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.