this income must be declared as exempt income (rentas exentas) and is not taxed but comes in to the equation to determine the top rate of tax that you pay in Spain.

3 Income that is taxed both in UK and Spain. Rental income comes into this catagory. Spanish property rental needs to be included in UK tax return and UK property rental needs to be included in your Spanish tax return. The tax already paid in the respective countries is taken into account. The Spanish deal very favorably with rental income if it is long term, it is classed almost like a public service, and they only tax part of the net income; this means that any tax paid in UK will normally cover any tax due on the Spanish side for rental income.

Spanish tax is a lot more complicated than UK tax and is difficult for the layman to work out. For example most of the allowances are only applied once the tax bill is calculated, unlike UK where they are deducted from the total income before the tax is applied.

The allowances are only applied at the lowest rate of tax, 19%, so that rich and poor get the same amount of relief.

You get 3 allowances in Spain, a general allowance of 2,000€ (which is taken off the total income before tax is calculated, a personal allowance which increases once you reach 65, and a sliding scale earned income allowances that decreases as you earn more, so could be worth 4,000€ odd or nothing dependent on your income.

There are other allowances for children and older family members who are dependents.

A rule of thumb to go by is that if you only have a UK old age pension, you will have no tax to pay in Spain

Otherwise, in most cases, you will have to pay a few hundred euros per year more than you did in UK.

Most gestors will charge around 50€ to file your tax return for you.
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Re: Income tax - UK and Spain

Postby partygoer » Tue Jun 30, 2020 4:11 pm

Nikkifinca wrote:Partygoer... can you tell me who advised you that you don’t have to pay Spanish tax on Uk rental income? My accountant disagrees and I pay tax on it in the Uk, that amount is offset against the amount I pay here.


We may be talking at cross purposes here but here goes
See...

https://www.gov.uk/tax-uk-income-live-abroad/rent.

OH is registered on the non resident landlord scheme with HMRC which means that tax on the income is not taken at source by the Agent who manages our property.. but is declared on the OHs UK annual self assessment form.The HMRC issue an NRL number so that our Agent knows they cannot take tax off of the income.
I've attached a picture of the document from the HMRC that states..
'You must still pay tax on your rents in the United Kingdom'.

All income is declared to both HMRC and Agencia Tributaria annually.
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Re: Income tax - UK and Spain

Postby Espanabums » Tue Jun 30, 2020 4:28 pm

partygoer wrote:
We may be talking at cross purposes here but here goes
See...

https://www.gov.uk/tax-uk-income-live-abroad/rent.

OH is registered on the non resident landlord scheme with HMRC which means that tax on the income is not taken at source by the Agent who manages our property.. but is declared on the OHs UK annual self assessment form.The HMRC issue an NRL number so that our Agent knows they cannot take tax off of the income.
I've attached a picture of the document from the HMRC that states..
'You must still pay tax on your rents in the United Kingdom'.

All income is declared to both HMRC and Agencia Tributaria annually.



There are 3 ways to pay tax in UK on rental income,

1 let your tenant deduct the tax due and pay a reduced rent to you and the tax deducted from that rent is paid by the tenant to HMRC (in my opinion very dodgy as you are relying on your tenant to settle your tax bill)

2 Your letting agent deducts the tax on your behalf and gives you the residue and pays the tax over to HMRC (not favoured by letting agents as it is extra work)

3 Claim your rent in full (minus letting agent fees etc.) and settle your own tax affairs with HMRC via self assessment.


HMRC will not routinely communicate with Agencia Tributaria/Hacienda/Spanish tax authority, annually, and so you need to declare your UK rental income when you submit a Spanish tax return
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Re: Income tax - UK and Spain

Postby Sage » Tue Jun 30, 2020 4:44 pm

Espanabums wrote:
Janetg wrote:

The Spanish deal very favorably with rental income if it is long term, it is classed almost like a public service, and they only tax part of the net income; this means that any tax paid in UK will normally cover any tax due on the Spanish side for rental income.

What's the Spanish definition of long term ?
In the UK most tenancy contracts (Assured Shorthold Tenancies) are for 6 or 12 months......some of them run on longer as Periodic Tenancies.
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Re: Income tax - UK and Spain

Postby Espanabums » Tue Jun 30, 2020 4:47 pm

Pete31 wrote:Hi, so if you have sold a house in the uk how do they know over here if you have sold it?



If you sold a house in UK that sale should be reported to HMRC, with a view to capital gains tax, via self assessment. If you do not normally submit a self assessment return In UK, the sale will be notified to HMRC by both your conveyancing agent and Estate agent. Even if you sold the house privately and did your own conveyancing, HMRC would get to know about the sale through the land registry.

If you are a Spanish resident, you should have declared the asset using the modelo 720 form and again when it is sold and you no longer hold it as an asset. If you have been letting the property you should have been declaring the income. If you have not been letting the property, you should still declare it on your Spanish tax return as you are liable to pay imputed tax much as non Spanish residents pay imputed tax on their holiday homes.

If you are not a Spanish resident you will be liable for capital gains tax on your sale of a UK property if it was sold within the full year that you became a Spanish resident.

If you have recently moved to Spain and declared to HMRC that you are changing from being tax resident in Spain, rather than tax resident in UK, then HMRC will share Information with Spain during the transition.

Whilst we are in transition due to Brexit, you may be able to use the proceeds of your UK house sale to fund you purchase of a Spanish property, without incurring capital gains tax.

Tax offices throughout Europe are now fully joined up with reporting of capital movements.
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Re: Income tax - UK and Spain

Postby Espanabums » Tue Jun 30, 2020 4:49 pm

Sage wrote:
Espanabums wrote:
Janetg wrote:

The Spanish deal very favorably with rental income if it is long term, it is classed almost like a public service, and they only tax part of the net income; this means that any tax paid in UK will normally cover any tax due on the Spanish side for rental income.

What's the Spanish definition of long term ? Not cast in stone, but 1 year
In the UK most tenancy contracts (Assured Shorthold Tenancies) are for 6 or 12 months......some of them run on longer as Periodic Tenancies.
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Re: Income tax - UK and Spain

Postby Jonnno » Tue Jun 30, 2020 5:10 pm

My original reason to post this item was related to payment of tax on a UK government pension.

My accountant originally arranged for tax on my NHS pension to be paid in Spain and that has been the case for several years. That is now being challenged by my new accountant. I dont know the rights and wrongs of that but at present trying to unravel.

So info on other peoples actual experiences (rather than other peoples theories) would be welcome. Thanks.
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