Not quite right as technically every cent is taxable.
And EVERYONE is supposed to do a return after the first full year of residence.
Otherwise you wont get the Fiscal Cert needed to pay zero tax on the pension in the UK.

Ordinary people get €5550 plus another €2000 odd.
The first €12,450 is at 19% *(but they then take off the allowance) then the rest is at whatever rate you end up in.
SO for me its €7550 off €12,450 which means the remaining 4000 odd is taxed at 19%, the rest from €12,451 is taxed at a higher rate.
But there is also a low earning allowence which means that anything below €15,000 (I think is tax free) but then you are paying a higher rate on anything above that.

AS I dont care if people know how much I earn I had Pension, Savings interest, premium bond winnings and paid €2448 on an income of €21,000

Im probably wrong on some of this as I jsut do a speadsheet with my income monthly and dump it on the accountant...

 

I have a UK pension of £9000 per year will I have to pay tax on it? can’t seem to find any info on it.

 

The low income allowance Barriej refers to is called the reduccion por obtencion de rendimientos del trabajo - see this information from the AEAT website regarding last year's figure. The full amount of the allowance is €6,498 which is given to anyone earning €14.047 meaning they pay no income tax. Above that figure the allowance tapers away gradually until anyone earning over €19,500 doesn't get any of it, just the basic allowances you described. So unfortunately with an income of €21k you won't qualify for any of it.

Tax Agency: 7,1,6. Reduction for obtaining work income

The figure is likely to increase for this year's returns but I haven't seen it published yet.

The allowance of €2k is for general expenses and the computer programme used to complete the tax return automatically allocates it to everyone with income from work or pensions.

Your savings income isn't added to your income from work of pensions, it is entered in a separate section.

Is all of your pension income from the UK taxable in Spain? If any of it is from a Crown pension (which are taxable only in the UK) then that should be entered in a separate box for exempt income. Although you are not taxed on that directly it can affect the rate at which you pay tax if your remaining income exceeds the personal allowances.

I should also say that your income is split for taxation 50/50 between national tax rates and the rates for the autonomous region you are resident in, as they can vary (but the difference isn't likely to be much). The tax return shows you the split towards the end of it.

 

Actually having checked the new figure for the low income allowance for 2024's returns (for submission this year) is €7,302.

Agencia Tributaria: Novedades publicadas en el INFORMA 2024 - Novedades publicadas en el INFORMA durante el mes de ju...

 

If I’ve understood correctly, for retirees over 65, there is a tax allowance of 6,700 euros, then the next 12, 450 is taxed at 19%, and then jumps to 24% until 20,200, and 30% after that… which are staggering jumps...

Notwithstanding that you have misinterpreted how it works what you have to remember that Spain is a relatively low wage country where the gross average salary is just €2,500/mth compared to UK where it is £2,804 or €3,369. The tax system naturally reflects that hence anyone coming from another country with generally higher average incomes can find it on the punitive side.

Offset against that of course is the generally lower cost of living in Spain so it's not just about income tax!

 

True. I paid €4,457 last year on my income for 2023 which is almost double what I would have paid if I still lived in the UK. But that difference would have been largely wiped out just by the vastly higher Council Tax in the UK, plus the utility bills are much higher, eating out costs a lot more especially if you want a glass of wine with your meal and services like hairdressing are much more expensive.

 

The UK has become prohibitively expensive, the transport infrastructure is unreliable and expensive and the climate would take you to your wits end! That is not even mentioning the post election politics. Comparing UK and Spain is like comparing chalk and cheese!

 

First, many thanks for taking the trouble to explain and put me right.

Second, I didn’t mean to complain about Spanish taxes, prompting the discussion about the relative merits of the UK and Spain. I agree that income tax is only part of the picture. I was just surprised at the rates, never having had cause to look at them before, as I'm self-employed and it's all very different . But obviously I chose to live here and accept the differences in tax regimes, or anything else. I merely wanted to understand what to expect after retirement.

So could I check to see if I’ve grasped it now:

On gross pension income of 21,000 euros: my allowance of 8,700 (6.7000+2,000) is applied to the first 12,450, paying 19% on the remaining 3,750 (so 712,50). Then the next 7,750 (from 12,451 to 20,200) is taxed at 24% (1.860), and the final 799,00 euros above 20,201 euros at 30% (so 239,70). Total tax: 2.812,20.

Then any savings interest is taxed separately at 19% (up to 6,000).

Is that more or less it?
thanks

 

I just used the AEAT Renta Open Web simulator (can be found here) and put in your income figure of €21k, age over 65, resident in Andalucia (a different region might alter the tax liability slightly), no dependents, no disability. It returned a tax liability of €2,623.20. You'd need to add your savings interest.

Agencia Tributaria: Simuladores

 

Lynn, I have tried going into Renta web & other option it seems they wanted NIF? Is this calculator only meant for local resident with NIF?

 

Thank you Lynn, that's very kind of you. Now I have a pretty good idea of things...

 

neilben
In your original post you say:

At the moment I’m self-employed so know nothing of tax allowances on income. I simply pay 15% IRPF on everything I invoice, plus the fixed monthly national insurance contribution of course.

I assume then that someone does your Spanish tax return for you. I recommend that you bite the bullet and follow the format of your old returns and do it yourself online. Once you retire it will be very simple as you won't have the complications of self-employed expense allowances and it will save you gestor fees.


On gross pension income of 21,000 euros: my allowance of 8,700 (6.7000+2,000) is applied to the first 12,450, paying 19% on the remaining 3,750 (so 712,50). Then the next 7,750 (from 12,451 to 20,200) is taxed at 24% (1.860), and the final 799,00 euros above 20,201 euros at 30% (so 239,70). Total tax: 2.812,20.

That's not correct. Your allowance will be, as you say, 8700. After that, the first 12450 is 19% ( 2365) so you wouldn't enter the 24% bracket. Savings income is separate.

 

Thanks for your comments.
I have always used a gestor and sometimes considered doing my own tax returns to save on fees. But the problem is not just filling in forms correctly but being able to deal with any comeback from hacienda. Over the last 25 years I’ve received 4 or 5 notifications querying some “anomaly” in my returns and demanding documentation to resolve it, which never come to anything as they are caused by things not immediately tallying, such as when I declare something at the end of one tax year, and a client declares it in the next. Not a big deal on the face of it, but much easier to get the expert to sort it out.
Certainly, when I stop work my tax affairs will simplify, just the annual declaration rather than quarterly Vat returns, expenses and so on…. My retirement income will come from 3 sources (UK pension, Spanish pension and savings interest), which should make things easier. But still not sure I would be capable of doing it myself. And my gestor fees will drop from around 300 a year at present to 100 or so. I see it as the price of peace of mind.

As to your comment on calculating tax on pension: If you read back through this thread, what you say seems to slightly conflict with what others have told me about how it works. But in the end, it is whatever it is, not much I can do about it. At least I have a rough idea for now…

 

Can anyone please clarify how tax on pension income works in Spain? Even though I’m a couple of years away from retiring, I’d like to get an idea.

At the moment I’m self-employed so know nothing of tax allowances on income. I simply pay 15% IRPF on everything I invoice, plus the fixed monthly national insurance contribution of course.

If I’ve understood correctly, for retirees over 65, there is a tax allowance of 6,700 euros, then the next 12, 450 is taxed at 19%, and then jumps to 24% until 20,200, and 30% after that… which are staggering jumps...

I think I also saw something about another 2,000 euro allowance: Is that so, and how does it work?

So assuming a gross pension income (UK and Spanish pensions) of 21,000 euros per year:
The first 6,700 is tax free, leaving 14,300 taxable, of which the first 12,450 is taxed at 19%, so 2,356, and the next 1.050 is taxed at 24%, so 252, and the last 800 at 30%, 240: meaning total tax would be 2,848, leaving a net pension income of 18,152.
(If there is another 2,000 euro allowance, then the first 8,700 is tax free, leaving 12,300 taxable, which would be taxed at 19%, so 2,337, leaving a net pension income of 18,663.)

Does that look about right?

And I believe I will still have to do a tax return as income is from 2 sources? Which is a shame as I was hoping to be rid of that hassle…

And what happens with tax on savings interest? I ask because this year I will be getting some interest on savings for the first time from an account in the UK. I gather it’s 19% up to 6,000. Is it treated separately or simply added to the general / pension income?

Thanks in advance for any guidance.

hi..
The first €6,700 is tax-free, and the rest of your pension is taxed at the rates you mentioned. The extra €2,000 allowance applies if you're over 65. For savings interest, it will be taxed separately but added to your total income for tax purposes. Yes, you'll need to file a tax return since you have income from multiple sources.
thank you...

 

hi..
The first €6,700 is tax-free, and the rest of your pension is taxed at the rates you mentioned. The extra €2,000 allowance applies if you're over 65. For savings interest, it will be taxed separately but added to your total income for tax purposes. Yes, you'll need to file a tax return since you have income from multiple sources.
thank you...

The extra €2k allowance most definitely does not apply only if you're over 65 - as I said, it is given to everyone who has income from work or pensions. I've lived in Spain since well before I turned 65 and that allowance for general expenses has always shown up on every tax return I've completed. Where on earth are you getting your information from?

See here for the correct information - the last sentence in the section on Deductions and Allowances.

Spain income tax, rates and allowances | Blevins Franks Advice

 

It's a mistake many make to apply the same principals to tax in Spain as UK, viz. a fixed tax free allowance then tax according to fixed pre-determined bands, it doesn't work like that here.

One factor to potentially take into account is the treatment of income from UK annuities which is based on the age at which you began to draw benefits, also how an annuity was purchased can come into it and btw, strictly speaking a traditional UK annuity does not qualify for the same relief as a Spanish one.

There are others.