Fred James

The asset declaration does not involve income tax directly. If you take income from the assets or sell and make a capital gain, tax would be liable but it would be anyway. All the asset declaration does is put them in a better informed position to keep tabs on you.

Notdunroamin

I've been told that the taxation of annuities depends on how the money to purchase them was accrued, i.e. was it a fund you paid into yourself or jointly with an employer?

gemscot1

well i guess i could use some of the funds to buy an anuity and leave the rest invested - this will allow me to understand how it it taxed etc and then learn from it - what i have learned in life is you can get as much advice as you like but nothing like dipping the toe in the water so to speak

bolton wanderer

For Spanish residents the current modelo 720 declaration, "wealth tax", is zero % on assets, as long as you don't have assets over €700,000 (someone will be along to fine tune this amount shortly).
This "wealth tax" could be increased quite easily at the whim of the Spanish government if/when required.... Residencia in Spain is far more palatable if you have fewer worldwide assets. I'm not sure whether this would impact on your UK annuity (pension?) but would certainly impact on any savings, investments currently under a UK tax wrapper like a ISA.

Good luck.

tebo53

Hi, when I was about to retire I also looked at the lump sum option which was very tempting at that time. I then found out the difference it would make to my monthly income if I didn't take the lump sum and was quite amazed at the income difference. So unless you have specific plans for your lump sum please consider the extra monthly income that would give you.
Taxes are one of the pains of life which we can't avoid but I'm glad I didn't have to pay "lump sum" amounts.

Steve

Notdunroamin

Good advice, the thought of £x000 tax free in your hand is very tempting but if you don't actually need it, say for paying off a mortgage or other debt reduction, then leaving it were it is means that you'll be getting 25% more pension for the rest of your life!

A potential downside is that it might increase your annual tax liability so you'd need to do the maths to see if it would be beneficial in the long run or not.

gemscot1

firstly thanks everyone for your replies - its useful to hear others thoughts

my concern is that annuity ratrs are so low right now but yes wont need the lump sum as both my uk house and spain property is owned outright so no mortgage or anything to pay

will need to look at the 700k limit as all properties and savings plus pension would exceed this

gemscot1

actually looks like pension rights are exempt and also main dwelling together with the 700k limit is per person - so does look like it will be a non issue at least - of course still need to report

Lmj2018

The pension pot is not included in the declaration of assets.

Fred James

As I said earlier.

gemscot1

ok starting to draw up a plan so thanks everyone

i think the optimum solution would be to mover over here and then either do one of following:-

1. if requirements are watered down for uk passport holders with property in spain then i could chance going back to the uk for 1 yeat to clain the pension lump sum and then go back to spain afterwards

2. if the requirements look onerous then i could just forgo the tax free lumpo sum and just buy the annuity

britishbull

The important thing is to get the pre-Brexit rights before end of tax year 2020. First tax return will be filed in 2021 for the whole of 2020 on UK income and capital gains, etc (but double taxation treaty so don't panic). Whilst a lump sum from your pension pot taken in 2020 would be taxable, it seems the pension pot as a whole would not. If you were to become non-tax resident in, say 2022, would you not retain your rights to reside in Spain but then be able to take your 25 percent tax free from the pension pot? And come back to Spain in 2023. All depends what rights you get when you register pre end of 2020. ie do you get a lifetime right to reside in Spain even if you go non-resident for a year?

gemscot1

these the million dollar question - guess we need to wait and see what rights are given - would be great if as you suggest they allow a lifetime right to reside if you need a year as a non resident

Fred James

I don’t think you will ever get permanent right of residency until you have been in Spain for 5 years. Once you have done that, you cannot lose that right unless you spend more than 5 years outside Spain. That’s a big improvement over the current rules which say you cannot spend more than 2 years away.

That is all in the Withdrawal Agreement which is a binding treaty.

Woody7

Very interesting thread as I am in a similar situation, however, can I clarify a couple of points.

I retired and received a large lump sum in November 2019, does that mean I could become a tax resident in 2020 without being liable for tax on that income? I thought the 2020 tax year was for income received in 2019 or do i have that wrong?

if i get residency in Spain this year (I currently have a holiday home) what rights do i have to give up in the UK, for example access to the NHS family doctor etc? If i got residency in Spain i would still retain a small house in the UK.

Ultimately i will need to consult a expert but any 'heads up' now would be helpful.

Andy