Taxation of Uk State Pension in Spain

This topic contains 4 replies, has 5 voices, and was last updated by  Anonymous 13 years, 3 months ago.

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  • #51727


    Can anyone who is currently drawing their UK State Pension in Spain and it is their sole income please tell me how the tax payable is calculated on it. I keep hearing conflicting stories as to how much tax is payable. The calculations that I have made appear to involve higher deductions under the Spanish system as the allowances are lower and tax rates higher than in UK. As I am considering retirement in Spain with no other income than pension, it is of some concern that my money will not stretch as far in Spain as I had first thought. Any information would be gratefully received.

  • #61721


    I cannot comment on your tax situation, but I want to say that a friend of ours who retired to Spain 2years ago, is returning to England to sell his UK property as the cost of living is rising in Spain and his UK pension is not “coping” with that rise. They do enjoy a good social life and he plays golf twice a week. Utility bills, eg telephone are quite expensive and I think, payable every two months as opposed to our quarterly bills.When we worked it out pro rata, Spain seemed quite expensive. These are just my observations.

    We have noticed a significant rise in expenditure when we go to Spain for a holiday. Also the pound is weak against the euro just now.

  • #61722


    Best to seek professional advice about taxation before you commit to moving anywhere abroad. There are a number of resources on this site that could help (see Resources section).

    We spent time living in Cyprus on a pension and have just opted to move to Spain. As ever – the cost of living depends on your chosen lifestyle. Certainly heating bills are not so much of a concern in a Med country! I think overall it is “swings and roundabouts”.

    The cost of living is increasing everywhere of late – especially where tourism is well established and there is a good infrastructure for transport and to support ex patriot communities.

  • #61723


    According to the Blevins Franks book “Living in Spain” for 2005 there was a “personal minimum” exempt from tax which is 3,400 Euros. Over 65s got an extra 800 Euros and over 75s an extra 1,000. These presumably are equivalent to personal allowances for income tax in the UK.

    For taxable income in excess of this up to 4,080 Euros, the income tax rate was 15% (in 2005) whilst the band of taxable income from 4,081 to 14,076 is charged at 24%. There are some regional variations and the figures no doubt have been revised for 2006.

    A UK State Pension will be paid gross with no income tax deducted.

    You may have to complete a Spanish tax return and this can be completed by you as an individual or a joint one with a spouse depending one which results in the lower tax. I am not sure how this works.

    The book states if you have an overseas pension e.g. a UK State Pension and it is less than 8,000 Euros (presumbly in 2005) and is your only income you do not have to complete a tax return. However as the pension does not suffer any withholding tax (tax deducted at source) I am puzzled how the Spanish tax liability will actually be satisfied. For example if my understanding is correct a 70 year old with a UK State Pension of 7,000 Euros should pay tax of:

    15% x (7,000-3,400-800) = 15% x 2,800 = 420 Euros.

    Mike Grant

  • #61745


    From next year the personal allowances will increase to 9000 euros as
    shown in this link:-

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