# The Plan



## johnbear1 (Apr 6, 2015)

So here it is in a nutshell. I have lived in Benalmadena but have returned to UK for personal reasons.. I have an NIE and residency. I shall return when I retire and here's how .
THE PLAN: Rent my house in UK to pay for the rent in Spain, But the UK pension will be my income so what is the best way to get my monthly pension in my pocket ?
say I save 12 months rent before I leave when that ends in Spain I will have 12 months rent from UK in the bank to exchange through smart currency, but the pension and my rental income concern me for fear of losing it to the taxman.

My Question is to those already in Spain is.....How do you do it ??


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## 90199 (Mar 21, 2010)

I pay tax in the U.K. on my Govt pension. I pay tax in Spain on the gains from my investments and O.A.P. 

I use a Spanish accountant to look after my tax returns, I use a financial adviser to minimise my income tax and inheritance tax liabilities on my investments, and to maximize the returns on my investments.


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## johnbear1 (Apr 6, 2015)

I actually at this moment in time would not pay tax as I am under the personal allowance I would have to pay tax on my rental income but could maybe offset it against the rental payments made in Spain

I posted the thread a bit hastily I should have asked..... how do I get paid my UK STATE pension without losing out on the exchange rate ?


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## 90199 (Mar 21, 2010)

johnbear1 said:


> I actually at this moment in time would not pay tax as I am under the personal allowance I would have to pay tax on my rental income but could maybe offset it against the rental payments made in Spain
> 
> I posted the thread a bit hastily I should have asked..... how do I get paid my UK STATE pension without losing out on the exchange rate ?


I let my pensions accumulate in a U.K. bank, then when the exchange rate is in my favour, like now, I transfer a lump sum using Smart currency exchange (there are others) to my Spanish account. Transfers over 3000 GBP do not attract commission. 

Regarding rental income I am sure others will respond, but you may need to take professional advice.


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## baldilocks (Mar 7, 2010)

johnbear1 said:


> I actually at this moment in time would not pay tax as I am under the personal allowance I would have to pay tax on my rental income but could maybe offset it against the rental payments made in Spain
> 
> I posted the thread a bit hastily I should have asked..... how do I get paid my UK STATE pension without losing out on the exchange rate ?


Your UK state pension can be paid by the UK pension to a Spanish bank and you will get the full business rate on the day. It will arrive here on the same day that it would have in UK. The Pensions Agency in Newcastle are a very helpful bunch.

Their e-mail is [email protected]


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## Chopera (Apr 22, 2013)

johnbear1 said:


> So here it is in a nutshell. I have lived in Benalmadena but have returned to UK for personal reasons.. I have an NIE and residency. I shall return when I retire and here's how .
> THE PLAN: Rent my house in UK to pay for the rent in Spain, But the UK pension will be my income so what is the best way to get my monthly pension in my pocket ?
> say I save 12 months rent before I leave when that ends in Spain I will have 12 months rent from UK in the bank to exchange through smart currency, but the pension and my rental income concern me for fear of losing it to the taxman.
> 
> My Question is to those already in Spain is.....How do you do it ??


It sounds like the rent from your UK house will also be income. Whether you choose to use it to pay for the rent in Spain is irrelevant, it's still income.


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## Chopera (Apr 22, 2013)

johnbear1 said:


> *I actually at this moment in time would not pay tax as I am under the personal allowance I would have to pay tax on my rental income but could maybe offset it against the rental payments made in Spain*
> 
> I posted the thread a bit hastily I should have asked..... how do I get paid my UK STATE pension without losing out on the exchange rate ?


Are you basing this on UK tax laws or Spanish ones? If you retired to Spain then you'd be subject to Spanish tax laws, but you'd also have to pay tax on the UK rental income in the UK. However in 2017 the UK government is thinking of removing the tax allowance for non-residents.


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## johnbear1 (Apr 6, 2015)

*Income*



Chopera said:


> It sounds like the rent from your UK house will also be income. Whether you choose to use it to pay for the rent in Spain is irrelevant, it's still income.


Since writing I have decided to sell my UK property and buy an apartment and whats left over SPEND.....do you think that is classed as income ?I could survive for five years before my pension I would not work.


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## Lynn R (Feb 21, 2014)

johnbear1 said:


> Since writing I have decided to sell my UK property and buy an apartment and whats left over SPEND.....do you think that is classed as income ?I could survive for five years before my pension I would not work.


Any interest you receive on your capital is classed as income, but you are not taxed on the capital itself (unless it's high enough to bring you within the scope of Spanish wealth tax, but I believe that has to be in excess of €700K per individual). If the amount is over €50K you would also have to make an annual declaration of overseas assets to Spain, as well as an income tax return.

By the way, we did exactly what you are proposing to do as we moved to Spain and had no income for several years until our pensions became payable. We did not have to pay any income tax in either the UK or Spain - but we do now, as we have pensions coming in. We have to pay more tax here in Spain than we would in the UK, as the personal allowances are lower here, but we find it is balanced out by other things being cheaper, especially Council Tax and the general cost of living.


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## johnbear1 (Apr 6, 2015)

Lynn R said:


> Any interest you receive on your capital is classed as income, but you are not taxed on the capital itself (unless it's high enough to bring you within the scope of Spanish wealth tax, but I believe that has to be in excess of €700K per individual). If the amount is over €50K you would also have to make an annual declaration of overseas assets to Spain, as well as an income tax return.
> 
> By the way, we did exactly what you are proposing to do as we moved to Spain and had no income for several years until our pensions became payable. We did not have to pay any income tax in either the UK or Spain - but we do now, as we have pensions coming in. We have to pay more tax here in Spain than we would in the UK, as the personal allowances are lower here, but we find it is balanced out by other things being cheaper, especially Council Tax and the general cost of living.


Thank you for taking the time to reply on this lovely one time only sunny day lol


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## peedee (Aug 30, 2015)

johnbear1 said:


> Since writing I have decided to sell my UK property and buy an apartment and whats left over SPEND.....do you think that is classed as income ?I could survive for five years before my pension I would not work.


We are selling up in the UK but with some of the capital buying a UK buy to let to provide income and, should we ever need it, a foothold on the UK housing market..
We have set up a limited company to purchase the buy to let so it's a separate entity and UK based.
We are putting the capital to buy the property into the company as a directors loan which the company will then pay back to us from the rental income thus providing our income.
By repaying the loan the company will make no profit and so there will be no tax liability. As we will not be charging interest to the company the loan repayments to us will not be taxable as there will be no 'income' element.
So over a period of time the companies balance sheet will improve as it owns more of it's assets so the company will be worth more but it's probably going to take 20 years before the company makes a profit.

You may be able to do a similar process by putting your property into a company (as a directors loan) and taking repayments of that loan interest free to pay your rent in Spain.


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## bob_bob (Jan 5, 2011)

johnbear1 said:


> Since writing I have decided to sell my UK property and buy an apartment and whats left over SPEND.....do you think that is classed as income ?I could survive for five years before my pension I would not work.


Don't sell your UK property...pay any tax required but keep it, UK property is going up and Spanish property is still floating in the crappa. Should you need to return to the UK you or your loved ones may well be stuck with a property they can't sell or if they do the property will hit take a hit on its purchase price.


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## johnbear1 (Apr 6, 2015)

*the Plan*



bob_bob said:


> Don't sell your UK property...pay any tax required but keep it, UK property is going up and Spanish property is still floating in the crappa. Should you need to return to the UK you or your loved ones may well be stuck with a property they can't sell or if they do the property will hit take a hit on its purchase price.


Thank you but the thought of returning to the UK turns my stomach !!


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## bob_bob (Jan 5, 2011)

johnbear1 said:


> Thank you but the thought of returning to the UK turns my stomach !!


John, non of us now what lies ahead for us in the future. I'm ex army and a retired nurse with a reasonable UK size property portfolio (some inherited most bought by us) and a few years ago we sold a London property to allow us to buy something special...then I went ill, deaths door stuff. If we'd spent half a million back then I doubt we'd get €200k for it now.

I'm extremely lucky in having a very comfortable income which allows me to travel pretty much wherever I/we fancy and thats what we do, weekend here, week or more there and it may be that when the wife hangs up her nursing uniform we will go and rent long term for a year but...we'd never buy now in Spain or anywhere else for that matter. If I was twenty years younger, healthier and had lived for a year or so in Spain, was truly confident we would stay then I'd buy but at the age of 60 there is simply no way I would.

Look on the likes of Spanish property for rent in Spain properties for rent Spain real estate and see what you can get. With rental you can hand back the keys and move, buy and you'll be stuck.


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## baldilocks (Mar 7, 2010)

bob_bob said:


> John, non of us now what lies ahead for us in the future. I'm ex army and a retired nurse with a reasonable UK size property portfolio (some inherited most bought by us) and a few years ago we sold a London property to allow us to buy something special...then I went ill, deaths door stuff. If we'd spent half a million back then I doubt we'd get €200k for it now.
> 
> I'm extremely lucky in having a very comfortable income which allows me to travel pretty much wherever I/we fancy and thats what we do, weekend here, week or more there and it may be that when the wife hangs up her nursing uniform we will go and rent long term for a year but...we'd never buy now in Spain or anywhere else for that matter. If I was twenty years younger, healthier and had lived for a year or so in Spain, was truly confident we would stay then I'd buy but at the age of 60 there is simply no way I would.
> 
> Look on the likes of Spanish property for rent in Spain properties for rent Spain real estate and see what you can get. With rental you can hand back the keys and move, buy and you'll be stuck.


What it comes down to is make sure you are sure before taking the big step, just as you should with any other thing. Apart from a sister in UK, my family consists of SWMBO and her mother and we are all here in this house. I have neither need nor desire to return to the UK, not even for a holiday.


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## mrypg9 (Apr 26, 2008)

johnbear1 said:


> Thank you but the thought of returning to the UK turns my stomach !!


I wouldn't make that comment until you have had more experience of living outside the UK. 
You will be moving to Spain, not Paradise.

Incidentally, you need to bear in mind that however and wherever your UK income is paid it will be subject to variable rates of exchange.
In the seven years I've lived here I've seen the £ go from parity , one £ one euro, to £1=1.43 euros.
Those are big fluctuations to handle if you are on a fairly small income.


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## xabiaxica (Jun 23, 2009)

peedee said:


> We are selling up in the UK but with some of the capital buying a UK buy to let to provide income and, should we ever need it, a foothold on the UK housing market..
> We have set up a limited company to purchase the buy to let so it's a separate entity and UK based.
> We are putting the capital to buy the property into the company as a directors loan which the company will then pay back to us from the rental income thus providing our income.
> By repaying the loan the company will make no profit and so there will be no tax liability. As we will not be charging interest to the company the loan repayments to us will not be taxable as there will be no 'income' element.
> ...


Are you certain that the loan repayments are tax free in Spain?


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## Rabbitcat (Aug 31, 2014)

It's a difficult choice and maybe you should have a look at some of the buy versus rent threads on the forum.

Personally as I ponder the comp!ex question I switch between the two options and haven't 100% decided. There are some excellent info and experiences on this forum worth browsing


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## peedee (Aug 30, 2015)

xabiachica said:


> Are you certain that the loan repayments are tax free in Spain?


This is what we've been advised.
My logic is if I lend you a fiver and then you give me the fiver back I would not expect to pay tax on it as I have not made a profit or generated an income so the advice seems right to me :eyebrows:


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## Alcalaina (Aug 6, 2010)

johnbear1 said:


> Since writing I have decided to sell my UK property and buy an apartment and whats left over SPEND.....do you think that is classed as income ?I could survive for five years before my pension I would not work.


We did this too and we converted half the proceeds to Euros, which we put in a savings bank here in Spain. The exchange rate was €1.30 to the pound at the time. So when it sunk to almost parity we were protected.


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