# Tax on UK savings



## mr_madonna007 (Sep 17, 2012)

I'm sure this question has been asked many times before.

I will be moving to Spain a year from now.

I will still pay for my NI contributions to the UK from my savings, as I'm not at retirement age (I've paid 23/24 years in, so no point it stopping now).

I will be keeping a UK bank account with my savings.

Do I legally need to declare this to the tax authorities in Spain?

How would they know about my UK savings if I don't declare it?

I already have a Spanish bank account, and of course will transfer a lump sum for living expenses when I move, but also keep a lump sum in the UK.

Thanks


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## xabiaxica (Jun 23, 2009)

mr_madonna007 said:


> I'm sure this question has been asked many times before.
> 
> I will be moving to Spain a year from now.
> 
> ...


when you move to Spain & become tax resident then you will have to declare ALL WORLDWIDE assets & income

I have no idea if/how Spain would know about it if you didn't tell them., but the penalties for non-declaration are high

here's a recent discussion http://www.expatforum.com/expats/sp...on-overseas-assets-spanish-tax-authority.html


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## Stravinsky (Aug 12, 2007)

mr_madonna007 said:


> I'm sure this question has been asked many times before.
> 
> I will be moving to Spain a year from now.
> 
> ...


Well, one way they will know about it (if they choose to examine your finances) is by seeing that you are transferring money to your Spanish bank account from an account in the UK
Depends on how much your savings are as regards asset declaration, follow the link that Xabiachica put up


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## mr_madonna007 (Sep 17, 2012)

Stravinsky said:


> Well, one way they will know about it (if they choose to examine your finances) is by seeing that you are transferring money to your Spanish bank account from an account in the UK
> Depends on how much your savings are as regards asset declaration, follow the link that Xabiachica put up


Yes that's true, but there are ways ways around "money transfers" from your overseas bank account.

It's fine if you good at being "a master of deception", but as I'm not, I'd rather not try that as I'm a bad liar.

Reading the Spanish news on the "New Tax Laws" the consequences could be seriously damaging!

It's a shame you can't break your savings down to "just under the tax limit" spreading out your savings somehow.

The other things is, you would already have paid tax on your UK savings - I thought you wouldn't have to pay tax twice - is that correct?

So if you get taxed on your Spanish savings by Spain, then the savings you have in the UK get's taxed by Inland Revenue, surely declaring it, you wouldn't pay tax for the 3rd time surely?

Sorry if I'm sounding Naive :sorry::sorry:


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## Stravinsky (Aug 12, 2007)

mr_madonna007 said:


> Yes that's true, but there are ways ways around "money transfers" from your overseas bank account.
> 
> It's fine if you good at being "a master of deception", but as I'm not, I'd rather not try that as I'm a bad liar.
> 
> ...



Theres a double taxation treaty.
The correct stance is that if you are fiscally resident in Spain (which you will be presently if you are here for 183 days) then you declare your worldwide income in Spain for tax purposes, which means you use form FD9 to "zero rate" you for tax in the UK. Now, you also have to declare any assets over €50k in different catagories as well.

If you have paid tax in the UK then that is deductible from your return here, so although you dont pay tax twice, you have to make up the shortfall between the UK rates and the Spanish rates.

Clearer?


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## mr_madonna007 (Sep 17, 2012)

Stravinsky said:


> Theres a double taxation treaty.
> The correct stance is that if you are fiscally resident in Spain (which you will be presently if you are here for 183 days) then you declare your worldwide income in Spain for tax purposes, which means you use form FD9 to "zero rate" you for tax in the UK. Now, you also have to declare any assets over €50k in different catagories as well.
> 
> If you have paid tax in the UK then that is deductible from your return here, so although you dont pay tax twice, you have to make up the shortfall between the UK rates and the Spanish rates.
> ...


The fog is starting to clear...slowly :clap2:

So am I right in reading you would pay zero % tax on your UK savings if you fill out a FD9 form? 

It makes sense about paying the shortfall between the UK and Spanish tax rates.

I know you'll pay taxes on your Spanish savings account.

I know the tax rate changes depending how much you have.

You can tell I'm not much of an "accountant", so it does a get a bit confusing because the difference in taxation.


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## Stravinsky (Aug 12, 2007)

mr_madonna007 said:


> The fog is starting to clear...slowly :clap2:
> 
> So am I right in reading you would pay zero % tax on your UK savings if you fill out a FD9 form?
> 
> ...



After FD9 you won't pay income tax in the UK

You will pay tax on your worldwide income in Spain

You will be subject to Wealth Tax in Spain which has such high allowances that it probably wont affect you

You will have to declare your worldwide assets valued at over €50k per group, but see other threads for this. Its presently a declaration, not a tax.

If you get a UK tax free lump sum in the UK from pension or investment, it will be taxable in Spain

If you have a Civil Service pension it is NOT taxed in Spain at all, only at source in the UK


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## mr_madonna007 (Sep 17, 2012)

Stravinsky said:


> After FD9 you won't pay income tax in the UK
> 
> You will pay tax on your worldwide income in Spain
> 
> ...




Fog clearing even more :clock:

I've just checked this:

Income Tax Rates for the year ended 31st December 2013 

From (euro) To (euro) Income tax %


0- 17,707 24.75%

17,707- 33,007 30%

33007- 53,407 40%

53,407- 120,000 47%


Hopefully this list will stay in order, as you can't tab across!

24.75% is quite high to be taxed on anything between 0 and 17,700 euros.

If you pay taxes on your savings, theoretically, are you paying into the system correct? 

I don't plan to use any of the services i.e medical/welfare system, but if I ever had to, would I be entitled to use if if that time ever came?

On another topic, your stay in Spain is up to 183 days before you hit residency stage.

Is that 183 days in one year?

I know I'm asking a lot of questions. :ranger:


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## snikpoh (Nov 19, 2007)

mr_madonna007 said:


> Fog clearing even more :clock:
> 
> I've just checked this:
> 
> ...


Yes, the lower rate kicks in at 0 but you also have allowances. I think the single persons allowance is 5000 ish. So, in reality, you don't start paying 'till then.

If you are paying Spanish tax on UK savings, then you are OK.

The 183 days is per calendar year and not necessarily contiguous.

Finally, if you want to claim tax back that you've paid in UK. I understand that you can do this (on the FD9 as well?) BUT, you still end up paying 12% - that is, you don't get it all back.


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## mr_madonna007 (Sep 17, 2012)

snikpoh said:


> Yes, the lower rate kicks in at 0 but you also have allowances. I think the single persons allowance is 5000 ish. So, in reality, you don't start paying 'till then.
> 
> If you are paying Spanish tax on UK savings, then you are OK.
> 
> ...



So am I correct in reading that if you have 6000 euros, you would only pay 24.75% tax on 1000 euros from 5001 euros?


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## 90199 (Mar 21, 2010)

One small point, only interest on savings is taxed. Another small point, if you have Govt Pension in the U.K. it will be taxed in the U.K. no matter where you reside.


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## snikpoh (Nov 19, 2007)

Hepa said:


> One small point, only interest on savings is taxed. Another small point, if you have Govt Pension in the U.K. it will be taxed in the U.K. no matter where you reside.


I thought you could decide to have it paid gross if you wanted?


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## 90199 (Mar 21, 2010)

snikpoh said:


> I thought you could decide to have it paid gross if you wanted?



My pension is taxed in the U.K. it is a Govt. pension, for me there is no decision available.

O.A.P. that is paid gross and declared here for tax purposes and because it is under the threshold it is not taxed here.


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## CapnBilly (Jun 7, 2011)

snikpoh said:


> I thought you could decide to have it paid gross if you wanted?


You can complete an R105 to have interest paid gross, but not all banks/building societies provide the facility, in which case, HMRC will only refund over 12% as you said. Nor will they instruct the payer from an FD9 as they will do for pension income etc.

Just a small point, tax on interest is 21% not 24.75%.


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## xabiaxica (Jun 23, 2009)

Hepa said:


> My pension is taxed in the U.K. it is a Govt. pension, for me there is no decision available.
> 
> O.A.P. that is paid gross and declared here for tax purposes and because it is under the threshold it is not taxed here.


 I think you're at cross-purposes


you're talking about govt. (as in used to work for the civil service) pension - snikpoh is talking about the state pension (as in what OAPs get )


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## CapnBilly (Jun 7, 2011)

xabiachica said:


> I think you're at cross-purposes
> 
> you're talking about govt. (as in used to work for the civil service) pension - snikpoh is talking about the state pension (as in what OAPs get )


and I'm talking about interest LOL


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## chris&vicky (Feb 6, 2013)

Stravinsky said:


> After FD9 you won't pay income tax in the UK
> 
> 
> If you get a UK tax free lump sum in the UK from pension or investment, it will be taxable in Spain


Maybe stupid questions, sorry. 

If you have funds in savings that were the result of a tax free pension lump sum prior to you becoming tax resident in Spain is this taxed in Spain? Or is it just if you take the lump sum while resident? 

Also if you cash in a UK Share ISA while resident in Spain I assume you are liable for tax (Capital Gains?), but not if you cash in before becoming resident?

Thanks


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## extranjero (Nov 16, 2012)

*government pension*

Previously a government pension was not declared in Spain. Following new tax rules, although the pension is only liable for UK tax, it must now be declared in Spain. Not a lot of people know that!


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## CapnBilly (Jun 7, 2011)

chris&vicky said:


> Maybe stupid questions, sorry.
> 
> If you have funds in savings that were the result of a tax free pension lump sum prior to you becoming tax resident in Spain is this taxed in Spain? Or is it just if you take the lump sum while resident?
> 
> ...


Not stupid questions at all. Better to ask before you commit yourself.

The interest earned on savings from a tax free lump sum prior to becoming tax resident (i.e drawn in the calendar years before) will be taxable in Spain, when you are a tax resident, but the lump sum would only be taxed if received when you are tax resident.

Your assumption is correct in terms of Share ISA.


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## chris&vicky (Feb 6, 2013)

CapnBilly said:


> Not stupid questions at all. Better to ask before you commit yourself.
> 
> The interest earned on savings from a tax free lump sum prior to becoming tax resident (i.e drawn in the calendar years before) will be taxable in Spain, when you are a tax resident, but the lump sum would only be taxed if received when you are tax resident.
> 
> Your assumption is correct in terms of Share ISA.


Hey thanks, that's what I was hoping you would say. I am getting a bit paranoid now and with all the horror stories I read, all I want to do is do everything legally, pay my taxes, budget properly, and not worry too much!


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## extranjero (Nov 16, 2012)

If a person is paying into a savings plan, endowment policy,etc in the UK, which matures after becoming resident in Spain, then why should it be taxed in Spain? After all, the idea was to receive considerably more in bonuses and interest than you have put in! If Spain then taxes it and wipes out all or some of the extra money this is wrong. If years have been spent paying into these plans while living in the Uk, then it is robbery for Spain to tax them after becoming resident. Of course if the plans were commenced after becoming a resident, then yes, they would be taxed in Spain. How many people, planning to move to Spain are aware of this. These saving plans, retirement lump sums etc should be protected if started in UK before retiring here. What say you Capn Billy?


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## Stravinsky (Aug 12, 2007)

extranjero said:


> If a person is paying into a savings plan, endowment policy,etc in the UK, which matures after becoming resident in Spain, then why should it be taxed in Spain? After all, the idea was to receive considerably more in bonuses and interest than you have put in! If Spain then taxes it and wipes out all or some of the extra money this is wrong. If years have been spent paying into these plans while living in the Uk, then it is robbery for Spain to tax them after becoming resident. Of course if the plans were commenced after becoming a resident, then yes, they would be taxed in Spain. How many people, planning to move to Spain are aware of this. These saving plans, retirement lump sums etc should be protected if started in UK before retiring here. What say you Capn Billy?


Why? Because you have chosen to live in a Spanish tax situation and therefore you pay taxes due under the laws here ... Same as a tax free lump sum on a pension .. it's taxable here and has been for at least 6 years as I knew about it before I came here. If people aren't aware of it before they move here then they havent done their research properly.

I have endowments, pensions and more coming out this year .... and I wont be a tax resident in Spain when it happens 

I guess the answer is if you dont like it, then dont live here


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## agua642 (May 24, 2009)

You could also not be a permanent resident, then you're not liable to pay Spanish taxes. 
I'm sure there are other loops which are legal! That can be jumped through, it's all about knowing the system and applying in the correct way, without breaking the law 😊


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## Stravinsky (Aug 12, 2007)

agua642 said:


> You could also not be a permanent resident, then you're not liable to pay Spanish taxes.
> I'm sure there are other loops which are legal! That can be jumped through, it's all about knowing the system and applying in the correct way, without breaking the law 😊


Theres a difference between what I think you are referring to as permanent residency and fiscal residency

You can actually be a "resident", because you live here for between 3 and 5.9999999999 months recurring, and still not be a tax resident 

Theres not any loops that even the experts that I have spoken to know that show a way of an ordinary person living here for more than 6 months and not being a tax resident.


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## extranjero (Nov 16, 2012)

I still think that any savings plan commenced before residency and maturing afterwards should be exempt from Spanish Tax. Its a licence to grab money!


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## agua642 (May 24, 2009)

I agree! Robbing B***** only the banks & governments can get away with this type of behaviour


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