# Tax Residency



## chris&vicky (Feb 6, 2013)

Moving to Spain in 7 weeks and was going to inform HM revenue that I am no longer tax resident in UK so that I can get my rental income paid to me gross. 

I am a little confused though as my understanding is that I will not be tax resident in Spain until next year so where am I tax resident for the rest of this year?


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## Aron (Apr 30, 2013)

chris&vicky said:


> Moving to Spain in 7 weeks and was going to inform HM revenue that I am no longer tax resident in UK so that I can get my rental income paid to me gross.
> 
> I am a little confused though as my understanding is that I will not be tax resident in Spain until next year so where am I tax resident for the rest of this year?


The HMRC will give you all the information you need. 

You will still pay UK tax until you have sorted out your residency and seen a gestor. The gestor will do everything necessary. It is nothing to be confused about.

Even though you have residency and pay tax in Spain, The Inland revenue will still send you a tax code each year which should be NT.


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## chris&vicky (Feb 6, 2013)

Aron said:


> The HMRC will give you all the information you need.
> 
> You will still pay UK tax until you have sorted out your residency and seen a gestor. The gestor will do everything necessary. It is nothing to be confused about.
> 
> Even though you have residency and pay tax in Spain, The Inland revenue will still send you a tax code each year which should be NT.


Sorry I did not understand that. My UK letting agent has given me a form to complete so that my rent is paid to me gross as I am leaving the UK. Are you saying that I will pay tax on a tax return in UK until I am tax resident in Spain next year even though I am not living in the UK?


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## 90199 (Mar 21, 2010)

HMRC will decide, have a word with them.

I haven't been resident in the U.K. for years, but I still pay tax there, however I suspect that my circumstances differ somewhat from yours.


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## CapnBilly (Jun 7, 2011)

Even though your rental income will be paid gross, you still av to pay UK tax on it, although you will get a personal allowance. Ant tax you do pay can be offset against Any Spanish tax that is due


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## chris&vicky (Feb 6, 2013)

CapnBilly said:


> Even though your rental income will be paid gross, you still av to pay UK tax on it, although you will get a personal allowance. Ant tax you do pay can be offset against Any Spanish tax that is due


Thanks. Best to have it paid gross then to make use of my personal allowance. Although I don't really get why I pay tax on it in UK if not tax resident in UK and don't see how they give me a personal allowance if not resident in UK. I will give the revenue a ring.


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## snikpoh (Nov 19, 2007)

chris&vicky said:


> Thanks. Best to have it paid gross then to make use of my personal allowance. Although I don't really get why I pay tax on it in UK if not tax resident in UK and don't see how they give me a personal allowance if not resident in UK. I will give the revenue a ring.




Quite simple really - that's the law!

Rental income is one of those things that has to be taxed in UK. If you have tax to pay in UK, then you get a personal allowance.


If you get the timing right, you may have a period where no tax is paid (other than tax on rental income) in either country. It's all to do with the different tax years.


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## chris&vicky (Feb 6, 2013)

snikpoh said:


> Quite simple really - that's the law!
> 
> Rental income is one of those things that has to be taxed in UK. If you have tax to pay in UK, then you get a personal allowance.
> 
> ...


Thanks. That only applies to rental income then, any other like investment income is only taxed in Spain? So I assume you mean any investment income between now and January will not be not be taxed at all? With current interest rates that could save me a fiver!


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## Stravinsky (Aug 12, 2007)

chris&vicky said:


> Thanks. That only applies to rental income then, any other like investment income is only taxed in Spain? So I assume you mean any investment income between now and January will not be not be taxed at all? With current interest rates that could save me a fiver!


Becoming "zero rated" for tax in the UK wasnt as simple as just telling HMRC. We had to go to the Hacienda in Spain and get forms sorted, then they had to be sent back to the UK tax office who then did the deed.

We moved in an October, and didnt have to make a return in Spain until 16 months later


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## stevesainty (Jan 7, 2011)

There are certain incomes that are taxable in UK even when you are no longer resident. Most of these are also taxable in Spain as well, but, as has been pointed out already, you only pay tax once because of the dual taxation treaty.

One of these incomes is rental income on property. When you complete the form that your letting agent gave you, he will be absolved of all tax liability on your behalf to HMRC; that is why they want you to complete it but at least you receive it in full. You will need to account for the tax later.

You will need to complete an annual self assessment tax return to HMRC for the rental income. This is compulsory, but very easy to do online. If the property is jointly owned then both of you need to complete one.

For income received between 6 April 2013 and 5 April 2014 the return has to be filed anytime after 6 April 2014 and any tax due must be paid by 31 January 2015. You will have a full personal allowance to offset against it. However any other income you have received during the 2013-14 tax year will also use up said personal allowance.

You must also register with the Spanish tax system using form 'FD9 Spain individual' which you can download from HMRC website. The form is in English and Spanish and both parts need to be completed and sent to Hacienda. They will, hopefully, stamp it and give it back to you. You then forward it to HMRC.

You will have a full tax allowance in both Spain and UK to offset against any income that you receive.

Although you will have paid tax on your rental income in UK you will also have to declare it on your annual Spanish self assessment return but also declare the tax already paid. The rate of taxation will differ however and you may, depending on your circumstances, have to pay a little more tax in Spain.

The Spanish tax year runs from 1 January to 31 December, so you have to work out your income pro rata. However you do not have to register for Spanish tax until you have lived in Spain for 183 days. Once you have become tax resident though, you will be liable for the full Spanish tax year.

Other income that is compulsorily taxed in UK are so called Government pensions, Teachers, Policemen, Firemen, Civil Servants etc.

Incomes that you can elect to be taxed in Spain are Bank Interest, dividends, State old age pensions.

Also remember that things like lottery wins are also taxable in Spain.  

I hope that this is not too complicated for you. Feel free to ask more about it as I have just gone through the same procedure recently.


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## chris&vicky (Feb 6, 2013)

stevesainty said:


> There are certain incomes that are taxable in UK even when you are no longer resident. Most of these are also taxable in Spain as well, but, as has been pointed out already, you only pay tax once because of the dual taxation treaty.
> 
> One of these incomes is rental income on property. When you complete the form that your letting agent gave you, he will be absolved of all tax liability on your behalf to HMRC; that is why they want you to complete it but at least you receive it in full. You will need to account for the tax later.
> 
> ...


Hey thanks for taking the time to post such a detailed reply that is very kind of you. I may need to read it through a few times as my head is about to explode with everything that is going on at the moment  

A few of questions though if you don't mind. 

You say your allowance in UK is used up by "other" income, what other income? Surely not income that you are not taxed on because you are not resident? I don't get that.

You say certain things that you can "elect" to be taxed in Spain on like bank interest, but I thought once you were tax resident in Spain you had no choice you have to pay tax on this and you are not taxed on this in the UK if not resident there?

I have a private pension in drawdown so if during the period when I am not resident in UK and not tax resident in Spain (September 2013 - December 2013) if I draw down my whole year's entitlement I assume I will have to pay no tax on that? Seems a bit too good to be true that one  

Thanks


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## stevesainty (Jan 7, 2011)

No problem, just ask away.



chris&vicky said:


> You say your allowance in UK is used up by "other" income, what other income? Surely not income that you are not taxed on because you are not resident? I don't get that.
> 
> I mean anything that you have received as income in UK only, between 6 April 2013 and 5 April 2014. Be that employment income, bank interest, lol, dividends etc.
> 
> ...


HMRC are very friendly and if you ring their helpline they will arrange, free of charge, for a specialist to ring you back at a set time. He/she will be happy to answer all your questions.

I am not passing the book, by the way, I am happy to answer all your queries myself. Payback for all the help I have been given on this forum.


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## 90199 (Mar 21, 2010)

stevesainty said:


> Other income that is compulsorily taxed in UK are so called Government pensions, Teachers, Policemen, Firemen, Civil Servants etc.


Unless the recipient is a Spanish national, then they are/can be taxed in Spain.

One thought, that man who first thought of taxation, should have been taken round the back and shot


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## stevesainty (Jan 7, 2011)

Hepa said:


> Unless the recipient is a Spanish national, then they are/can be taxed in Spain.
> 
> One thought, that man who first thought of taxation, should have been taken round the back and shot


William Pitt the younger started Income Tax (December 1798 budget) to pay for the Napoleonic war, at a rate of two old pennies to the pound (2/240) for income over £60 pa. The bounder:boxing:


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## Aron (Apr 30, 2013)

chris&vicky said:


> Sorry I did not understand that. My UK letting agent has given me a form to complete so that my rent is paid to me gross as I am leaving the UK. Are you saying that I will pay tax on a tax return in UK until I am tax resident in Spain next year even though I am not living in the UK?


I haven't lived in the UK for about 9 years. I still get my tax code from the UK every year which is NT, nil tax. At any time HMRC could ask me to complete a tax return form if they felt it was necessary. I know this because they have told me. You can't just move away and pay no tax, it has to be done through your gestoria. Every year the tax year in Spain is from the 1st Jan - 31st Dec. if you move to Spain in say August, which is over halfway through the year, the tax office in Spain or the UK will determine where you pay this years tax.
As I said in my first post, ask HMRC for their advice before you leave, then the advice of a gestor when you get to Spain.


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## 90199 (Mar 21, 2010)

Aron said:


> I haven't lived in the UK for about 9 years. I still get my tax code from the UK every year which is NT, nil tax. At any time HMRC could ask me to complete a tax return form if they felt it was necessary. I know this because they have told me. You can't just move away and pay no tax, it has to be done through your gestoria. Every year the tax year in Spain is from the 1st Jan - 31st Dec. if you move to Spain in say August, which is over halfway through the year, the tax office in Spain or the UK will determine where you pay this years tax.
> As I said in my first post, ask HMRC for their advice before you leave, then the advice of a gestor when you get to Spain.


I steer clear of Gestorias, they are not all up to date. The Tax office is just down the road, so we make an appointment, walk down with the folder of documents and one of the staff completes our tax return for us, and it is free!!


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## Aron (Apr 30, 2013)

Hepa said:


> I steer clear of Gestorias, they are not all up to date. The Tax office is just down the road, so we make an appointment, walk down with the folder of documents and one of the staff completes our tax return for us, and it is free!!


Well my tax office is over an hour away, if the traffic is light. Then there is the parking which is impossible even if the traffic is light. Now saying that, I have a Spanish gestor who is recognised as a good gestor, contable and asesoria.


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## Aron (Apr 30, 2013)

Hepa said:


> I steer clear of Gestorias, they are not all up to date. The Tax office is just down the road, so we make an appointment, walk down with the folder of documents and one of the staff completes our tax return for us, and it is free!!


It is true about a few gestorias. You should do some research rather than pick one out of the phone book. In Spain, anyone can be an gestor, I could even though I'm not qualified. 
When we first came toSpain we were told on an expat site about a lawyer. We were told she was the best. This has proved to be the case. Through that lawyer, she recommended our gestoria. That advice was the best advice we could get and we have every confidence in that firms ability.
I would never advise people to do it yourself unless you know what you are doing. My wife used to be an accountant, but we still use our gestor.


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## chris&vicky (Feb 6, 2013)

stevesainty said:


> No problem, just ask away.
> 
> 
> 
> ...


Thank you. Yes of course I will speak to HMRC and a tax advisor but I think it is always good to have a rough idea of what's what so you can ask the right questions. 

I am beginning to think that you need to be an expert in taxaction if moving to Spain yet when I walk along the Costa del Sol at Benalmadena most Brits appear to be experts in intoxication!


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