Talk Quesada forum

This was really helpful information from marcliff as I have been trying to fine out about tax on my UK local government lump sum. Can you please point me in the right direction to find information to pass to my accountant - is there something on HMRC website? Thank you

Any recommendations for an accountant for completing our resident tax returns? I’m not enitirely confident is the girl we are using so thinking g of changing.

Sorry we are too far away to know accountants in your area. Back onto the question of local government lump sums I am being told that these are taxable in Spain, if anyone has evidence that they are not it would be really useful. Thank you.

I deferred my pension for 3 years in the UK. A few months ago I received my lump sum of £20000. However, it was taxed at 40%, so they kept back £8000 of the lump sum in tax, and I only received £12000 in the end.

Had you consulted a good Financial adviser you would have been able to save paying all that tax .

jpeg wrote:Had you consulted a good Financial adviser you would have been able to save paying all that tax .

How do you know my financial position to say that? I worked in the financial industry all my working life....I advised myself!!!!

Thatch1 wrote:I deferred my pension for 3 years in the UK. A few months ago I received my lump sum of £20000. However, it was taxed at 40%, so they kept back £8000 of the lump sum in tax, and I only received £12000 in the end.

Am assuming you mean you were fiscally resident in the UK at that point and taxed by the UK authorities? It doesn't sound like Spanish tax rates.

In which case neither does it sound like you are talking about a defined benefit occupational pension scheme - final salary or career average - where you have a balance of pension and tax free lump sum.

In which case your situation is different to the one raised by the OP.

Sounds more like it was a lump sum taken from a private pension scheme which by taking it in one go tipped you into the top rate of tax for that year so you ended up paying 40% on it, which you obviously must have chosen to do as you wouldn't have taken the money without being aware of that. Though it's a bit strange you were taxed 40% on the full £20,000 rather than on 75% of it ( but your situation was probably more complicated eg if you had already drawn down some of the pension before and got the tax relief then etc etc. )

The issue raised by the OP is more to do with the tax fee lump sum people get from defined benefit occupational schemes and is an important point for people to be aware of when making their future plans .

It has been pointed out that if it is not a government pension ( and USS, Teachers schemes etc are not government pensions ) the sum that would be tax free in the UK will be taxable if drawn down while fiscally resident in Spain.

If it can't be taken before becoming resident ( clearly preferable!) , it could be worth thinking about commuting much of the lump sum part into annual pension instead. I also gather that if you buy an annuity there is special,possibly advantageous, treatment of that in Spain but you really need to see a spanish tax advisor on that.

Its another point for people to note that you also ( from a private ' money purchase'pension) won't get the 25% tax free allowed in the UK, all of it is liable to Spanish tax and I gather things like maturing endowment policies etc are also treated differently from the UK, so really worth checking this all out so there are no nasty surprises.

I am in the same situation as the original poster, and I am in the process of taking a lump sum from my UK pension, which will be taxed at source in the UK. I gained residency in January, so will not be tax resident in Spain until next year when I have to make my first tax return.
According to the Blevins Franks webpage that jpeg linked above, I fall into this category:
'The Spanish tax authorities (Agencia Tributaria or Hacienda) will generally want the tax due on your UK pension to actually be paid for the first time (in May/June of the following year) before they will issue a Certificado de residencia fiscal. This might not be until almost 18 months after you have taken up Spanish residence. If this is the case, you will ultimately be repaid any PAYE tax deducted at source in the UK while you were actually resident in Spain. '

How do I reclaim the tax that will be deducted? Has anybody else been through this process?