gallerie9

Ok
I think i need to get this sorted
I am paying tax on my UK pension a private one
Not old well not pensionable age yet
Where am i better off paying it
I think I have to in Spain
So how do i go about it
Help

Fred James

If you live in Spain for more than 183 days in one calendar year you will have to pay the tax in Spain.

To do this you need to fill in form FD9 from HMRC and on it declare the income you want paid tax free in the UK. That form then goes to the Spanish taxman who stamps it and returns it to you. You then send it back to the UK and your pension will be paid tax free and you will probably get a rebate.

You will pay the Spanish tax on your 2007 income at the end of June next year so you get a bit of a tax holiday!

You say you have a private pension. If your pension is an annuity that you purchased yourself (rather than a company scheme) then you will pay very little tax on it as you only have to declare a small percentage of it. The percentage depends on the age that you were when you started drawing the pension but for example, if you were 60 then you only declare 24% of it. As a result, with the big increases in tax allowances for 2007 you may well pay no tax.

Also the income from an annuity is classed as savings income and you only pay 18% tax rather than the new standard starting rate of 24%

Rosemary

I was employed by the county council in UK until April 2006. I put in the relevant tax form in Spain plus provided my P60 this year and was told that as I had been paid by the government in UK and therefore my pension when I receive it in December is classed as a civil service pension that this will automatically be taxed in UK and this cannot be changed. I have since read that civil service pensions are taxed at source and Spanish authorities may ask for proof that they are being taxed.

Rosemary

Fred James

That's true, Crown pensions are usually taxed in the UK. It is one of the points in the Double Taxation Agreement between the UK and Spain.

I doubt that anyone would ever be asked for proof of payment of UK tax as the Spanish taxman would not be aware that you had a UK Crown pension. It is also virtually impossible to avoid paying UK tax on them anyway.

EsuriJohn

Hi Fred James,

There are one or two places where the Double Taxation Treaty is different and allows Crown Pensions to be paid tax free to be taxed in the country of residence. The one I know of for certain is Cyprus where the tax rate for pensions is 5%. I only found this after we had chosen Spain over Cyprus but to late to change. It certainly makes you think 5% as opposed to 22%.

Regards,

John.

Fred James

Hi John.

I was aware of that - that's why I said "usually".

I did look at Cyprus but decided Spain had more to offer - especially as my main pension is an annuity so it effectively gets taxed at about 5% in Spain!

EsuriJohn

Hi Fred James,

You are the exact opposite of us my main pension is my Crown one. I still think we made the right choice for all sorts of reasons but we still love Cyprus and go for three weeks at the end of September.

Regards,

John.