Spain Bound

I know I shouldn't have been, but I was horrified by the amount of income tax I have had to pay as a resident! Be aware. Spain is not as cheap as you might think, and I don't think this point is pushed home enough.

You have to declare ALL your income, pensions paid from ex-employers in the UK, State pension from the UK, also, if you have them, income from any savings, ISA's, Tessa's. The lot!

They are ALL taxed at the Spanish Rate which is a lot higher than the UK rate (ISA's and Tessa's aren't taxed at all in the UK so there's a huge difference to start with.)
Then they subtract the tax you have already paid in the UK from what they want in Spain, and you pay the difference. And what a difference!

Obviously all this depends on your own circumstances. But work it out. It's not hard.
My understanding of the Allowances for 2005:
Tax Free: Spain -the first 3400 euros. UK-the first 4895 POUNDS
After that: Spain first 4000 euros taxed at 15%. UK first 2090 POUNDS at 10%
Then: Spain next 9800 euros taxed at 24%. UK next £30,000 (approx) at 22%
Then: Spain next 12000 euros at 28%
Then: Spain next 19000 euros approx taxed at 37%

Let's say you earn 10000 pounds pension a year. Say that's 14400 euros.
In UK you will have paid £872.30 (say that's 1256€) in tax.
In Spain you will be charged 2280 euros in tax.
That works out as YOU HAVE TO PAY 1024 euros to the Spanish taxman!

Imagine what is is if you earn more.

I suppose it's not in the interest of some groups to be very up front about this, but be warned. Work it out. And all this about "...you don't have to declare this or that..." Really? Who says?

Bottom line is I'd still rather live here though!

Fred James

That says it all really.

Yes, income tax in Spain can be higher than the UK - it depends on your circumstances, but other taxes are lower such as the equivalent of council tax and water rates, car tax etc.

There are also some tax breaks in Spain that are not available in the UK. Personal annuities are hardly taxed at all and there is mortgage relief for the whole (capital + interest) payment which can be worth over 4000 euros for a couple who both have income.

Duty on booze and tobacco is very much lower and even VAT is marginally lower. It just depends on what you spend your money on.

Taking into account the lower cost of living, then living in Spain on an average UK pension, even paying the higher Spanish income tax, you can have a much higher standard of living that you would in the UK on the same income - that's why there are so many retired Brits in Spain.

As you said - I'd rather live here (and pay the tax!)

Fred

tim hortons man

From a wage slave point of view taxes are at similar levels to Northern Europe, and a bit lower than the Scandinavian counties.

I remember reading somewhere that certain pensions were tax free when received by a resident of Spain. Unfortuanately as I'm a few years away from that part of my life I didn't really pay attention to it.

Spain Bound

I wonder if you are thinking of (UK) government pensions, eg if you were a civil servant. I understand they are exempt.

Mitzyboy

Yes A civil service pension is tax paid UK, not taxed in Spain.

I worked out my taxes and if you have a good gestor you can learn the angles. Theres not a massive difference, and when you take into consideration I won't be paying £1600 a year council tax and £300 a year water rates ...............

keithwalters

I don´t know if its true or not, but someone told me that you can deduct certain things from your income (such as mortgage repayments) before you are taxed on it, thereby significantly reducing the amount of income tax you pay.

merlino

From next year when I move out to Spain ( Oliva ), the annual personal tax allowances are due to rise significantly as shown in this article from expatica :-


http://www.expatica.com/source/site_...efit+families+



Phil

Spain Bound

Hi Mitzyboy,
Yes you are quite right we do save a lot on council tax, water rates, petrol and so on. No question about that. I was concerned though that there are people who (like me) should already know, but don't, that the income tax is a lot higher here than in the UK. I don't have a civil service pension, nor a mortgage (I know you can get tax relief on a mortgage.) But I'd love to know what other angles there are... I thought I had a good gestor but he didn't come up with any. I'll be trying another, but do you have any advice?

Amara

Yes you can - We do it on our rent - It is called "salary sacrifice" - So our rent is deducted directly from my Husband's salary and then he pays tax on what's left. It is a brilliant benefit and you can do the same thing with a mortgage - similar to the old tax relief system in England - ah the good old days!!

Mitzyboy

Well thats good I can certainly arrange for my income to be less than 9000 euros

Where are you settling in Oliva Phil? I'm at Tossal Gros in the hills

Mitzyboy

Where abouts are you settling Spain Bound?

Gray C

Does this also apply to a Local Government pension as well as civil service? Strictly speaking they are not quite the same although most people consider them to be.

Spain Bound

Already there! In Quesada, near Torrevieja. But I don't pay rent, so I'm still looking for an angle to reduce my tax!

Fred James

If the signature on the cheque is Paymaster General its a Crown pension. If its the local authority it isnt.

Fred

EsuriJohn

Hi Gray C,

Yes the LG pension is a fully funded contributory pension but good news for you it is taxed at source in UK and you cannot get it paid untaxed in Spain.

It is therefore not considered by the Spanish Tax-man even though if it was it would push you into a higher tax bracket and bring more income to the Hacienda. See Blevins Franks "Living in Spain" para 4.8 page 49

Regards,

John.