# Advice on receiving my UK retirement pension to Spain



## Desne (Aug 9, 2014)

Hello
I am emigrating to Northern Spain next month. Could anyone tell me which is the best way to receive their pension from the UK to Spain. I shall be receiving my civil service pension, and incapacity benefit (as I have had to medical retire) and it will be paid into my bank account here in England, but I shall need to transfer this to my Spanish Bank account. I am not a clever clogs when it comes to numbers and exchange stuff. I just want a reliable and excellent customer service provider that will not rip me off. My pension will be not be very much so every penny/euro counts. Thank you.


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## thrax (Nov 13, 2008)

Once you open a Spanish bank account, your civil service pension can be paid directly into it at no cost to you. They use the actual exchange rate at the time of transfer. Simple. If you phone them (Capita it used to be) they will tell you what you need to do. I found them very helpful.


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## larryzx (Jul 2, 2014)

thrax said:


> Once you open a Spanish bank account, your civil service pension can be paid directly into it at no cost to you. They use the actual exchange rate at the time of transfer. Simple. If you phone them (Capita it used to be) they will tell you what you need to do. I found them very helpful.


I am in a very similar situation to you. I decided to have my government employee pension paid to my UK bank and my OAP to my Spanish bank. Every so often I get the pensions admin (equiniti.com, it used to be Capita) to make a couple of payments of my Government pension into my bank in Spain. I can do it by email, so quick and easy.

The transfer is, as previous post explained, paid from UK through Madrid to your bank in Spain. The rate is that on the day of transfer, so a few days before it arrives in your account. The rate is almost certainly unbeatable by any other method, other than of course having funds deposited into a UK account and waiting until the rate improves and transferring then, but of course that would not get the best exchange rate and would incur charges, as it would be treated as a transfer and not a pension payment.

PS Be aware that once you leave UK you will not (very unlikely anyway) to be able to open a UK bank / Building Soc account / UK based credit card, but if you already have one then you will almost certainly be able to keep it. So consider opening any accounts which you may later need before you leave.

PPS I read yesterday that government employee pensioners may lose all tax relief in UK, which if correct (I think) will mean £2,000 more tax p.a. for those on a £10,000 p.a. pension.


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## Chopera (Apr 22, 2013)

larryzx said:


> ...
> PPS I read yesterday that government employee pensioners may lose all tax relief in UK, which if correct (I think) will mean £2,000 more tax p.a. for those on a £10,000 p.a. pension.


Correct. I mentioned it on here I while back - but I don't think it has sunk in yet. Basically the UK plans on removing all income tax relief for non-residents. This is not much of a big deal for many people because due to the dual tax agreement, what gets taxed in the UK doesn't get taxed in Spain. So people end up paying more tax in the UK and less in Spain and to an extent it balances out (this is a bit of a generalisation). However UK government pensions don't get taxed in Spain so there is no offset.

Edit to add: it's the tax relief on the first £10,000 income they plan on removing (or at least reducing) so it applies to everybody with government pensions (not just those on a £10,000 p.a. pension)


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## Lynn R (Feb 21, 2014)

larryzx said:


> PPS I read yesterday that government employee pensioners may lose all tax relief in UK, which if correct (I think) will mean £2,000 more tax p.a. for those on a £10,000 p.a. pension.


Actually, the consultation document published by the Government makes it clear that they are not intending to remove the UK personoal tax allowance for those in receipt of government and other pensions which are taxable exclusively in the UK. This is the relevant extract from it (Para 6.6 of the consultation document




"However, under double tax treaties, UK sourced government service pensions (a wide category which includes, amongst others, some NHS staff and those employed by local authorities) are generally only taxed in the UK, regardless of recipients’ residence status. This can also be the case with some other forms of income under specific treaties. The withdrawal of the UK personal allowance from non-residents in receipt of a UK government service pension would result in them paying more tax overall as there is no overseas tax liability against which the additional UK tax could be relieved.

The government is concerned that individuals, like those in receipt of government service pensions, who are not eligible for double taxation relief, would be disproportionately affected by the removal of the UK Personal Allowance.

The government does not intend to raise taxes on vulnerable groups or in situations where the UK is the principal taxing authority and an individual has no recourse to relief as a result of the UK having sole taxing rights under a tax treaty. If the government were to restrict non-residents’ entitlement to the Personal Allowance, it would intend this to apply to types of income which are taxable both in the UK and overseas (such as that from immovable property) but to retain the Personal Allowance on income that is taxable exclusively in the UK."


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## Chopera (Apr 22, 2013)

here's the consulatation document: 

https://www.gov.uk/government/consu...ents-entitlement-to-the-uk-personal-allowance


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## Chopera (Apr 22, 2013)

OK it looks like the document was updated (4th August) since I last read it and what Lynn says is correct. I think they realised that with such a big tax relief threshold, non-residents never really benefitted from it and just ended up paying more tax in their country of residence instead. So now the UK government is effectively saying you can pay it to the UK instead!


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## Desne (Aug 9, 2014)

Yes it's still called Capita. Thank you.


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## larryzx (Jul 2, 2014)

Chopera said:


> Edit to add: it's the tax relief on the first £10,000 income they plan on removing (or at least reducing) so it applies to everybody with government pensions (not just those on a £10,000 p.a. pension)


The point I was hoping to make was that as the basic tax rate is 20%, and those affected will lose the right to the tax free allowance of £10,00 then those on a pension of £10,000 may pay £2,000. more than now. Those on a smaller pension will pay 20% of that pension. (However the piece I read said the lose would be as much as £4,000 for some).


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## larryzx (Jul 2, 2014)

Desne said:


> Yes it's still called Capita. Thank you.


My Government pension correspondence used to show Capita, but now it shows only Equiniti, as does their email address: Maybe it varies for the different types of employment of former gov employees.


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## Chopera (Apr 22, 2013)

larryzx said:


> The point I was hoping to make was that as the basic tax rate is 20%, and those affected will lose the right to the tax free allowance of £10,00 then those on a pension of £10,000 may pay £2,000. more than now. Those on a smaller pension will pay 20% of that pension. (However the piece I read said the lose would be as much as £4,000 for some).


I guess they might have been quoting the worst case scenario for a couple with both being paid government pensions (it makes for great sensationalist headlines and plenty of internet traffic as people start panicking)


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## Lynn R (Feb 21, 2014)

larryzx said:


> The point I was hoping to make was that as the basic tax rate is 20%, and those affected will lose the right to the tax free allowance of £10,00 then those on a pension of £10,000 may pay £2,000. more than now. Those on a smaller pension will pay 20% of that pension. (However the piece I read said the lose would be as much as £4,000 for some).


Sorry, but the piece you read sounds like just one more bit of inaccurate and sloppy reporting. I saw some articles myself which said the same thing, but later ones have pointed out that Government pensions will not be affected. Read the consultation document (in full if you like from the link Chopera gave), and particularly, as I said, Section 6.6.

Although the proposals will affect people with other types of UK income including rental income, the Government is NOT proposing to withdraw the personal allowance from those in receipt of Government pensions. That is because such income is taxable only in the UK, the UK wishes to keep sole rights to tax such income, and therefore if the allowance were to be withdrawn the taxpayer would not be able to pay tax on it in Spain and offset the tax paid in the UK under the double taxation treaty.


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## larryzx (Jul 2, 2014)

Chopera said:


> I guess they might have been quoting the worst case scenario for a couple with both being paid government pensions (it makes for great sensationalist headlines and plenty of internet traffic as people start panicking)


I just called my tax office in UK (They deal with government employee pensions). 

They said there are no plans to change anything and, as mentioned here, it is only a consultation document at present. 

The person I spoke to said he thought any new legislation is not likely to apply to Government Employee pensions but to property income, from properties in the UK owned by non residents in UK.

Sorry to have mentioned the sensational headlines 'from a local scandal rag'.


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## Chopera (Apr 22, 2013)

larryzx said:


> I just called my tax office in UK (They deal with government employee pensions).
> 
> They said there are no plans to change anything and, as mentioned here, it is only a consultation document at present.
> 
> ...


It's not really your fault - pretty much everywhere (not just the usual scaremongerers) reported the same thing. I went to the document myself and missed the paragraph that Lynn posted since I don't receive a government pension and wasn't so interested in that part.

To me the plans make sense - any increased tax allowances for non-residents just means they pay more tax in their country of residence instead (unless they live in some tax haven, or are tax evaders) so what happens is the UK effectively ends up giving revenue to some other country every time they increase the tax allowance. It's not surprising they wish to stop it.


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## larryzx (Jul 2, 2014)

Chopera said:


> To me the plans make sense - any increased tax allowances for non-residents just means they pay more tax in their country of residence instead
> so what happens is the UK effectively ends up giving revenue to some other country every time they increase the tax allowance. It's not surprising they wish to stop it.


I am not sure from your post if you are clear about taxation on UK government employee pensioners who live say in Spain. 

In the UK they get the full tax allowance on their former Government employee pension, about £10,000 relief. 

If they have other income which is only taxable in Spain, say the OAP or a private pension from UK, or if lucky Premium Bond winnings, then they get full tax relief on that in Spain, say 7,000€, thus get around £16,000 tax relief.

If that same person lived in UK they would get only the one tax relief (£10,000) so would in effect pay tax on all their OAP.

Thus a person living in Spain with the same total income BUT from say a private pension and OAP in UK, gets £10,000 less tax relief over all than a former UK government employee..


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## Lynn R (Feb 21, 2014)

It would make more sense to me if everybody paid tax on all income they receive, from whatever source, in their country of residence, and benefit only from whatever personal allowances apply in that country. That would remove any anomalies such as the one which means people in receipt of Government pensions (and I will be one, in due course, although it will only amount to 20% of my occupational pensions) receive more allowances than others.

However, that´s not what´s being proposed as the UK (and I believe the same applies in other countries) wants to hang on to exclusive rights to hang on to tax on Government pensions. 

Under the present proposals, I don´t know what would happen, say, in the case of someone who is in receipt of a Government pension but also receives rental income from the UK. They shouldn´t be entitled to a personal allowance in respect of the latter in future, but if they are still to receive a personal allowance because they have a Government pension, how will that work I wonder?


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## Chopera (Apr 22, 2013)

As things currently stand:

If I am a non-UK resident and receive say €20k income from property in the UK then I end up paying UK income tax on only €10k income (because of the €10k UK allowance). Say €2k (at 20%). 

I then declare the same income to the Spanish inland revenue and find I'm due to pay them €5000 (at 25% and assuming I don't get a tax allowance) from which the €2k I have already paid to the UK is deducted due to the dual tax agreement.

So I end up paying €2k to the UK and €3k to Spain

Under the proposed changes:

If I am a non-UK resident and receive €20k income from UK property I lose the €10k tax allowance so I end up paying €4k to the UK instead of €2k (at 20%).

I then declare the same income to the Spanish inland revenue and find I'm still due to pay them €5000 (at 25% and assuming I don't get a tax allowance) but this time I can deduct the €4k I have already paid to the UK instead of €2k, due to the dual tax agreement.

So I end up paying €4k to the UK and €1k to Spain.

I end up paying the same amount of tax, but more of it goes to the UK and less goes to Spain.

This is a gross simplification, but it's the point I was trying to make, and why I can understand the UK government is looking at doing this. The existing tax allowance benefits the Spanish government rather than the person paying tax and is therefore a bit pointless. They might as well take the money themselves (from their point of view).

Of course there are plenty of details to be ironed out, and there may be Spanish tax allowances to take into acount as well, but I was talking in very general terms.

For the case of people receiving income from both a UKL government pension and property, I imagine the UK government pension will be subject to the tax allowance but the income from property will not. But I'm speculating.


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## larryzx (Jul 2, 2014)

Lynn R said:


> I
> 
> Under the present proposals, I don´t know what would happen, say, in the case of someone who is in receipt of a Government pension but also receives rental income from the UK. They shouldn't be entitled to a personal allowance in respect of the latter in future, but if they are still to receive a personal allowance because they have a Government pension, how will that work I wonder?


I have a Gov pension in UK so I get taxed in UK on that and have the allowance applied. If I were to buy a property in UK and let it, then that income (at present) would be added to my Gov pension, so I would pay tax on the whole rental income, as my tax free allowance would have been 'used up' by my gov pension.. (I would also need to declare that letting income in Spain and may have some tax to pay here). In that type of case nothing would change.

If I had just a private pension from UK that would be taxed in Spain. If I also had rental income in UK that would be taxed in UK (at present) with a tax free allowance applied. If they remove that allowance then the tax would be on the whole amount in UK and I would declare it also in Spain, as above. Seems straightforward.

Chopera. In the situation you present:

The tax you would have paid in UK on the rental income, is off set against any Spanish tax liability. That is covered in the Double Taxation Agreement between UK and Spain


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## Chopera (Apr 22, 2013)

larryzx said:


> ...
> Chopera. In the situation you present:
> 
> The tax you would have paid in UK on the rental income, is off set against any Spanish tax liability. That is covered in the Double Taxation Agreement between UK and Spain


Yes, that's the point of my post - the dual taxation agreement means that as things stand, any UK tax allowances just mean more tax ends up being paid to the Spanish inland revenue instead.


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## larryzx (Jul 2, 2014)

Chopera said:


> Yes, that's the point of my post - the dual taxation agreement means that as things stand, any UK tax allowances just mean more tax ends up being paid to the Spanish inland revenue instead.


Sorry, I did not follow that, as in my case that is not so. A Gov employee pension is not taxed in Spain at all, so even if one got it all tax free in UK they would not pay any tax on it in Spain as it would be ignored here.

I see now you were talking only about rental income.


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## Lynn R (Feb 21, 2014)

larryzx said:


> I have a Gov pension in UK so I get taxed in UK on that and have the allowance applied. If I were to buy a property in UK and let it, then that income (at present) would be added to my Gov pension, so I would pay tax on the whole rental income, as my tax free allowance would have been 'used up' by my gov pension.. (I would also need to declare that letting income in Spain and may have some tax to pay here). In that type of case nothing would change.
> 
> /QUOTE]
> 
> ...


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## larryzx (Jul 2, 2014)

Lynn R said:


> larryzx said:
> 
> 
> > /QUOTE]
> ...


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## extranjero (Nov 16, 2012)

larryzx said:


> Sorry, I did not follow that, as in my case that is not so. A Gov employee pension is not taxed in Spain at all, so even if one got it all tax free in UK they would not pay any tax on it in Spain as it would be ignored here.
> 
> I see now you were talking only about rental income.


But next year you will have to declare your government pension , which will be included in working out your tax base, perhaps resulting in more tax in Spain, even though it will only liable for tax in UK.
If some one has a small Govnt pension, which, together with the state pension,( declared for tax in Spain, not exempted from UK tax as it's under the threshold) comes to under £10,000 , will it needed to be exempted if
A) the tax allowance in UK is withdrawn
B) the allowance is kept for Govnt pension
will the state pension be included, or taxed


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## stevesainty (Jan 7, 2011)

It is my view that if you are entitled to UK tax allowance, you will receive the full allowance to be offset against any income that is taxable in UK.

The proposed criteria for the entitlement to a UK tax allowance will be based on the % proportion of total income generated in UK, the figure proposed is 75%.
There are 3 kinds of income to be included in this,

Income taxed solely in UK for example, Government pensions, including Local Authority and Civil Service

Income that is taxed in UK and Spain, for example UK rental income with any tax paid in UK offset against any tax due in Spain

Income that is taxed only in Spain, for example UK State pension, non-Government Occupational Pensions & bank interest, with any tax paid in UK offset against any tax due in Spain.


So if you add up all the income generated in UK, and that total is 75% or more of your total income, you would be entitled to the full UK personal tax allowance.

If, for example, you only have UK rental income that is less than 75% of your total income, you would no longer be eligible for a UK tax allowance and so would be taxed on the full amount. This tax paid would be offset against any tax due in Spain from your UK rental income.

You could end up paying slightly more tax on UK rental income as you can only offset the UK tax paid up to the full amount of the Spanish tax due. Currently you pay tax in Spain based upon 40% of your net UK rental income (soon to be 50%).

NB

If you are in receipt of a UK state pension (Old Age) it is not paid tax free, but uses up as much of your personal allowance as needed to make it appear to be tax free. You must inform HMRC that you are tax resident in Spain to release your UK personal tax allowance currently used up on your UK state pension to be able to use it against other UK income (government Pensions and rental income)


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## extranjero (Nov 16, 2012)

But if the state pension ( not exempted) is declared in Spain, along with other pensions ( which have been exempted from UK tax, ) I am asking 
If the State pension didn't need to be exempted, as together with the Govnt pension it was under the threshold, if the UK allowance is kept for those with Govnt pensions , will the state pension still be included as part of the £10,000 or just the amount of the Govnt pension be protected?
Obviously if the state pension, together with the Govnt pension had exceeded the tax threshold, the state pension would have been exempted( via FD 9) but until the question of the UK allowance being withdrawn arose, there was no no problem.


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## larryzx (Jul 2, 2014)

extranjero said:


> C If some one has a small Govnt pension, which, together with
> D the state pension,( declared for tax in Spain, not exempted from UK tax as it's under the threshold) comes to under £10,000 , will it needed to be exempted if
> A) the tax allowance in UK is withdrawn
> B) the allowance is kept for Govnt pension
> will the state pension be included, or taxed




This is becoming complicated !

Gov pensions and other income are separate

So Gov pension taxable only in UK (but whatever it is maybe will need to be shown on the tax return in Spain to asses tax base) 

Item D. OAP is taxable only in Spain so UK exemptions etc do not apply. 

A If the tax allowance is withdrawn from Rental income in UK then, the tax one pays will still be subject to the provisions of the Double Taxation Agreement.

Item B. No reason why that should change.


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