DLC

Yes, you need to declare it in the tax return.

It's all explained here, in Spanish though.

Barriej

Well, not sure about now.

But you answered your own question. Any monies taken while a Uk resident is taxed (or not in the case of the 25%) in the country you were resident in at the time. The same goes for cashing the whole lot in.

Once resident in Spain you are supposed to file a 720 which lists all of your assets over 50k.
Assuming I had £200,000 in my pension and I then withdrew the 25%, you are then supposed to declare any change (think its 20k up or down). So year 1 my pension would show 200k year 2 150k and questions from the tax man as to where the money went. Doing it in the Uk the year before you move means it cannot be taxed ANYWHERE.

Now back to my first comment. I am no longer tax resident in the UK so any sum taken from my pension is tax free, but I am supposed to declare that on my Spanish tax return.
Will they know? Dont have the answer to that
Is it worth the hassle hiding such things? No Im not a multimillionaire who can afford the hassle, so I will be honest.

Your milage may vary and you can do what you want (many do not inform) but I sleep better knowing Im not defrauding my new country of residence.

Alfonsocolli

I get it that we need to declare. But is the UK not in an agreement with Spain not to tax twice on income received?

DLC

Yep, here it is:

https://www.gov.uk/government/public...n-tax-treaties

Alfonsocolli

Thanks DLC
It's all legal jargon to me and don't quite understand the documents.
Are we then saying that I would not be paying tax twice?

Lynn R

As a Spanish resident, you would be required to declare all your worldwide income and pay tax on it in Spain (with the exception of Crown pensions which are only taxable in the UK although they still have to be declared on your Spanish tax return). After your first tax return has been submitted in Spain you would then submit a Spain (Individual) Double Taxation form, with a certificate of fiscal residence obtained from the Agencia Tributaria, to HMRC who would then refund the tax paid in the UK and, in the case of pension income, allocate you an NT tax code so that the income you declare in Spain is paid without UK tax being deducted in future.

As to how the Spanish tax authorities know what payments you have received, the automatic exchange of financial information has been in operation for a few years now. If you are resident in Spain (or any other country signed up to the treaty, there are well over 100 of them), all financial institutions you hold accounts with are required to provide details of your accounts to HMRC who send all the information annually together with details of your income to the tax authority in your country of residence. I read a post from someone recently where Agencia Tributaria had picked up details of a dormant account which had paid 2.50 in interest for a year which had not been declared in Spain, that's the level of detail they go into.

https://www.gov.uk/guidance/automati...%20investments.

Alfonsocolli

Thank you so much Lynn!
2 more questions if you don't mind.
I will be renting out my home in the UK as a BTL.
The income I will get after costs will be around £12k pa.
That will be my only income, in the UK its under the tax threshold, so I won't be paying tax in the UK.
Do I end up paying tax in Spain?

After I've moved to Spain I will also be cashing in my pension fund in full. 25% tax free and the remainder will be taxed in the UK (only about £45k in total, so not worth keeping). Once I do that and declare it in Spain, will I incur tax in Spain or will I just pay tax once in the UK?

TIA 😊

Fred James

You will pay tax on the UK net rental income in Spain. It will be added to your other income.

The pension lump sum will be taxed in both UK and in Spain and you can claim any Spanish tax paid against the UK tax and get a rebate from HMRC in due course.

Alfonsocolli

Thanks Fred
So are we saying that even though the £12k net profit from the btl in the UK is not subject to tax, as its under the current tax threshold, that I would par tax in Spain and then get it back from the hmrc?

Fred James

No, you can only reclaim the Spanish tax from HMRC if you have paid HMRC tax on the same rental income. As you havent paid any UK tax, you cant claim it back from the UK.

Alfonsocolli

Really confused now...
So if I don't pay tax in the UK I have to pay tax in Spain then?

Fred James

Yes, as a tax resident in Spain you pay tax on your world wide income.

Barriej

Basically yes.
Both countries have a 'tax allowance' anyway. And you will end up paying the higher of the two.
Once you are a resident you become a target for the tax authority in your new country.

If you get a pension/wages in the Uk of lets say £30k you will pay Uk tax on the amount after the allowance. If you put this on your Spanish tax form you will only pay the difference due to the rates of tax here (lets say UK rate = 20% and Spain 25%) you will owe the difference.

Next year when no longer a Uk resident ALL of the money is taxed by Spain. There should be NO tax to pay to the UK.
But you will have a slightly more complex situation as you have income generated in the Uk so Uk tax is due, You will not pay twice.

Get a Spanish Accountant to file the first couple of years and then you can do it yourself.

The different tax years are a little bumpy, UK April to March. Spain Jan to Dec. So you will have an overlap.

Alfonsocolli

Wow...
So on say £12k a year from the UK, what would I expect to pay in taxes in Spain?

Joppa

For non-earned income, you get personal allowance of 5,550 euro and 6,700 euro if aged 65 or over. Tax rate is 19% on first 12,450 euro and 24% on next chunk up to 20,200 euro. So assuming you are under 65, £12,000 is 13,860 euro, you pay 19% on 13,860 - 5,550 = 8,310 euro or 1578. 90 euro or around £1,367.