Spanish Tax Calculation with UK Crown Pensions involved

Posted: Sat Apr 13, 2024 3:59pm

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Growing Old Disgracefully

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We are starting to organise our finances in advance of our NLV application hopefully later this year. We both receive civil service pensions (which we understand are taxable only in the UK) and will also be drawing down from private pensions plus receiving some interest from UK savings accounts.

We have some discretion about the amounts drawn down from those private pensions and are trying to work out the tax implications, but can't find a good example of how the tax calculation works when crown pensions are involved.

At the moment we expect to receive roughly the following amounts in Euros depending on exchange rate fluctuations:

Self - Crown Pension 20,000 Private Pension 5,000 Interest 500

Wife - Crown Pension 6,500 Private Pension 8,500 Interest 500

If anybody could explain how much Spanish tax we would each be expected to pay on these amounts your knowledge would be much appreciated.

Edit. Just to add we are both currently under 65.

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Posted: Sat Apr 13, 2024 4:09pm

marcliff

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Posted: Sat Apr 13, 2024 4:09pm

You will not pay any tax on your crown pensions as the dual tax agreement means you are only taxed in one country.

However, you declare your crown pension and these are taken into account to assess your tax rate in Spain. Those crown pension will eat up your tax free allowance in Spain and you will be charged tax on all the others at a rate of 19% for any income above the tax free allowance to €12,450 then 24% from there to €20,200. You'd both be paying 19% of you private pension and interest received plus your state pension (when you get it) will also be taxed and could take you into the 24% bracket.

I have approximately the same as you with crown pension at £20,050, private pension slightly higher at £7450, state pension at around 9,000 and interest on savings approximately the same at £630. My tax bill this year is €3,825 plus the tax the HMRC takes off my crown pension. It means I'm paying about double what I would in UK (the good news is my annual council tax is about what I'd pay in UK every month).

Posted: Sat Apr 13, 2024 4:13pm

Growing Old Disgracefully

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Posted: Sat Apr 13, 2024 4:13pm

marcliff wrote on Sat Apr 13, 2024 4:09pm:
You will not pay any tax on your crown pensions as the dual tax agreement means you are only taxed in one country.
However, you declare your crown pension and these are taken into account to assess your tax rate in Spain. Those crown pension will eat up your tax free allowance in Spain and you will be charged tax on all the others at a rate of 19% for any income above the tax free allowance to €12,450 then ...

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...24% from there to €20,200. You'd both be paying 19% of you private pension and interest received plus your state pension (when you get it) will also be taxed and could take you into the 24% bracket.
I have approximately the same as you with crown pension at £20,050, private pension slightly higher at £7450, state pension at around 9,000 and interest on savings approximately the same at £630. My tax bill this year is €3,825 plus the tax the HMRC takes off my crown pension. It means I'm paying about double what I would in UK (the good news is my annual council tax is about what I'd pay in UK every month).

Many thanks Marcliff. Very helpful.

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Posted: Sat Apr 13, 2024 9:10pm

Darro

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Posted: Sat Apr 13, 2024 9:10pm

If there is an afterlife I'm coming back as a Civil Servant, and marrying one too!

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Posted: Sun Apr 14, 2024 12:10pm

Herefordjack

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Posted: Sun Apr 14, 2024 12:10pm

I've got nothing to add to Marcliff's very good advice except to say, on a related topic, be aware that the Spanish tax year is the calendar year, not April to March like the UK.

Also, if you arrive in the first half of any calendar year, you will be treated as a Spanish tax resident for that year. This means your worldwide income for the WHOLE of that tax year from January 1st onwards will be considered fair game by the Spanish tax man. If you have a UK residence and sell it in that tax year, before or after you move to Spain, any capital gain you make on it will be taxable in Spain. Beware!