hrothgar

Whilst checking all pros and cons of moving to Spain,I thought I'd check out the tax situation. I found to my horror that I will be paying thousands of pounds more tax than in the UK because income is taxed from base with no allowances. As this is the case, can any pensioner tell me if my wife's state pension would be taxed in Spain? As it stands she is not liable for tax in the UK, as her income is below the personal allowance threshold.

hrothgar

Having checked on a tax info site apparently the answer is yes.

EsuriJohn

Hi Hothgar,

Fred James has just posted a comprehensive reply to just this question on another thread search on Fred and your fears will be allayed.

Regards,

John.

hrothgar

Thanks for that - what a relief, apparently you DO get a personal allowance after all! But after checking again I'll STILL be paying more than twice as much tax as in the UK. (But then I won't be paying the astronomical community charge so that balances it out a bit).

Mitzyboy

Exactly .... you have to look at the big picture

Mitzyboy

where is it, soz can't find it

Fred James

You are quite right, income tax in Spain is nearly always higher than the UK.

There are two simple reasons for this - the allowances are lower and the tax rates are higher.

To give a couple of examples. On an income of £20000 the UK tax would be £2990 and in Spain it would be £3708.

The situation is worse for the over 65's as the UK age allowance is much better than in Spain. The tax in this case is £2481 in the UK and £3540 in Spain.

On an income of £10000 the UK tax is £726 and in Spain it is £1176.
For over 65 it is £281 and in Spain £1032

These figures are for someone being taxed individually. Couples can opt for joint taxation and this may well reduce the figures but a similar situation exists in the UK.

The two main areas where Spain has better allowances are for investment in your primary residence such as mortgage relief and also for personal pension plans where you have purchased an annuity. The income from these annuities is discounted by up to 75% before being taxed.

As Mitzyboy said, you have to look at the bigger picture and remember that there are far fewer "stealth" taxes and other taxes such as council tax etc.

EsuriJohn

Hi Mitzyboy,

Look back for Brenda Teathers thread TAX ON PENSIONS well worth a read through!

Regards,

John.

hrothgar

You've just made my day! Part of my pension pot is an annuity. In fact quite a large portion of it. That's reduced my tax liability nicely.

Big Pete

Firstly thought this thread was bound to be about UK which it isnt ,,

I agree with Mitzboy nowhere in the world can we escape some taxation , and you must take the whole picture into account ,what you win on the swings ,you lose on the roundabout or something like that ,

In any event if its whizzing down the slide or getting dizzy your guaranteed to not scrape your knees on the Spanish fairground , where as without you noticing them Uk roundabouts spin you round and will soon break your back.

EsuriJohn

Hi hothgar,

Be careful this is a very complex area and I think it only applies if the annuities are taken out in Spain. Its a long time ago but I think the trick is to get any lump sum you are entitled to before you come to Spain then transfer the remaining pension pot to Spain and take out the annuity in Spain but I may have got it all round my neck!

Regards'

John.
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Fred James

I know of a number of expats who have UK purchased annuities and they do qualify for the allowances. You just declare the reduced amount on your tax return.

Mitzyboy

Right, as there seems to be concern over this situation, I did a few figures overnight and after running it past the all knowing Fred just to be sure, this is what I came up with.

Married couple, under pension age, residents, drawing income of 13,000 euros and having total assets, split between them (house in joint names) of 500,000euros (and thats a fair amount of assets).

All of course in euros:

Wealth tax:

Assets 500,000
Husband asset allowance 108,000
Wifes asset allowance 108,000
Duel prime property allowance 300,000

Total assets: 500,000
Total allowances: 516000.00
Wealth tax: Zero

Income tax:

Income 13,000.00
Husband allowance 5050.00
Wifes allowance 5050.00
wage earners allowance 2600.00

Total income 13,000.00
Total allowances 12700.00
Taxable income 300
Zero tax due on that income

I may be a few sheckles out here and there, but does that put a few paoples minds at rest??

Mitzyboy

Sorry the income tax should read @24%, 72 euros!