Fred James

Yes, its a good guide to the tax bands, but the personal allowances could be misleading. You also get another €2000 on general income and pensions etc and for low earnings (such as a basic UK state pension) there is another allowance of up to €3700.

Lynn R

Wasn't that €3700 low income allowance increased in 2018? From the andalucia.com forum FAQs on Income Tax for Residents:-

"There has been a major increase in allowances for low incomes.

Up until now, there was a special allowance (detailed above) for earned income (including pensions) of €3700 for incomes in the range of €11250 to €14450. Incomes between those two figures were reduced pro rata so that incomes above €14450 got no extra allowance.

For 2018 these figures have been revised upwards. The allowance is now €5565 and the band is increase from €13115 to €16825."

Siftersam

Thanks to everyone who replied. Pensions are part of a very tricky topic even for those that remain in the UK.
My need to make a decision is a little way off yet as we plan to do the very often recommended 'try before you buy' rental route before committing to a move.
Thanks again!

Fred James

Quite right, it was increased. I should have got it right - I wrote the FAQs!

Notdunroamin

Which programme would that be then?

By definition 'everybody' includes me but I don't use whatever it is you're referring to!

Fred James

It’s the program supplied by AEAT which all tax declarations go through. Your tax advisor will use it, the guy in the tax office uses it and if you do it yourself, you will use it. A tax declaration cannot be submitted without using it, whichever way you choose to declare. It has been that way for the last 20 years that I have declared my tax.

Originally you used to download the program to your computer, run it and print out your declaration which you took to your bank, now it is all done 100% online. I can do our two declarations in about 15 minutes.

Keithtoon

Hi all,
I have just used the link TAXLEAK.
I entered= over 65 and a yearly pension of 22,500 Euros.
I will be retired, not working. Will I still have to pay "Social Security" (6.35 %)
Thank you.
Keith

Lynn R

No, you won't have to pay Social Security contributions.

Keithtoon

Hi Lynn,
Thank you for swift reply. This is great news.
And all this is done at home on your PC?
No need to pay OTHERS to do it? #Simples

Lynn R

We both do our Spanish tax returns online, yes at home on our PCs. But we only have pension income plus a small amount of interest on savings. If we had more complicated tax affairs, like rental income from property or a lot of investments, I would no doubt pay a gestor or accountant to do it. For the year in which I sold my old house and bought another property, I did pay someone to do my return as I wanted to make sure the capital gains situation was dealt with properly.

It's also a good idea to have one done for you for the first return you submit, then you can refer to the copy if you want to have a go at doing it yourself the following year. There is no need to pay someone to do that if you don't want to, there is the facility to make an appointment at your nearest Hacienda office and they will complete the return for you, free of charge. It's a very good service, we used it a few times. They never want to see any supporting documents like P60s or bank statements, we just wrote down the figures for our income and interest received, converted into euros, and they used those figures with no queries being raised. Their staff have always been very pleasant and helpful. If you are a couple they will show you the comparison of how much tax you would have to pay if submitting a joint return or individual ones, so you can decide which is more advantageous for you. When we've been to the office we've always been seen on time (sometimes before the scheduled time), had the returns completed for both of us and been out again within 15 minutes.

Keithtoon

Wonderful!
Thank you Wise Lynn.
Regards
Keith.

Keithtoon

Hi all,
Just thinking of different options:
With a £200,000 Pension fund...what is the best way to go, Drawdown or Annuity?
Regards and thank you.
Keith

Barriej

To be honest it all depends on your ongoing required lifestyle.

I took the 25% lump from mine the year before we moved over and while it has not performed as well as it would have if left in the pot.
I do at least have the money (tax free as we moved in the year after I took the sum) to live on and provide for emergencies (or buying a new car, going on holiday)

I have elected to take my pension flexibly as a drawdown.
The reasons being,
1. The annuity rates quoted (I had £250k in my pot) were not wonderful.
2. They were fixed (as they are for life or a set period)
3. My wife has no income, so we can take more from the scheme now and until we reach Uk retirement ages (saving on tax)
4. Once at UK retirement age I can reduce the amount taken (not possible with annuity) and keep my income below or at worst at the lowest tax threshold.
5. I dont need the money I am removing at the moment so it goes to prop up the savings for when we do.

You have to remember that anywhere will tax you if you go over the threshold.
Tax avoidance is legal, evasion is not.

So lets say I take €15,000 a year from my private pension (after taking £58.000 tax free) As a couple we should not pay any (or a couple of hundred euros) in tax.
My pension at the moment is gaining per month slighlty more than I am taking out each month in growth so, as such I am winning. (the value of your investment can go down as well as up)
In 2029 when I get my OAP I will reduce the pension drawdown to keep us at approx €15,000 a year.
In 2030 when my wife gets her OAP, I will stop taking money from the policy and it will then gain and will be, what I leave my children (unless I want to continue and pay tax or if an emergency arises).
The drawdown would allow me to take a lump sum to visit the daughter in Australia, an annuity would not.

You dont get this amount of flexibility from an annuity. My father is paying a fair amount of tax because he has his OAP and his BA pension. I dont want to do this, but he had no choice but to have an annuity.
I also dont like the fact that with some annuities, you no longer own the pot. It becomes money that you cannot access if emergencies arise.

Just my 2c and I for one worked my backside off for 40 plus years to build up the pot, so I'm having as much use of the money as I can while still alive.

Keithtoon

Thank you BarrieJ for your input.
Yes this year I will take my 25% Tax free amount. I will be receiving UK gov pension of £19,500 (approx) Any drawdown will be taxed obviously.
Why I mentioned Annuities is that i read this...see below. What is your thoughts?

Annuities

Annuities are taxed favourably in Spain as a proportion of the income is treated as non-taxable capital, and only the balance is subject to income tax.

The taxable income element of a whole of life annuity is determined by applying a fixed percentage (between 40% and 8%) to the amount received, depending on the age of the beneficiary at the time the annuity vests. For example, a man under 40 years of age would have 40% of his annuity income taxed leaving the remaining 60% tax-free. For a man aged 70 or over, 8% of his annuity income is taxable with the remaining 92% tax-free. Annuity income is taxed as savings income, so at 19% on the first €6,000; 21% on income between €6,000 and €50,000 and then 23% on anything over €50,000 (for 2017).

The above tax treatment normally applies to annuities which have not been acquired as a result of inheritance, legacy or other means of succession, and where an employer has not contributed to the savings phase.

For temporary annuities (an annuity paid over a set period of time) the relevant percentage applied to the income depends on the duration of the annuity i.e. for an annuity up to five years 12% is liable to Spanish tax leaving 88% exempt; for an annuity over 15 years 25% is taxed and 75% exempt.

Alfonsocolli

Hi all
Silly question, how does the spanish tax system even know if and when you take 25% of your pension pot. And at that, what if you cash in all of your pension pot in the UK, 25% tax free and 75% taxed in the UK? If you're already paying tax in the UK for the 75%, why would you end up paying tax in Spain as well. Is there not a double taxation agreement between the UK and Spain??