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change of threshold tax for people who have to pay tax in uk

change of threshold tax for people who have to pay tax in uk

Old May 21st 2015, 2:25 pm
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Exclamation change of threshold tax for people who have to pay tax in uk

Does anyone know of this new situation. My neighbour has been charged tax here in Spain, although she has a forces pension and has to pay uk tax because of change of threshold levels. Have tried to find out about this but even my tax consultant was not aware of it. This will affect all who are in this situation

Thank you
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Old May 22nd 2015, 7:23 am
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Default Re: change of threshold tax for people who have to pay tax in uk

Hi and a warm welcome to the Spanish forum on BE. Myself and Fred James are the moderators for the Spanish forums whilst BEVS moderates Europe. Moderators are there to ensure that the site runs smoothly within the rules of BE. This is so that members gain the information that they are looking for and find their experiences on the forums to be friendly and worthwhile.

Problems and complaints should always be addressed to a moderator who will look into the matter and deal with it efficiently and fairly. Our members who post in the Spain Forums are usually friendly and helpful with a wealth of knowledge about the issues of living in Spain. I hope that you enjoy your time participating in the forums.

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Old May 22nd 2015, 8:09 am
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Default Re: change of threshold tax for people who have to pay tax in uk

Originally Posted by spanish62lil
Does anyone know of this new situation. My neighbour has been charged tax here in Spain, although she has a forces pension and has to pay uk tax because of change of threshold levels. Have tried to find out about this but even my tax consultant was not aware of it. This will affect all who are in this situation

Thank you
Government pensions are not taxed in Spain. If she has the UK state pension that will be taxed in Spain.

The UK tax thresholds are irrelevant.

It could be that whoever did her tax declaration incorrectly declared the forces pension.
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Old May 22nd 2015, 8:54 am
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Default Re: change of threshold tax for people who have to pay tax in uk

I do not know whether the forms have changed at all but if I remember correctly I completed an FD9 showing my state pension and private pensions which was then stamped by the hacienda to show that I was being taxed on this income in Spain. This was then sent to the UK Tax office with details of my small government pension so that they could provide me with a suitable tax code for that income.

Other people may have more up to date information on this because this was all completed in July 2012.

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Old May 22nd 2015, 9:24 am
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Default Re: change of threshold tax for people who have to pay tax in uk

Originally Posted by Fred James
Government pensions are not taxed in Spain. If she has the UK state pension that will be taxed in Spain.

The UK tax thresholds are irrelevant.

It could be that whoever did her tax declaration incorrectly declared the forces pension.
Could this not be because the new UK tax threshold is higher than the Spanish threshold and therefore tax is due on that difference? I may be well of course here but just wondering.
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Old May 22nd 2015, 9:45 am
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Default Re: change of threshold tax for people who have to pay tax in uk

No, the threshold makes no difference to the Spanish tax. The Government pension is taxed in the UK and if it exceeds the allowances then UK tax is paid. If it was another type of income, then, as that would taxed in Spain, any tax paid on the same income can be deducted from any Spanish tax paid.

UK Government pensions are expressly excluded as they can be taxed ONLY in the UK so there is no tax paid on them in Spain so there is nothing to deduct the UK tax from.

As I think you already know, next year they will have to be declared in Spain as "exempt" income so they are still not taxed directly, but the amounts may affect the Spanish tax paid on other income that is taxed in Spain.
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Old May 22nd 2015, 9:49 am
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Default Re: change of threshold tax for people who have to pay tax in uk

[QUOTE=Fred James;11653257
As I think you already know, next year they will have to be declared in Spain as "exempt" income so they are still not taxed directly, but the amounts may affect the Spanish tax paid on other income that is taxed in Spain.[/QUOTE]

Cheers Fred it was that last bit that I was thinking of.
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Old May 22nd 2015, 2:20 pm
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Default Re: change of threshold tax for people who have to pay tax in uk

Originally Posted by Fred James
next year they will have to be declared in Spain as "exempt" income so they are still not taxed directly, but the amounts may affect the Spanish tax paid on other income that is taxed in Spain.
Yes, nothing definitive I've read anywhere so just hazarding a guess...

...in future and depending on the particular amount and circumstances, the 'exempt' income resulting from a UK govt service pension, that is UK taxed income having already benefited from the generous UK personal allowance, might mean the Spanish personal allowance of about €5500 won't be granted for any 'unexempt' income.

So in effect somebody drawing a UK govt service pension won't be taxed directly in Spain, but indirectly they'll have to pay an extra circa €1100 in tax on their 'unexempt' income.
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Old May 22nd 2015, 3:06 pm
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Default Re: change of threshold tax for people who have to pay tax in uk

Originally Posted by iano
Yes, nothing definitive I've read anywhere so just hazarding a guess...

...in future and depending on the particular amount and circumstances, the 'exempt' income resulting from a UK govt service pension, that is UK taxed income having already benefited from the generous UK personal allowance, might mean the Spanish personal allowance of about €5500 won't be granted for any 'unexempt' income.

So in effect somebody drawing a UK govt service pension won't be taxed directly in Spain, but indirectly they'll have to pay an extra circa €1100 in tax on their 'unexempt' income.
Must be a hell of a pension if they have to oay an extra 1100 euros!
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Old May 22nd 2015, 3:36 pm
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Default Re: change of threshold tax for people who have to pay tax in uk

There is "chatter" on other forums that some gestors and even the Hacienda are confused about when the new DTA agreement regarding Gov pensions comes into force. It seems quite clear, as Fred points out, that it applies to 2015 income and therefore La Renta 2015 ie next year. Nevertheless some gestors are applying it to La Renta 2014.
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Old May 22nd 2015, 3:37 pm
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Default Re: change of threshold tax for people who have to pay tax in uk

Originally Posted by iano
Yes, nothing definitive I've read anywhere so just hazarding a guess...

...in future and depending on the particular amount and circumstances, the 'exempt' income resulting from a UK govt service pension, that is UK taxed income having already benefited from the generous UK personal allowance, might mean the Spanish personal allowance of about €5500 won't be granted for any 'unexempt' income.

So in effect somebody drawing a UK govt service pension won't be taxed directly in Spain, but indirectly they'll have to pay an extra circa €1100 in tax on their 'unexempt' income.
It is definitive - it is clearly stated in the new Double Taxation Treaty which is now in force.

Where in accordance with any provision of the Convention income
derived or capital owned by a resident of Spain is exempt from tax in
Spain, Spain may nevertheless, in calculating the amount of tax on the
remaining income (or capital) of such resident, take into account the
exempted income or capital.


It does not affect the Spanish personal allowances. The way the tax in Spain is calculated is now quite complicated and, even after the personal allowances are taken into account the percentage of tax deducted changes as a result of taking into account the exempt income.

All the tax allowances and rates change from 1st January this year (which will affect next year's tax declaration) and as the tax program that will incorporate these changes will not be available until April next year it is difficult to calculate the effect.

I have run some examples on the current tax model and if you have an average UK Government pension and a UK state pension with a few extras for investment income, the extra tax could indeed amount to an extra €1100 or so. The good news is that with higher pensions the amount of extra tax is not as bad as one would expect.

This of course may change either way when the new rates and allowances come into effect.
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Old May 22nd 2015, 3:44 pm
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Default Re: change of threshold tax for people who have to pay tax in uk

Originally Posted by Brano77
There is "chatter" on other forums that some gestors and even the Hacienda are confused about when the new DTA agreement regarding Gov pensions comes into force. It seems quite clear, as Fred points out, that it applies to 2015 income and therefore La Renta 2015 ie next year. Nevertheless some gestors are applying it to La Renta 2014.
For some income, the changes did take effect for 2014 income. As far as government pensions are concerned, it starts on Jan 1 2015.

I cannot understand how qualified gestors, let alone Hacienda can be confused.

On the first page of the treaty it says -

Effective in Spain:
(i) in respect of withholding taxes, on income derived on or after
12 June 2014;
(ii) in respect of income taxes and other taxes (other than withholding
taxes), for any tax year beginning on or after 1 January 2015.


How can that confuse them?
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Old May 22nd 2015, 3:52 pm
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Default Re: change of threshold tax for people who have to pay tax in uk

Originally Posted by Fred James
For some income, the changes did take effect for 2014 income. As far as government pensions are concerned, it starts on Jan 1 2015.

I cannot understand how qualified gestors, let alone Hacienda can be confused.

On the first page of the treaty it says -

Effective in Spain:
(i) in respect of withholding taxes, on income derived on or after
12 June 2014;
(ii) in respect of income taxes and other taxes (other than withholding
taxes), for any tax year beginning on or after 1 January 2015.


How can that confuse them?
I don't know. I'm just reporting on what has apparently happened to some individuals and may be the cause of the OP's question. Hopèfully isolated cases.
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Old May 22nd 2015, 3:57 pm
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Default Re: change of threshold tax for people who have to pay tax in uk

Hmm, further digging around has revealed the following...

"New UK/Spain Double Taxation Agreement for 2015

A new version of the double tax agreement between Spain and the UK comes into full force on 1 January 2015.

One of the changes closes the loophole whereby persons resident in Spain and receiving a UK government pension may obtain the benefit of personal allowances in both countries.

Spanish tax returns for 2015 will account for UK government pensions (Crown pensions) as using up the Spanish personal tax-free band. The pension income itself will continue to be taxed only in the UK, but other income such as a UK state pension may now be pushed into a higher tax rate band. This is likely to mean that those receiving this type of pension will pay a little more tax than in previous year."

Double tax treaty between Spain and the UK

I make ' a little more tax' = €1340 (20% x €6700, the Spanish Personal Allowance for 65+). Heck, a big chunk out of the OAP for a low ranking ex-Govt employee.

Last edited by iano; May 22nd 2015 at 4:12 pm.
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Old May 22nd 2015, 4:07 pm
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Default Re: change of threshold tax for people who have to pay tax in uk

Originally Posted by iano

The pension income itself will continue to be taxed only in the UK, but other income such as a UK state pension may now be pushed into a higher tax rate band.
As I said, it's not as simple as that. The tax may well increase even though you stay in the same tax band. The site you quoted is giving a simple view of the situation because if you tried to explain it in detail, no one would understand it.

What they are describing is a very simplistic view of the situation based on what would happen in the UK if that situation applied. The calculations in Spain are entirely different which you would see if you looked at a Spanish tax declaration although the end result may well be almost the same.

The Tax Treaty makes no reference to this apart from the paragraph I quoted.

Last edited by Fred James; May 22nd 2015 at 4:14 pm.
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