Tax in Spain

Hi. I’m a little confused. Are you saying that you live in Spain and have done so for many years without applying for Residencia or are you saying that you live in England and only visit Spain for short periods of time? When l lived in England l was counting down the time when l could leave -the weather and the horrendous cost of living in my opinion would override any potential cost differences. Don’t leave it too late to move to Spain! Paul.

As you say, everyone's circumstances are different, but in general, income tax is higher in Spain than the UK. I'm not sure I'd use the word 'significantly'.

On the other hand, you get more public services here than in Britain after a decade of Tory austerity. Remember libraries? Street cleaners? Roads without potholes? Free adult education? There is a good health service too.

And of couse, you have to factor into your calculations the lower cost of living here. Many things we spend money on routinely are a lot cheaper than the UK. The IBI (council tax), for example. Water supply. Booze, fresh fruit and vegetables, diesel, car tax, eating out, mobile phone and internet. Electricity is a bit more expensive, insurances are about the same.

And the sunshine is free!

PS You couldn't have retired here pre Brexit without applying for residency, just as you can't now. Unless you were talking about buying a holiday home. Pre Brexit, if you stayed here more than 90 days without applying for residency, you'd have been in the country illegally.

Replying to Paulh63 and Herefordjack, we have not as yet moved to Spain.  No we are not looking for a holiday home but to retire.   Despite the wonderful sun and a lower cost of living, the tax situation is really making us think again.   As a pensioner £5k per annum additional tax to live in Spain is a significant amount if my calculations are correct.     I am not sure the lower cost of living would offset the increase in tax. 

Hi Anthony63,

As you say, individual cases can be quite different.  While the basic rate of Personal Allowance in Spain is only €5,500 (versus £12,570 for 2021/22 in the UK - or €14,555), there are many more levels of allowance in Spain than in the UK and they generally favour older age groups, so if you´re already retired you attract additional allowances and these can increase as you get older.  Conversely, there are certain types of investments and savings which attract higher tax in Spain - for example, tax-free ISAs in the UK are taxed in Spain, and although the basic rate of income tax is 19% (versus 20% in the UK) the combination of different types of income could see you taxed at a higher rate in Spain.

Day to day living costs can be hugely different.  For example, in 2015 the Council Tax for our 4-bed detached house in Surrey was almost £3,000 per annum; our current Council Tax ("IBI") in Spain for a 3-bed detached house with private pool is only €365 per annum.  Electricity in Spain is more expensive than the UK, but since the abolition of the "sun tax" in Spain, regional governments offer grants for solar-powered energy; also, bottled gas is cheap and many people use it for cooking and water heating.

The other significant cost in Spain is healthcare, but if you´re UK State pensioners, your healthcare in Spain is funded by the UK via Form S1 from the Overseas Healthcare Team.  Otherwise, you´ll need private health insurance until you reach retirement age.

While we can give you an indication of the pros and cons of Spanish income tax versus UK, you really do need to speak to a tax advisor to assess your specific circumstances.

Kind regards,

Kim

Of course I don't know your circumstances, but another big consideration is housing. If you intend to sell there and buy here, you may well come out on top financially since the UK property market is booming, while her it is flat if not struggling.

You might come out of it with additional funds to invest to boost your income. But if you ARE selling in the UK, do it before you become tax resident here to avoid complications.

I think much of it depends on the source of your income. 

Mine will come all from either occupational pensions or personal pensions.

How is the cadastral value calculated - is it a lot less than the market value of a property in Spain?

I haven't a clue. It's never impacted on me. I think it's less than the market value, a bit like they do 'rateable value' council tax valuations in the UK.

Tbe only time I've seen it referred to recently was when I did my income tax return. You have to enter your number on the form to establish you are a home owner. There's a link on the form which takes you to it.

PS referring to your source of income, you get an additional 2000€ tax allowance to offset against occupational pensions. Did you factor that in?