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Residents' Income Tax - Lump Sums

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Posted: Wed Aug 9, 2017 5:02pm
1 reply49 views2 members subscribed
jimtaylor

Posts: 401

Location: La Marina

334 helpful posts

In a previous thread I’ve given you the good news about the way annuities are taxed in Spain, but now for some bad news.

A pension lump sum is free of tax in the UK, but is taxed in Spain if received while you are a resident here (unless it's from a UK government service pension which is only taxed in the UK).

If you haven’t yet taken your pension, then you might consider taking a higher pension, or even better an annuity, as this may just be a more tax efficient option.

It's a bit of a gamble, as you don't know if you'll live long enough to recoup in increased pension/annuity payments the amount that the lump sum would have been. It could take ten or twenty years, and as the increased income will be subject to tax anyway, over those years, it might not be the most tax-efficient method of taking your money.

There isn't a clear choice as to what you should do - it all depends on your personal circumstances.

Or, of course, if you're near to taking a pension before moving out here, then only make the move after you've received the lump sum.


SusieWong

Thu Aug 10, 2017 9:07am

Posts: 52

Location: Orihuela Costa

8 helpful posts

Posted: Thu Aug 10, 2017 9:07am

Interesting Mr Jim.

Could you legally deregister from this foreign register thingy and go back to the UK for the necessary period?. In fact does anyone deregister when they leave or die, or is it the worlds  biggest yellow pages.

I myself live in UK, Spain and Thailand and I never know from one year to the next how much time I will spend in either.


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