Tax on my Civil Service Pension?

Hi there, and welcome to the Forum!

I have been looking at this very issue for when I legally retired in the next 2 years.

I (like you) am in receipt of a civil service pension which is currently not taxable, but declared in Spain where I am resident.

I have been officially advised that once I receive my state pension it will take me over the threshold making me liable to pay tax of at least 2,000€ plus.

The civil service pension is a non exportable benefit, therefore can only be paid into a Uk bank, whilst the State pension can be paid directly into a Spanish account; either way, these have to be declared in your yearly return and consequently you become liable to pay tax. 

I speak as a resident of Spain, and therefore it may be different if you are non resident.

The best course of action is to appoint a Gestoria to handle such matters and save any confusion. 

Hope this helps

Regards

Hi John the situation with the pension under the tax rate in UK is that it becomes part of your total income for tax in Spain as you have to pay tax on it as far as they are concerned.  My husband has a small army pension and it is included in his worldwide income here.  There are extra allowances here depending on your age and your partners income and a good tax person should advise you of these.   If the CS pension can only be paid into a UK bank what would happen if your bank withdrew your right to an account there?

Hi, my wife has a civil service pension, she worked for DWP. It gets paid directly into our Spanish bank account. You are correct about the tax situation, her state pension pushes her into a bracket to pay tax. 

Many thanks Jeanne58, Alicia, and LM18 for your prompt responses.(Much appreciated by me) 

I have very quickly realised that I am certainly going to have to speak to a number of "professionals" if I am going to get to Spain.

Thanks again for your kind attention.

Regards

John

Hi I am in a similar situation, I am resident, have an occupational pension that can only be paid in the UK.  I declare it to the Spanish tax authorities but have submitted the relevant forms issued by Spain to HMRC so that I avoid double taxation.  I am now waiting for HMRC to sort out their side of things.  I would say don't hold your breath for HMRC,. I wrote to them over 18 months ago, have made several phone calls and have received the Covid excuse and still I am waiting 😟😟

To say they are tardy is an understatement, HMRC even tried denying they received and documents, despite writing to me at my Spanish address!

Many thanks for your post LosPardoslady. Which I much appreciate.  Regards John

Hmrc are way behind, we became tax resident in 2018, did all the paperwork to show we were not tax resident in Uk. Did a small Sipp withdrawal in 2020, which was taxed at source. I finally had a refund in February this year. They lost my tax returns twice and like you said they were unaware we lived in Spain, despite them writing to us, and sending our return to complete to our Spanish address!

You do not pay tax twice of course on CS type pension. However once you are signed on to the local padron the Sp-tax Hacienda/Tributaria consider you as tax resident. At this point it is wise to convert to Sp Tax declarations (by calendar year) and obtain at the earliest chance a zero rating (eg ex-pat/non residency) with HMRC, along with a fiscal residency certificate issued here. Failure to do so can land you liable to fines in Spain. (They research back years, but can only demand back-tax for 4 yrs)  Your CS pension is taxed at source but MUST still be declared (in a different section) each year along with other income such as State pension, investments etc. on your annual submission. By declaring  the CS pension as income, it keeps you legal, does not incur tax, but MAY put your total earnings into a higher bracket which might need a slight increase on local tax here. Whilst all this can be done yourself, it is much easier to employ an accountant familiar with both tax authorities. The fee for a normal annual submission done by a professional can be €60 to 200 depending on complexity and their time used.

Most times a husband and wife are better off taxed as individuals in Spain. Typical annual tax for a man with state and occupational pensions plus modest investment income would be <€2k. Less the tax on any Uk pensions paid at source. So somewhat more than you are probably paying as Uk resident.

Hello Seafarer, 

Many thanks for taking the time to respond to my question, which I much appreciate. I am finding all of the documents requirements to move to Spain very complex and will certainly need to seek the advice of professionals on the matter. I understand that I need to declare all Global income to the Spanish authorities and have read that my CS pension should be taxed by the UK HMRC. As my CS pension is below the HMRC Personal Tax allowance (about £12,500), however, then how will HMRC calculate the tax payable? e.g. If my CS pension was ,say, £13,500 pa then I would be liable for 20% on the "excess" £1000. Another contributor to this form has advised that, in this situation, the Spanish Tax authorities would claim the tax payable in agreement with the UK HMRC. My wife and I have dreamed of retiring to the sun and have read that the cost of living in Spain is better that the UK, however, is it affordable? I currently pay 20% tax on my income over £12,500 but in Spain this could be 19% to 30% over income of circa ^