Densol

I receive a decent Government ( Civil service ) pension and a small non Gov occupational pension.
As I understand it - my Gov pension is taxable in UK ( suits me 100%)
but the small company pension is taxable in Spain and will be at the top rate due to Gov pension pushing it into that band ?
Hope I have that right ?

Joppa

Yes, basically. While you don't pay tax on your civil service pension in Spain, you still have to declare it to Spanish tax authorities and it will affect the tax rate on your occupational pension and UK state pension when eligible, between 19% and 47%.

Densol

Hi
thank you for your reply. The civil service report my pension payment to HMRC as £0.00 as its tax free. That is what appears on my HMRC record, so I am thinking I report exactly as they do to Spanish tax services ?

Joppa

You state in your previous post that your UK government pension is a special tax-free pension. I am not familiar with any tax implication for such a payment in Spain when you become tax resident here. You should consult tax advisor in Spain for your exact position. I suspect that Agencia Tributaria would still want to tax you for your tax-free pension.

marcbernard

I am at a loss in understanding why your Civil Service pension is declared to HMRC as zero, since my CS pension suffers tax at its fullest extend. There are, I believe, certain pensions payable to very special persons who gain exemption from tax due to extreme employment, but I am not one such recipient. Could you enlarge the topic? I agree with Joppa.

Dxf

Hola,

The magic words are "Article 18 of the UK / Spanish Double Taxation Agreement" and if you obtain a certificate or letter from the HMRC to that effect, then the Spanish tax authorities will not tax that amount but as said above, will take note for the rate at which other incomes attract tax

Davexf

marcbernard

Your post does not venture to explain why HMRC are not taxing the pension in the UK. Mine certainly is! I think that HMRC have made a mistake (not their first!)

Joppa

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The OP has stated in a previous thread that the pension received from HM government is 'a substantial tax free for life injury pension.'

bobd22

There are some Tax Free Civil Service Pensions I believe? I have government pensions but all mine are taxed in UK at correct rate and declared to Spain as UK tax paid, never been any issue to date. I receive my UK State pension Gross and pay tax on that to Spain, to be honest works out better for me to do that. I know that with military pensions any awarded for injury are classed as War Pensions and as such are UK tax free.

Notdunroamin

The OP's 'understanding' is correct.

The Spanish tax system has little or no concept of 'tax free' anything so even though a UK pension might be deemed tax free there it does not follow that it will be tax free in Spain.

Because of a more generous tax regime UK government service pensions can be a double edged sword as the declaration of them in Spain can often result in higher tax bills than if they were pleb pensions which can be paid gross.

Densol

Its a specific Gov service pension paid due to injury so its tax free and reported to HMRC as 0 …. Because HMRC are only interested in taxable pay.
Thus PIP is not reported either as that is tax free

Densol

Cheers Dave
I think I’ll be taxed on my second non Gov pension at the highest rate then @ 47% but its only £500 a month that one, so doable if I want to live in Spain x

Densol

Its a Government pension and the rules are these are taxed in the country of payment - ie UK - hence the UK HMRC administers the taxation of this ( non taxable )

bobd22

Given its a government pension Spain will not be interested in amount of tax paid in the UK, they are only interested in the amount of the pension. That way they apply that to your Spanish tax allowance re any other income that is taxed in Spain.

calman014

Despite government pensions being taxed in theory in UK, and this includes armed forces pensions, the dual tax agreements between your country of residence and the UK is the relevant guidance in this case. The dual tax agreements have gone through several adjustments over the years.
I had a similar problem regarding a small pension from UK and also assumed that this was taxed in UK. After much research it turned out that gov. pensions are taxable in my country of residence. HMRC did not give a definitive answer, they just stick a standard tax code on it. Some Google research and a knowledgeable tax office employee from my country of residence provided the evidence to support local taxation based on the agreement with UK. It “could” differ in your case. Talk to a tax specialist, especially if it’s a large amount.