Tax on pensions? old thread
 

I have been looking at the above old thread from October last year, with much interest.As I will be living on my NHS occupational pension for three years, before my state pension kicks in, I was a bit concerned about how much I would be taxed on it. It certainly isn't a kings ransome, and initially it looked like I may be worse off, however, I spoke to someone, who was recommended to me, who said that as, in Spain, mortgage repayments can be offset against tax, I may get away with paying only a token amount. I was wondering, what experiences others have had with this. :unsure:

Re: Tax on pensions? old thread
 

Might be difficult, as your pension is from a UK goverment agency, which means it is paid and taxed in the UK(you have no choice in this as I understand it!!)therefore unlikely relief on a spanish mortgage will be available when your tax will be paid in UK

Re: Tax on pensions? old thread
 

Hi Solarwizz and Brenda,

I think you will find that NHS pensions are not considered to be Government Pensions so it can be exported gross and will be taxed in Spain if Brenda becomes tax resident.

Regards,

John.

Re: Tax on pensions? old thread
 

NHS pensions are not considered to be Crown pensions and are taxed in Spain.

Mortgages are allowable on your primary residence. You can claim 15% of the total payments (interest + capital) up to a maximum of around 9000 euros.

Thats about 1350 euros and it is treated as a deduction rather than an allowance so it comes off the total tax due.

If you are taxed seperately and share the mortgage you both get the deduction.

Re: Tax on pensions? old thread
 

Thanks very much, I'm feeling quite reassured :)

Re: Tax on pensions? old thread
 

I stand corrected, thanks, I see you can also claim back against the capital??

Re: Tax on pensions? old thread
 

Interesting as I was in the lawyers office on Friday starting the process of buying a house and asked if there was tax relief on mortgage payments to be told no there isn't. Can anyone clarify please?

Re: Tax on pensions? old thread
 

Hi Solwizz,

I know its weird but at first I thought it was because NHS was a fully funded contributory pension scheme as are Local Government and Teachers ie you have to pay 6+% for 40 years to get a full pension. But no its not that because Local government and certain teachers are classed the same as Civil Servants and the Military which are non-contributory and they are taxed at source in UK and you cannot get round that.

The latter do have the advantage though that they are totally ignored by the Spanish taxman and you can export your State retirement pension gross so you get a personal allowance in each country set against the respective pension. In addition because the Government pension is ignored you are not pushed into a higher Spanish tax bracket by adding the two together.

Regards, :confused:

John.
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Re: Tax on pensions? old thread
 

It is available to tax residents buying their permanent residence.

You can also claim the same amount against the actual purchase/cost of reformation if you do not have a mortgage.

If you are building your own house you can claim it every year for up to 3 years.

If you are waiting to buy/build your house you can open a special savings account at your bank and any payments into it are given the same relief, again for up to 3 years. it's called a "Cuenta Vivienda".

If you are taxed seperately you can claim back over 2700 for each of the 3 years and for the ongoing mortgage thereafter.

As I said before, it is 15% of upto 9016 Euros. In the first 2 years of the mortgage it can be slightly higher.

Either you are a non resident or have a poor lawyer!:)

I speak from first hand experience.

Re: Tax on pensions? old thread
 

Hmmm,, know how you feel , as I have a Military Pension, a Company Pension, and soon to get my State pension, on top of that I have a company in Spain, so all in my assesoria, is making a fortune out of me,!!, In truth I have given up trying to understand whats going on, and just keep demanding less payments from my Assesoria, but I'm sure there is more to grab, if I ever get to grips with it!!:eek:

Re: Tax on pensions? old thread
 

I do have a mortgage, and it will be my only residence, so should be ok. How do I become tax resident? Is that the same as applying for 'residencia'? I won't be moving until May this year, so not sure whether I should set the ball in motion now, if that is possible, or will have to wait until I move. Are these issues something that my lawyer should advise me about, or do I need to look elsewhere? Sorry for asking so many questions, just need to be pointed in the right direction. :blink:

Re: Tax on pensions? old thread
 

Hi Brenda Teather,

You do not need to do anything to become Tax resident just be in Spain for more than 183 days in any Spanish Tax year (01/01/2007----01/01/2008).

This is not good advice you must be proactive to avoid being taxed in both UK and Spain and to get the benefit of all your allowances from day one. It is not the same as residencia which you do not need to have now we are in the EU but is nice to have anyway since it makes dealing with the Spanish system easier. Get on the Padron asap and have your E106/E121 before you leave UK.

I would suggest starting now by sorting out leaving Uk tax free. A very important point is to take any tax free pension lump sum before you leave UK because in Spain it would not be tax free. you should then arrange with your pension payer to be paid gross direct into your Spanish bank in Euro (if they will do the exchange they usually get a good rate because they are changing so much for others who have fled these shore before).

Next get your State pension paid gross again in Euro int your Spanish account ( visit the DWP website for details). Then take a look at which Spanish account you hold. Grupo Banco Popular have an account specially designed for those in receipt of pensions which has no charges for transactions and has other benefits too.

Lastly choose your time to leave UK carefully you get a full years allowances after April 6th so any income in the new tax year below the personal allowance level can be taken out of UK with tax reclaimed.

Regards, ;)

John.
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Re: Tax on pensions? old thread
 

As John and Kath have said, you become tax resident by default after you have spent 183 days here in one year.

You may wish to speed up that process so that you can get your UK income paid gross. To do this you should go to the nearest Spanish Tax office and get a tax reference number and get onto the system. You won't have to pay any tax until next year but you need this reference number for the UK Revenue to claim exemption from tax under the dual taxation agreement with Spain.

The actual form you will need to submit to the Revenue is here

http://www.hmrc.gov.uk/cnr/form_spain.htm

These is a lot of information about leaving the UK here

http://www.hmrc.gov.uk/pensioners/taxwhenleaving.htm#1

Your lawyer is not necessarily the best person to speak to about tax - that's not his job. You should be able to find a good Gestor who can sort out the tax for you.

As for the mortgage, the only difficulty I can forsee is the fact that you already own the property and, by definition, it is not currently your primary residence as you are non resident. When you become resident it will be your home so it should then be possible to claim the mortgage. If it not a Spanish mortgage there could be complications.

I was in the position of buying/building as a resident with no property in Spain so I cannot advise on this first hand. Again, a good gestor will know and the people in the tax office are usually very helpful.

Re: Tax on pensions? old thread
 

This will be our only residence and for the last 17 months have been living in rented accomodation in Spain and have been on the padron since then. My Crown pension, as I underatand, has to be taxed at source in the UK so I haven't registered into the Spanish tax system. From what I understand I am a fiscal tax resident due to the time factor so I should be eligable for tax relief on my mortgage payments. I guess a trip to the Gestoria is on the cards to sort it all out.

Re: Tax on pensions? old thread
 

Hi Fred and Brenda,

I have been told that your mortgage can be with any institution UK or Spanish Euro or £ but it must be against the Spanish property and registered by the notary and the Land Registry to enable you to claim allowances against Spanish tax.

Regards,

John.