Pension on UK private pension lump sum Tax

Hi,

Are you sure your UK figures are correct. I was led to believe you can take a 1/4 of your pension pot tax free and the rest is taxed at your normal tax rate (assuming you have used all your tax allowance for the year) unless the proceeds take you into a higher tax bracket? Don't know if its a typo, but the £400 you quote is actually 5% of £8000. 25% would be £2000.

Sorry can't help on the way it will be treated in Spain, but just thought you need to base your decision on accurate figures. 

Thank you, you are correct the first 25% is tax free, & I would pay tax on the other 75% that is on £6000 @ 20% would be £1200

Yes, thats more like it, I was waiting for someone else to point that out when I read it earlier, a lot to lose in 1 yr if after that you can bring your incomes to below the tax threshold if you dont cash in. I,m not sure about transferring half your  pension, I would have thought not as you are the recipient of that amount until death then your wife receives the spouses entitlement. Need to speak to your pension people. I get rent on property I myself own which takes me well over the allowance so when my hubby retires this year, I will be seeking advice as to the right time to either split the property into joint names or put it all into his, to also avoid tax as he only gets gov,t pension, no private ones.Good luck with your quests(€1 in my pocket is better than the tax mans)

Pauline.

Take the lump sum before you become a fiscal resident in Spain, as tax is levied on the full amount of a lump sum payment here. In other words, don't take up residency here until July or later.

The company pension will be in your name, and that's how it will show on the Inland Revenue database to which the Spanish tax office have access. If it's paid into a joint account, you might get away with declaring it as joint income, but you'd be in trouble if this was found out.

You can choose here to do individual or joint returns; whichever is better for you.

Thank you Jim for your reply, but I am a little confused as I thought the tax year in Spain ran from January to Decembe. However looking at what you said if I cash in my pension now and became a resident in say October I won't pay tax in Spain on that cash sum 

Thank you Jim for your reply, but I am a little confused as I thought the tax year in Spain ran from January to Decembe. However looking at what you said if I cash in my pension now and became a resident in say October I won't pay tax in Spain on that cash sum 

That's correct Jan. You become liable for resident's tax in Spain in the first calendar year in which you spend 183 days or more here.

If you moved here July 1st or later, then for tax purposes you'd be a non-resident for 2018 and only pay non-resident tax on modelo 210 for the part of the year you'd owned the property.

As well as the lump sum aspect of tax planning when moving to Spain, there's one other aspect that may be applicable to some people. I was already in Spain when my private pension fund matured. All payments into that were by myself - none by my previous employer. I could have received a bit more income by just taking that as pension payments, but I moved it to an annuity. That meant that, in my case, I only pay tax on 24% of the income, which gives me a net greater income than I would have received if I'd kept it as a straight pension.

Thank you for the information that is interesting what you are saying regarding annuities would these tax advantages be for both fixed term annuity  & a lifetime annuity.

The advantages apply to both, depending on your age when you start taking the annuity. I posted etails here:

https://www.costablancaforum.com/area/la-marina-spain-72/taxes-suma-nie-tax-advice-in-la-marina-25/residents-income-tax-annuities-20466/

I must make the point that many annuities are based on a fund into which the employer has also contributed. In that case, you need to try and establish what percentage was paid by the employer, as that percentage is taxable on the full amount paid out.

As you have no doubt gathered, income tax in Spain is complicated!