# Tax Resident UK/Spain



## chris&vicky (Feb 6, 2013)

I have seen posts on this before, but was rather confused by what was said. 

I leave UK at the end of August and will be living in Spain for at least a year so will become tax resident in Spain from January 2014. When do I cease to be tax resident in UK? If it is the time I leave UK then where am I resident from September to December 2013?

The reason this has become more of an issue for me is that I have just got a tenant for my house in UK and he wants to pay 6 months upfront rent. I will receive this after I leave UK but before being resident in Spain. 

Also I know you can offset taxes paid in UK against taxes paid in Spain but the tax years do not run concurrently, so which year offsets with which?


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## stevesainty (Jan 7, 2011)

If you are receiving rent for a property in UK then you will always be liable to pay tax on that income to HMRC forever, or until you no longer let your UK house or the tax laws change.

You will both still have a full UK personal allowance to offset against this income. 

You will each need to fill in a self assessment form, if the property is owned jointly, to account for the rental income.

You may deduct from this income, before tax is calculated, any agents fees, landlords insurance, mortgage interest, and any repairs that need to be done.

You automatically become tax resident in Spain, whether you register or not, on the 184th day of living in Spain.

Once tax resident you must fill in a tax return for the full Spanish tax year, Jan-Dec. In your case this must be submitted during 2015 for the 2014 tax year.

If either or both of you are in receipt of a UK state pension, then getting registered for tax in Spain is very beneficial for you. You should do so as soon as you can, although the Spanish tax authorities will probably not accept a registration until you have been in Spain for the minimum 183 days


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## snikpoh (Nov 19, 2007)

stevesainty said:


> If you are receiving rent for a property in UK then you will always be liable to pay tax on that income to HMRC forever, or until you no longer let your UK house or the tax laws change.
> 
> You will both still have a full UK personal allowance to offset against this income.
> 
> ...


I'm not sure that this is quite correct. 

Firstly it's the 183rd day but that's in a calendar year. If, like in your case, you straddle a year end, then you may not be tax resident by the 183- day rule. However, other rules may then apply (centre of fiscal activity etc.)

Once you are deemed tax resident in Spain, then even if you don't have a tenant for your UK property, you will have to pay tax on the imputed rental.

Regarding offsetting tax, you simply pro-rate it.


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## brocher (Mar 21, 2011)

chris&vicky said:


> I have seen posts on this before, but was rather confused by what was said.
> 
> I leave UK at the end of August and will be living in Spain for at least a year so will become tax resident in Spain from January 2014. When do I cease to be tax resident in UK? If it is the time I leave UK then where am I resident from September to December 2013?
> 
> ...


Actually, you will remain UK tax resident until HMRC agree otherwise!!

If you tell them you are leaving permanently, they may grant split year treatment but if you tell them you are only leaving for a year/ up to 3 yrs you will be UK tax resident and have to fill in a self assessment for the first part year, from August til the following April. 

You may well have to continue filling in self assessments for each of those first three years, albeit that you will then be paying tax in Spain, and the reciprocal agreement would kick in preventing you from paying tax twice.


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## chris&vicky (Feb 6, 2013)

brocher said:


> Actually, you will remain UK tax resident until HMRC agree otherwise!!
> 
> If you tell them you are leaving permanently, they may grant split year treatment but if you tell them you are only leaving for a year/ up to 3 yrs you will be UK tax resident and have to fill in a self assessment for the first part year, from August til the following April.


How do you know what is permanently? I have no plans in place to return, but one day I may. I may as well tell them I am leaving permanently, if I decide to come back after a year or 3 they can't stop me can they. 

I assume I would have to fill in UK tax returns anyway as most of my income is rental income. I am just not sure what happens with other income after I leave UK, like investment income or pension drawdown, particularly between when I leave September 2013 and December 2013 as I will not be tax resident in Spain then.


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## brocher (Mar 21, 2011)

chris&vicky said:


> How do you know what is permanently? I have no plans in place to return, but one day I may. I may as well tell them I am leaving permanently, if I decide to come back after a year or 3 they can't stop me can they.
> 
> I assume I would have to fill in UK tax returns anyway as most of my income is rental income. I am just not sure what happens with other income after I leave UK, like investment income or pension drawdown, particularly between when I leave September 2013 and December 2013 as I will not be tax resident in Spain then.


Pretty much the conclusion , I reached.

As I said earlier, you will likely be UK tax resident for the remainder of the tax year you leave- Sept 13 to Apr 14 . For this not to be the case, HMRC would have to grant you split year treatment and have provided confirmation that they have accepted you would no longer be UK tax resident.

When HMRC have accepted you are no longer tax resident, you should not have to complete UK self assessments.


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## CapnBilly (Jun 7, 2011)

You need to read the Statutory Residence Test. 

My reading of this is that you fail the automatic overseas test for 2013/4 and meet the automatic UK residence test which means you will be tax resident in the UK for the whole of 2013/4. However, I also think you meet Case 3 of the split year requirements, so they will grant you split year treatment from the 1st January 2014. i.e when you become a spanish tax resident. 

As already discussed, split year will not apply to your rental income. Having said that, they may not grant split year until you provide a certificate of fiscal residence in Spain, which you will only get from Hacienda when you actually submit a return . i.e June 2015. 

In other words, they only let you go when somewhere else has got you.


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## chris&vicky (Feb 6, 2013)

brocher said:


> When HMRC have accepted you are no longer tax resident, you should not have to complete UK self assessments.


But what about my rental income from UK property. I will always have to pay tax to UK on that even if not tax resident. I assume I get my personal allowance against it but there will still be about 6k taxable. If I don't have to do self assessments I really don't understand how that works. I am ringing HMRC tomorrow to ask a few questions.


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## stevesainty (Jan 7, 2011)

Quite simply, if you move to Spain from UK and intend to stay in Spain for the forseeable future then you will become liable for Spanish tax after 183 days regardless of whether you have any taxable income or not.

You are required to complete a Spanish self assessment return each year providing details of your income received during the proceeding year, Jan-Dec; even if this results in no Spanish tax to be levied.

If you have certain types of income in UK, this includes rental income, then you must complete a UK self assessment form every year that you earn such income.

This means that, if the property is jointly owned, both parties need to complete a UK self assessment return and also each complete a Spanish self assessment return. There is also an option in Spain to file a joint return if this results in a lower tax liability.

To inform HMRC that you intend to live and be taxed in Spain you need to complete an FD9 (two sections, one in English & one in Spanish) 

http://www.hmrc.gov.uk/cnr/spain-individual.pdf 

Submit both parts to the Hacienda (Agencia Tributeria) who will stamp both parts and return them to you. You then send them to HMRC. This effectively lets HMRC know that you are registered for tax in Spain.

In your circumstances this will effectively mean that you will have a full tax allowance in both Spain & UK and will only have to pay tax on income that exceeds these allowances in either country.

The upshot of doing this is that you will receive a full tax allowance from UK up until 5 April 2014, if you are leaving this year. This means that if you were paying tax under PAYE you will get a refund based on the unused portion of your allowance from when you ceased to be employed until 5 April 2014.

Also your old age pensions will be taxable in Spain, as will any private pensions (provided that they are not classed as government pensions). This will, I believe only leave your rental income to be taxed in UK which may be well covered by your UK tax allowance.


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## JaneyO (Sep 24, 2012)

stevesainty said:


> If you are receiving rent for a property in UK then you will always be liable to pay tax on that income to HMRC forever, or until you no longer let your UK house or the tax laws change.
> 
> If either or both of you are in receipt of a UK state pension, then getting registered for tax in Spain is very beneficial for you. You should do so as soon as you can, although the Spanish tax authorities will probably not accept a registration until you have been in Spain for the minimum 183 days


 Can you tell me why if you get a Uk state pension it is 'very beneficial' to be registered for tax in Spain? We are well below the tax threshold in the uk but have to pay tax here as the allowances are not so generous. I know the exchange rate you get on the pension is as good as it gets. Am I missing something here that could save me money???


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## stevesainty (Jan 7, 2011)

JaneyO said:


> Can you tell me why if you get a Uk state pension it is 'very beneficial' to be registered for tax in Spain? We are well below the tax threshold in the uk but have to pay tax here as the allowances are not so generous. I know the exchange rate you get on the pension is as good as it gets. Am I missing something here that could save me money???


When you receive your UK state pension it is 'tax free'. This is because your personal allowance in UK is drastically reduced to make it so.

If you are registered for tax in Spain, then you have your UK tax allowance restored. This can then be offset against other UK income such as property rental or so called Government pensions, Civil Servants, Police, Fire etc.

You then only pay tax in Spain on that portion of your income that is over the personal allowance, especially if you file a joint return and one of you has no Spanish income.

This is the case now, there may be moves afoot to change it; but you may as well take the opportunity whilst it still exists. 

This is legitimate tax avoidance, not tax evasion.


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## CapnBilly (Jun 7, 2011)

stevesainty said:


> To inform HMRC that you intend to live and be taxed in Spain you need to complete an FD9 (two sections, one in English & one in Spanish)
> 
> http://www.hmrc.gov.uk/cnr/spain-individual.pdf
> 
> Submit both parts to the Hacienda (Agencia Tributeria) who will stamp both parts and return them to you. You then send them to HMRC. This effectively lets HMRC know that you are registered for tax in Spain..


The former FD9 is now called 'Spain Form Individual', but as I have posted before Hacienda generally won't sign these now, but they will issue you with a 'certificate of Fiscal Residence', which HMRC will accept. You just send it with the same details as you would put on the Spain Form Individual'



stevesainty said:


> Also your old age pensions will be taxable in Spain, as will any private pensions (provided that they are not classed as government pensions). This will, I believe only leave your rental income to be taxed in UK which may be well covered by your UK tax allowance.


When the new DTA. Comes not force, if allows Hacienda to take government pensions into account when working out your marginal rate of tax


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## stevesainty (Jan 7, 2011)

CapnBilly said:


> The former FD9 is now called 'Spain Form Individual', but as I have posted before Hacienda generally won't sign these now, but they will issue you with a 'certificate of Fiscal Residence', which HMRC will accept. You just send it with the same details as you would put on the Spain Form Individual'
> 
> Perhaps in some parts, we got ours back 6 weeks ago from Elche.
> 
> When the new DTA. Comes not force, if allows Hacienda to take government pensions into account when working out your marginal rate of tax


If and when it is enacted yes, but that is no reason not to take advantage until it does.


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## CapnBilly (Jun 7, 2011)

stevesainty said:


> If and when it is enacted yes, but that is no reason not to take advantage until it does.


I would say is already too late.


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## stevesainty (Jan 7, 2011)

CapnBilly said:


> I would say is already too late.


Well if that is the case how come we have already benefited by substantial refunds in taxation already this year and an increased monthly income of around £100.

The authorities both here and in UK will let you know if your claims are no longer allowed. Nothing ventured eh?


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## extranjero (Nov 16, 2012)

Does anyone really understand the complexities of income tax in Spain? Even so called experts give different advice!


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## stevesainty (Jan 7, 2011)

extranjero said:


> Does anyone really understand the complexities of income tax in Spain? Even so called experts give different advice!


Yes, a few companies like Blevin Franks who are very good. They would not save us ordinary mortals any money though as there fees far outweigh any tax benefits they may find. Their books are quite a good read though, if you don't fall asleep reading them.

All I can say is that all the information about HMRC is on their website, you just need to trawl it. They are very friendly people and you can book a telephone appointment with someone there with specialist dual taxation knowledge.

I know a few bits and pieces from my previous part time occupation as a freelance bookkeeper. It has enabled me to maximise my familiy's tax avoidance, until all the rules get changed again.


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## chris&vicky (Feb 6, 2013)

stevesainty said:


> To inform HMRC that you intend to live and be taxed in Spain you need to complete an FD9 (two sections, one in English & one in Spanish)
> 
> http://www.hmrc.gov.uk/cnr/spain-individual.pdf
> 
> ...


When do I complete this form? I do not want to submit the form this year if it means I will become tax resident for 2013. For 2013 I will be taxed in Spain on all my salary income, and Share ISA income that is tax free in UK.


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## stevesainty (Jan 7, 2011)

chris&vicky said:


> When do I complete this form? I do not want to submit the form this year if it means I will become tax resident for 2013. For 2013 I will be taxed in Spain on all my salary income, and Share ISA income that is tax free in UK.


No, you submit this form early on in 2014, when you have been in Spain for more than 183 days. You do, however enter the date that you left UK, and the date you arrived in Spain.

Hacienda will not entertain you until you have been in Spain for at least 183 days. As Capnbilly says, they may not entertain you even then. It depends on where your local Hacienda is.

Spanish red tape is a funny old thing, changes from area to area and sometimes even to whom you speak to in the office.


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## CapnBilly (Jun 7, 2011)

stevesainty said:


> Well if that is the case how come we have already benefited by substantial refunds in taxation already this year and an increased monthly income of around £100.
> 
> The authorities both here and in UK will let you know if your claims are no longer allowed. Nothing ventured eh?


Err, this years returns here were last years income, so next years will be 2013, and I would suggest the new DTA will be in force by the end of the year !. I'm already saving for the extra next year.


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## stevesainty (Jan 7, 2011)

CapnBilly said:


> Err, this years returns here were last years income, so next years will be 2013, and I would suggest the new DTA will be in force by the end of the year !. I'm already saving for the extra next year.


I have no wish to get into an argument here. I am just offering my advice to someone asking for it. They are confused enough already.

I can only say what I have done and what the results have been.

http://www.hmrc.gov.uk/taxtreaties/signed/spain-uk-protocol.pdf

Spain - UK Protocol

Signed on 14th March 2013 This Convention has not yet entered into force. This will happen when both countries have completed their Parliamentary procedures and exchanged diplomatic notes. An announcement will be made…


This information has just been lifted from HMRC website, at the rates that government wheels grind, it may be some time IMHO.

I still maintain if you are not entitled to relief when you apply, you will not get it.

*If you do not even ask for it you certainly won't*


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## CapnBilly (Jun 7, 2011)

stevesainty said:


> I have no wish to get into an argument here. I am just offering my advice to someone asking for it. They are confused enough already.
> 
> I can only say what I have done and what the results have been.
> 
> ...


I think there's a couple of things mixed up in here. First of all, when you submit a Spain Form Individual to HMRC, they will allow anything which is not a government pension to be paid gross. This is presumably where your savings come from. A government pension will always be taxed in the UK as we know. The benefit comes having a government pension (not a state pension) which is only taxable in the UK, and for which you receive an allowance., and other income e.g a state or other pension which is taxable in Spain if you are fiscally resident. You then get a tax allowance in Spain, so this is how you gain. This is perfectly acceptable under the current rules.

However, as I have already said, under the new DTA, Spain will take this into account when working out your marginal rate of tax. Assuming this comes into force by the end of the year, then next years spanish tax return will mean you may pay a higher rate of tax ( on this years income). 

Therefore, IMHO it would be wise to make an allowance for this extra tax, so there is no surprises next year, if it doesn't come into force, then you will have a surplus to spend. How much extra will depend upon your income, but essentially they work it out like this - your total income inc government pension) less earned income allowance (on income taxable in Spain). The total is your taxable income, so if its €20707, then it's €17707 at 24.75% and €3000 at 30%. They then deduct your personal allowance at 24.75% and divide the net tax into your total income (inc government pension) to arrive at your marginal tax rate. This is the rate then applied to your income taxable in Spain. 

So, my point is, you still apply for the relief, as you are entitled to, but be aware of the extra tax you are likely to have to pay next year.

It's an important point, because this year people were moaning that their tax had gone up, even on the same income. Some of this was due to the additional supplement on the rates, but about 8% was due to exchange rates, and that was pretty obvious as the rate improved during the year. This is not obvious.


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## stevesainty (Jan 7, 2011)

Agreed. But!

The op is not yet in Spain and is asking for the procedures to go through when he does get here. He does not yet know what his overall tax position may be and should have, if prudent, enough savings to get him by until he does know.

Furthermore, he will be getting rental income in UK that is taxable in UK, ergo he will still receive a personal tax allowance. If he frees up the personal tax allowance on any state pension he is receiving, by being registered for tax in Spain asap, he will maximise the allowance against this rental income.

Yet furthermore, if he is in receipt of PAYE income during 2013/14 in UK he will still have the balance of his personal allowance from the date he leaves UK to 5 April 2014. This will form the basis of a tax refund from HMRC. The tax due for his rental income for 2013/14 will not be reported until 31 Jan 2015 at the latest. If any tax is due then it will need to be paid by 31 January 2015 also, more than enough time to save for it.

As for the timing of the introduction of the changes to DTA, we will have to agree to differ. I never personally budget up to the limit of my income, you always need a buffer because you never know what is around the corner.


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## chris&vicky (Feb 6, 2013)

stevesainty said:


> Agreed. But!
> 
> The op is not yet in Spain and is asking for the procedures to go through when he does get here. He does not yet know what his overall tax position may be and should have, if prudent, enough savings to get him by until he does know.
> 
> ...


Wow confused now I am  I need to read over all this to make some sense of it all.

For the record I have plenty of savings to cover whatever the tax is, I just want to understand what to do so I do not pay more than I should.

I am not in receipt of any pension, I have a pension in drawdown but do not need the income yet, unless taking it was tax beneficial.

Most of my income is rental, about 14k and some investment income, about 4k, nothing else.

being that I live mostly from savings, my rent in UK covers my rent in Spain, I didn't think it would be this complicated. But as it is I will just pay an accountant to deal with it.


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## CapnBilly (Jun 7, 2011)

Chris


What we are talking about in the previous posts has no impact on you.


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## chris&vicky (Feb 6, 2013)

CapnBilly said:


> Chris
> 
> 
> What we are talking about in the previous posts has no impact on you.


Um but he was referring to me? ....

The op is not yet in Spain and is asking for the procedures to go through when he does get here. He does not yet know what his overall tax position may be and should have, if prudent, enough savings to get him by until he does know.

Furthermore, he will be getting rental income in UK that is taxable in UK, ergo he will still receive a personal tax allowance. If he frees up the personal tax allowance on any state pension he is receiving, by being registered for tax in Spain asap, he will maximise the allowance against this rental income.

Yet furthermore, if he is in receipt of PAYE income during 2013/14 in UK he will still have the balance of his personal allowance from the date he leaves UK to 5 April 2014. This will form the basis of a tax refund from HMRC. The tax due for his rental income for 2013/14 will not be reported until 31 Jan 2015 at the latest. If any tax is due then it will need to be paid by 31 January 2015 also, more than enough time to save for it.

As for the timing of the introduction of the changes to DTA, we will have to agree to differ. I never personally budget up to the limit of my income, you always need a buffer because you never know what is around the corner.


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## CapnBilly (Jun 7, 2011)

stevesainty said:


> As for the timing of the introduction of the changes to DTA, we will have to agree to differ. I never personally budget up to the limit of my income, you always need a buffer because you never know what is around the corner.


To a certain extent, the timing and how you run your budget is immaterial, it's the impact which is important for people to know. 



stevesainty said:


> Agreed. But!
> 
> The op is not yet in Spain and is asking for the procedures to go through when he does get here. He does not yet know what his overall tax position may be and should have, if prudent, enough savings to get him by until he does know.


I don't think some of the discussions are relevant to the OP, and I have posted this.




stevesainty said:


> Also your old age pensions will be taxable in Spain, as will any private pensions (provided that they are not classed as government pensions). This will, I believe only leave your rental income to be taxed in UK which may be well covered by your UK tax allowance.


As you say. Have no with to get into an argument, but this was the initial post I responded to, and some of the subsequent discussions have no bearing on the OP, but i have posted the supplementary stuff, because I am conscious that other people view these threads, either now, or in the future, so it is important that they are fully informed


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## stevesainty (Jan 7, 2011)

OK CapnBilly, I give up.

Between the two of us we have thoroughly confused chrisnVicky.

I am sure that there will be someone more knowledgeable than you or I will come along and post on this thread.

As long as people get good information is all I care about.

I have had lots of it in the past on this forum, and just wanted to repay the favour.


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## CapnBilly (Jun 7, 2011)

stevesainty said:


> OK CapnBilly, I give up.
> 
> Between the two of us we have thoroughly confused chrisnVicky.
> 
> ...


Chris&Vicky shouldn't be confused, as their situation is more or less as Brocher posted, and I confirmed in post no 7 about the SRT, which is very clear. They will be a UK tax resident until 1st July 2014, when they will become a tax resident in Spain, but split year will be back dated to 1st anuary, BUT, they will probably need to confirm fiscal residence in Spain.

To a certain extent, the Spain Form Individual is a red herring, and is probably what is causing the confusion, as it really only relates to pension, royalty income etc, not rental income , which is what their main income base is. The subsequent discussions have been about government pension, and the impact of the new DTA, which is of no interest or impact to Chris&Vicky, except for the change in UK taxation of UK interest, which under the new DTA can be paid gross.

I think the problem is, your information is great, but it doesn't really apply in this case IMHO.


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## ronzeus (Jul 29, 2013)

Steve and Captain Billy ,you havent confused me ,you both make a lot more sense that what i have already been given.Thank you


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