# Lump Sum



## Megsmum (Sep 9, 2012)

Am I correct in saying that my nhs lump sum is taxable as "income" rather than CGT because it was contributory??


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## Steve171517 (Mar 22, 2014)

cambio said:


> Am I correct in saying that my nhs lump sum is taxable as "income" rather than CGT because it was contributory??


No your lump sum will not be taxable


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## extranjero (Nov 16, 2012)

Surely UK pension lump sums are taxable in Spain
That's what we have been led to believe, anyway


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## snikpoh (Nov 19, 2007)

Steve171517 said:


> No your lump sum will not be taxable



... are you sure?


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## Megsmum (Sep 9, 2012)

I was under the impression here in Spain it was taxable, it was just under what taxation bracket in comes


Bit confused now


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## Steve171517 (Mar 22, 2014)

cambio said:


> I was under the impression here in Spain it was taxable, it was just under what taxation bracket in comes
> 
> 
> Bit confused now


Hi, I'm not tax resident in Spain, when I got my lump sum in the UK, it was not taxable so it depends where you are tax resident. Can you not take your lump sum and have an increase your monthly pension instead. I believe that you have to live another 18 years to become in front. If your health is good there are many options to consider, you do not have to take the maximum lump sum you can take any amount between zero and the maximum but you probably know this already.


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## extranjero (Nov 16, 2012)

Steve171517 said:


> Hi, I'm not tax resident in Spain, when I got my lump sum in the UK, it was not taxable so it depends where you are tax resident. Can you not take your lump sum and have an increase your monthly pension instead. I believe that you have to live another 18 years to become in front. If your health is good there are many options to consider, you do not have to take the maximum lump sum you can take any amount between zero and the maximum but you probably know this already.


Were you not aware Cambio was resident in Spain?
That explains why you got it wrong!


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## Steve171517 (Mar 22, 2014)

extranjero said:


> Were you not aware Cambio was resident in Spain?
> That explains why you got it wrong!


I was not aware, I just saw that he wanted to know if he could take his NHS lump sum take free


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## Megsmum (Sep 9, 2012)

OKK

So back to my original question. Is it classed as Income?


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## Megsmum (Sep 9, 2012)

Steve171517 said:


> Hi, I'm not tax resident in Spain, when I got my lump sum in the UK, it was not taxable so it depends where you are tax resident. Can you not take your lump sum and have an increase your monthly pension instead. I believe that you have to live another 18 years to become in front. If your health is good there are many options to consider, you do not have to take the maximum lump sum you can take any amount between zero and the maximum but you probably know this already.


actually with an NHS pension you cannot take less lump sum and higher monthly payments, you can reduce your monthly payments and have a higher lump sum.

x


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## 90199 (Mar 21, 2010)

cambio said:


> actually with an NHS pension you cannot take less lump sum and higher monthly payments, you can reduce your monthly payments and have a higher lump sum.
> 
> x


Take your tax free lump sum in a U.K. tax year, then move to Spain in the following Spanish tax year.


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## extranjero (Nov 16, 2012)

But Cambio is already living in Spain. !


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## Megsmum (Sep 9, 2012)

Ok


We are already here! my lump sum arrived last January, we moved here in February therefore I was a tax resident here last year. It is easy to say do this one year and move the next,but sometimes "life"happens, we were more concerned in ensuring the house was sold in the correct tax year,

AGAIN

Is it classed under CGT or is it part of my income for last year, I vaguely remember reading that you are only taxed on the difference between contributions made and the final amount. I am not trying to avoid paying tax I want to know what to put it under


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## Megsmum (Sep 9, 2012)

extranjero said:


> But Cambio is already living in Spain. !



Well at least someone has been following my move!


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## Terdave (Dec 19, 2014)

cambio said:


> Ok
> 
> 
> We are already here! my lump sum arrived last January, we moved here in February therefore I was a tax resident here last year. It is easy to say do this one year and move the next,but sometimes "life"happens, we were more concerned in ensuring the house was sold in the correct tax year,
> ...


Your lump sum will be treated as taxable income,

Retiring abroad and your pension - Retiring abroad - Retirement - Which? Money

Hope the link works, Bottom of the page.


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## Megsmum (Sep 9, 2012)

Terdave said:


> Your lump sum will be treated as taxable income,
> 
> Retiring abroad and your pension - Retiring abroad - Retirement - Which? Money
> 
> Hope the link works, Bottom of the page.


thanks for that, prefer it to be income than CGT.


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## Megsmum (Sep 9, 2012)

> An issue faced by those about to retire is the tax status of any lump sum they might take from their pension scheme. In the UK, you are permitted to withdraw up to 25% of your retirement savings 'tax free'. If this occurs before you leave there should be no problem, but not all foreign tax regimes have the same rules.
> 
> In France and Spain, say, a lump sum of this sort will be treated as taxable income. Leaving the money invested could be advantageous in these circumstances.


Interesting, why would this be advantageous, because the bulk is invested? Mine is in a savings account


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## extranjero (Nov 16, 2012)

Even if the lump sum is paid out before someone leaves the UK, it can still be taxed in Spain if the person spends more than 183 days in Spain that year.
Same thing applies to selling the house in UK. Before moving to Spain


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## Megsmum (Sep 9, 2012)

extranjero said:


> Even if the lump sum is paid out before someone leaves the UK, it can still be taxed in Spain if the person spends more than 183 days in Spain that year.
> Same thing applies to selling the house in UK. Before moving to Spain


thanks

Thats what I thought

house sale not the issue as that was sold the year before

Thanks


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## Lynn R (Feb 21, 2014)

cambio said:


> Ok
> 
> 
> We are already here! my lump sum arrived last January, we moved here in February therefore I was a tax resident here last year. It is easy to say do this one year and move the next,but sometimes "life"happens, we were more concerned in ensuring the house was sold in the correct tax year,
> ...


I will be in the same position next year, as I received my lump sum this January although we have already lived in Spain for more than 8 years.

In my view (although I am not an accountant, I would be very interested to see any replies from anyone with more specialist knowledge), then if it's from a final salary scheme rather than a defined contribution or money purchase scheme, then I don't see how it can be anything other than income. With a final salary scheme, your pension and lump sum are not dependent on investment performance, they are guaranteed to be x times your final salary. So surely the amount of growth over and above the contributions paid would be irrelevant? In any event, you would have to obtain figures from your pension scheme administrator showing the total amount of employee and employer contributions made over your working life, plus the total value of your "fund" to arrrive at the "growth" figure by subtracting one from the other, and I am not sure that they are in a position to do that. You could ask and see what they say, I suppose.

Btw, I did do what AllHeart referred to and made an appointment with Hacienda to go in and have them complete my tax return the first year I would have been due to submit one. The lady I saw said that I was not receiving any income in the form of pensions or anything else, just a small amount of interest on savings, I was not required to submit a tax return and they didn't want to see me again until I started receiving my pension (said with a smile). I asked if they could record this in some way on their system as I didn't want it to cause any problems in the future, and I've certainly not received any letters from Hacienda in the intervening period querying why I haven't submitted any returns. So Hacienda's own advice is rather different from Snikpoh's, who said that everyone who is resident in Spain should submit a return.


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## extranjero (Nov 16, 2012)

It's a good idea to submit a return even if you're under the tax threshold 
It proves you're on the tax system, and you can avoid cgt if you sell your house?


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## Megsmum (Sep 9, 2012)

Lynn R said:


> I will be in the same position next year, as I received my lump sum this January although we have already lived in Spain for more than 8 years.
> 
> In my view (although I am not an accountant, I would be very interested to see any replies from anyone with more specialist knowledge), then if it's from a final salary scheme rather than a defined contribution or money purchase scheme, then I don't see how it can be anything other than income. With a final salary scheme, your pension and lump sum are not dependent on investment performance, they are guaranteed to be x times your final salary. So surely the amount of growth over and above the contributions paid would be irrelevant? In any event, you would have to obtain figures from your pension scheme administrator showing the total amount of employee and employer contributions made over your working life, plus the total value of your "fund" to arrrive at the "growth" figure by subtracting one from the other, and I am not sure that they are in a position to do that. You could ask and see what they say, I suppose.
> 
> Btw, I did do what AllHeart referred to and made an appointment with Hacienda to go in and have them complete my tax return the first year I would have been due to submit one. The lady I saw said that I was not receiving any income in the form of pensions or anything else, just a small amount of interest on savings, I was not required to submit a tax return and they didn't want to see me again until I started receiving my pension (said with a smile). I asked if they could record this in some way on their system as I didn't want it to cause any problems in the future, and I've certainly not received any letters from Hacienda in the intervening period querying why I haven't submitted any returns. So Hacienda's own advice is rather different from Snikpoh's, who said that everyone who is resident in Spain should submit a return.



Thanks Lynn

I am pretty certain it is now "income" have arranged to see someone in next few weeks as I also have to complete the 720, although no assets 50K
Will keep you posted

T
x


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## Lynn R (Feb 21, 2014)

extranjero said:


> It's a good idea to submit a return even if you're under the tax threshold
> It proves you're on the tax system, and you can avoid cgt if you sell your house?


I am "on the tax system" as I was previously submitting non-resident tax returns for the period whilst my house was a holiday home, and I got them to change my status to resident.

I am not selling my house in the forseeable future so no problem there. I will be making returns from next year onwards as I now have a pension, so by the time I come to think about selling proving fiscal residency will not be a problem.


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## snikpoh (Nov 19, 2007)

extranjero said:


> It's a good idea to submit a return even if you're under the tax threshold
> It proves you're on the tax system, and you can avoid cgt if you sell your house?




... it's also 'essential' for succession tax purposes.


As I understand it, it's a legal requirement to do a tax return.


When you say "you're under the tax threshold" - what do you think that level is?


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## extranjero (Nov 16, 2012)

Whatever the Hacienda says it is!


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## Lynn R (Feb 21, 2014)

snikpoh said:


> As I understand it, it's a legal requirement to do a tax return.
> 
> 
> When you say "you're under the tax threshold" - what do you think that level is?


See this extract from the Advoco website re tax returns for Spanish residents:-

"Situation 7: My only income is some interest on a bank account

If you are living off savings prior to your retirement and have no other source of income, then the interest on the savings is taxable and thus you might have to do a tax return. If the interest amounts to less than €1,600 then you do not have to declare it, if it is your only income. "

This accords with what Hacienda told me when I went to submit a tax return at their office.

There may not be many people in this particular situation, but I am one of them, and it isn't, therefore, 100% correct to say that every single person must submit a return

However, I believe the €1,600 threshold for declaring savings income has been abolished in the latest reform of the taxation system - which relates to income received in the 2015 tax year, and now all savings income must be declared. Won't cause me any problems because I'll be making a return next year anyway, having started to receive my pension in 2015.


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## snikpoh (Nov 19, 2007)

Lynn R said:


> See this extract from the Advoco website re tax returns for Spanish residents:-
> 
> "Situation 7: My only income is some interest on a bank account
> 
> ...



.... so I was correct then 


It's still very important for expats to be in the tax system (more so than for the Spanish) for the reasons mentioned previously.


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## Lynn R (Feb 21, 2014)

snikpoh said:


> .... so I was correct then
> 
> 
> .


Next year you will be.


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## gus-lopez (Jan 4, 2010)

You only have to declare if you have an income. Then it depends on the amount of income & what type. In some places,like here , they will not waste there time doing 'nil' returns even if you want one.
I don't declare as I have no income. My wife , who works, doesn't declare as she is not in the country for more than 183 days.

"Extranjero" How does being on the tax system help with cgt because ,as you know, here in Murcia they've done away with the allowances so we'll all be paying anyway ? Once 65 has been attained there is no requirement to be in the tax system to be exempt from CGt , just proof of age at the notary.


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## extranjero (Nov 16, 2012)

Think you are getting confused with IHT - Murcia has abolished allowances for that, not CGT
To avoid paying CGT when selling your house, you have to be over 65, have lived inthe property for 3 years, and are tax resident 
That criteria hasn't
changed as far as I know.


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## gus-lopez (Jan 4, 2010)

extranjero said:


> Think you are getting confused with IHT - Murcia has abolished allowances for that, not CGT
> To avoid paying CGT when selling your house, you have to be over 65, have lived inthe property for 3 years, and are tax resident
> That criteria hasn't
> changed as far as I know.


Yes apologies ,meant Iht. Getting old. 
There is still no requirement to be tax resident though at the notary in Lorca .Once over 65 & owned for requisite time, that's it. He has never asked for it.


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## extranjero (Nov 16, 2012)

gus-lopez said:


> Yes apologies ,meant Iht. Getting old.
> There is still no requirement to be tax resident though at the notary in Lorca .Once over 65 & owned for requisite time, that's it. He has never asked for it.


They are supposed to, but obviously some are very lax
If the tax certificate is not produced 3% should be retained


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## CapnBilly (Jun 7, 2011)

Lynn R;
However said:


> The threshold of €1,600 for savings income has not changed.


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## Roy C (Sep 29, 2012)

THis is a very interesting thread highlighting the complications of the tax system. My plan is, retire early next year maybe just into the new tax year so I don't get hit by too much of the 40% on my voluntary severance payment, the pension lump sum is currently tax free. Then impatiently wait until about Sept to.move, after selling the house and buying a flat here in the UK. Next after moving to Spain (at long last) I wait the 183 days to tax register which will take me past June 2017 and don't have to fill out a tax form until June 2018 for 2017 which should save me paying more tax than I will have already paid. Does this make sense and have I got it right?


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## Lynn R (Feb 21, 2014)

CapnBilly said:


> The threshold of €1,600 for savings income has not changed.


That would be good news, but I have read in several Spanish press reports about the reform of the fiscal system that the first €1,500 of savings income will no longer be exempt from taxation, as was previously the case (although this will not apply to this year's tax returns as it affects income received in 2015). For example, this is an extract from a Cinco Dias special report on the taxation reform:-

"NO OBSTANTE, hay más modificaciones en los ingresos del capital. Para el pequeño inversor, un contratiempo, y es que los primeros 1.500 euros cobrados en forma de dividendos, que hasta ahora estaban exentos de tributación, dejan de estarlo."

The withdrawal of this exemption is mentioned in this article, too:-

http://www.eleconomista.es/espana/n...o-y-todas-sus-novedades.html#.Kku87FVaIgu5E9q


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## CapnBilly (Jun 7, 2011)

Lynn R said:


> That would be good news, but I have read in several Spanish press reports about the reform of the fiscal system that the first €1,500 of savings income will no longer be exempt from taxation, as was previously the case (although this will not apply to this year's tax returns as it affects income received in 2015). For example, this is an extract from a Cinco Dias special report on the taxation reform:-
> 
> "NO OBSTANTE, hay más modificaciones en los ingresos del capital. Para el pequeño inversor, un contratiempo, y es que los primeros 1.500 euros cobrados en forma de dividendos, que hasta ahora estaban exentos de tributación, dejan de estarlo."
> 
> ...


Savings income has never been exempt from tax, but dividend income upto €1,500 was exempt, but this has been abolished and it is all now taxable. However, the threshold for reporting savings income still remains at €1,600


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## Lynn R (Feb 21, 2014)

CapnBilly said:


> Savings income has never been exempt from tax, but dividend income upto €1,500 was exempt, but this has been abolished and it is all now taxable. However, the threshold for reporting savings income still remains at €1,600


Thank you very much for the explanation.


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## Dave and Anne Galicia (Nov 15, 2008)

I assume you declare your total savings income each year and PADRE sorts the tax, if any that is due?


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## snikpoh (Nov 19, 2007)

Dave and Anne Galicia said:


> I assume you declare your total savings income each year and PADRE sorts the tax, if any that is due?


Yes, you will need to install PADRE and then get the digital signature if you want to do this at home or you can use the PADRE system at any of the Hacienda offices.


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