robscriven

I have been reading up on Spanish tax preparing to move to Spain. We will be Spanish resident. One area that seems unclear is treatment of a UK pension plan not taken as an annuity . Tax treatment seems to depend on the features of the plan. It is a usual modern personal pension held with Standard Life .

Does any have an experience of how this is treated?

I believe it will be- drawdowns taxed as general income at progressive rates- no CGT on change in plan value- included for wealth tax
Rob

Fred James

Drawdowns will be taxed as savings income at a lower rate than general income. Depending on the size of the pension pot, you may need to declare it on Form 720 as an overseas asset. No tax is payable unless you are rich enough to pay wealth tax (now called "Temporary Solidarity Tax for High Net-Worth Individuals.")

robscriven

Thank you. Does that also mean a final Salary pension and UK state pension is savings income, I read pensions were general income?

Also would the pension plan not be counted for wealth tax subject to the 700k/500k tax free amount? If not in Madrid or Andalucía I thought wealth tax still was payabke as not zero rated? Wont get near solidarity tax.levels.

Rob

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Fred James

State and final salary pensions are general income. Annuities are classed as savings if they are funded from personal income as opposed to company contributions.

dooper

Can i ask what the tax rates would be on a UK DB pension? I'm guessing you get a personal allowance which i think is a fair bit lower than the UK PA, then its taxed as income,not sure of the rates though ? Thanks..

Lynn R

The basic personal allowance is €5,550 (€6,700 for those aged 65-74 and €8,100 for those aged 75 or over), plus a €2k general expenses allowance on earned income. In addition, there is a low income allowance which has been increased this year, meaning that anyone who earns €15k per year or less (and that includes pension income) will not pay any income tax. That allowance tapers away gradually for incomes rising to €21k per year, the Government announced that people with incomes between €15k and €21k will pay less tax this year than the year before.

Quienes ganen menos de 15.000 euros no pagarán IRPF (empleojob.es)

UK Crown Pensions are only taxable in the UK (but must still be declared on your Spanish income tax return as exempt income, which may result in you paying a higher rate of tax on any other taxable income you receive if it exceeds the Spanish personal allowances). This is HMRC's list of which schemes are classed as Government ones and which aren't.

INTM343040 - DT claims and applications - Types of income: Pensions and Annuities - HMRC internal manual - GOV.UK (www.gov.uk)

PoloMarco

I’ve been looking into tax on UK pensions in Spain, but only yesterday found this information regarding low income.

If on NLV and tax resident in Spain, based on full state pension 2023/24 of £10600 per annum which is equivalent to €12000 at todays rate, does this mean with no other pension or income that there would be no tax due (ignoring other taxes on savings etc.)

If true, then I assume taking private pension in draw down after aged 55 and before state pension age would be similar assuming comparable values were involved.

Thanks

Lynn R

Yes - but I wouldn't have thought that there would be many people able to obtain an NLV with an income of €12k per year.

PoloMarco

I agree, but NLV proof of financial means can include use savings at 400% IPREM (€28000) year one, and 800% total for years two and three.

This low income allowance is interesting news.

Lynn R

It has been in existence for several years, was first introduced by the Rajoy Government in 2014, and increased by the present one. Both my husband and I have benefited from it, although I no longer will since I started to receive my UK state pension last year.

Barriej

Yep... We have friends who have the NLV and will be here in July (hopefully)
They showed a large lump in savings and were asked to show a minimum of €1000 a month income...

Ronnyone

I get so confused with all this. My accountant told me that all interest from savings over 1.600 euros must be declared even if you have no other income. I know that is weird but it was in the context of my son who is now 16 and has Premium Bonds and so it was a hypothetical situation. I assumed that he wouldn't need to declare unless he had an income of 15.000 euros.