How come our UK State Pensions are entirely wiped-out by Hacienda?

Do you make an annual tax return? I ask, because I'm struggling to understand the background details of your situation, and how it differs from mine.

I'm retired, and my income is made up of my state pension, three small occupational pensions, plus investment income, e.g. share dividends. I disconnected from the UK tax system in year two, and am tax resident in Spain only.

When I make my annual tax return, all Hacienda wants to know is the division between work related (pensions) and investment related income. They couldn't care less where it comes from (all UK) and they tax me accordingly. The tax rate is slightly higher than the UK but not excessively so. Maybe something is different because you get a Spanish pension, but I can't see what. Is your advisor declaring your UK income as a Crown pension and therefore not taxable? I have discovered something about that subject, because one of my smaller pensions is a Crown.

Hi Gareth,

I'm sorry to hear this.  You don't say how you calculated your anticipated pension amounts and how you know that almost all your UK pension is being taken by the taxman in Spain, so I wondered whether you have checked the State Pension eligibility criteria for each country:

https://europa.eu/youreurope/citizens/work/retire-abroad/state-pensions-abroad/index_en.htm

and whether you're eligible, under the UK/Spain Dual Taxation Agreement, to claim back some of the tax:

https://www.gov.uk/state-pension-if-you-retire-abroad/tax-on-your-state-pension

As you say, best not to use a gestor for tax matters - you need an asesor fiscal.

Kind regards,

Kim

Thanks for your thoughts on this.  When I get my tax done by the local gestoria in Finestrat, and I question the huge amount being taken off my small pension, it is always the same story: if your pension comes from one payer (un pagador) the tax threshold is considerably higher than if you have two payers (dos pagadores).  So most of my UK state pension gets taken off me every year, as I describe above, and the same is happening to my teacher colleague, now receiving his UK pension.

"Is your advisor declaring your UK income as a Crown pension and therefore not taxable?"  No, it is the first I have heard about this.  That was the purpose of my post, hoping to get new information on this.  I'd like to know where I can read about this.

It may be that being in receipt of Spanish pension is part of the problem.  I simply don't know.  As I said, my colleague and I should seek a proper tax consultant, but we don't know and are hoping to find one through recommendation!

Thanks, but it is not "anticipated pension amounts" in my case, as I have already been receiving my pension for three years.  How I know that almost all my UK pension is being taken by the taxman in Spain is simply that it happens every year!  Hacienda takes most of the amount I get paid by the UK state pension.  I am left with just a few hundred each month of my Spanish pension.

The fact that my friend has just discovered his entire UK pension will be taken by Hacienda (apart from one pound per month!) prompted me to ask whether this can be right.  I do not want to provide all the figures here because I am conscious that a public forum is not the place to put financial information!  

My colleague and I simply want to get this situation properly examined because we have been teaching and paying into pensions on the understanding we could retire without being in poverty, but we had not taken into account the punitive take from Hacienda when your pension comes from more than one payer.

Clearly, we need a tax professional on this but we have no idea where to go, and we shall share the cost of consultation as we are both in the same plight.

Same here. My pension is from two sources, Spain and UK.

If I received e.g. only the Spanish pension, my allowance before tax would be €22000. However, because I also have a UK pension, this is reduced to €14000. 

The small amount I receive from UK is almost all accounted for in the tax I have to pay.

Exactly.  You summed it up very neatly.  My question remains, what can be done - if anything - and is there someone who can recommend a local tax professional?  (Costa Blanca area.)  I particularly want a recommendation rather than taking pot luck as I feel I've been ripped off enough already by the tax man!

All I can tell you is that I do my income tax return myself once a year online, direct with the Agencia Tributaria website. I have an electronic certificate on my computer which identifies me to the taxman. It's not too difficult to get one of these. The tax return process is one of filling out boxes on an electronic form, most of which is feeding in your income numbers.

As I said before, the form only differentiates between (worldwide) income generated from work related sources, for a retired person that means pension or pensions, and income generated from investment sources, e.g. share dividends, interest on savings accounts, etc.

Nowhere does it ask me to break down my pension income or identify where it comes from. I might be wrong, but it sounds to me like your man is spinning you a line.

I can give you chapter and verse on what I do if you want. The thing about the Crown pension is a sidetrack and doesn't really affect what I've written above.

Thanks for the reply. I also declare yearly online.

The documentation concerning the number of sources of income declarable for pension purposes is explained here;

https://www.boe.es/eli/es/res/2003/01/13/(1)

My main issue, as with @Gareth23, is the one of the reduction in allowance after which tax must be paid when the pension originates from more than one source 

I wonder if anyone has experience in dealing with this or could recommend a gestor versed in UK pensions who could clarify?

Cheers and thanks again.

Hi Gareth,

Hopefully, you'll receive recommendations for tax consultants in your area, but for what it's worth, I use Abaco Advisers in Torrevieja, who also have an office in Alicante.

https://www.abacoadvisers.com/taxes

Kind regards, 

Kim