Income Tax for Retirees

[Sir Real]

Hi

I'm considering selling-up in the UK, and living in FV.  Something that's giving me cause to pause is income tax.  I understand that, once resident (183 days rule), all income is subject to Spanish Income Tax, which is considerably higher than in the UK.

I understand that there's a Double Tax Agreement, so Spanish IT is net of any UK liabilities, but it seems to be a significant additional amount.  I know the stock advice is to consult a qualified professional, but I'm still at the planning stages, so any kind of steer would be appreciated.

[gattaca66]

Yes, you are correct, after 183 days residency in a tax/calendar year you become tax-resident and are required to declare your full years income by the due date in the following year. End of this month, June, for the 2015 return.

All income from whatever source or country is included, and tax payable at the significantly higher Spanish rate. However, in the return you declare the amount of tax already paid in the UK, and this is deducted from the total due.

So yes, you pay more, but balancing that out is the much lower rate of council tax (IBI), no heating bills, much lower road tax etc. For us, it still weighs heavily in favour of living here in Fuerte.

You can find the Spanish tax rates online, and it's not hard to work out the payments. Best of luck with any decision-making!

[Sir Real]

Hi Gattaca66
Thanks for your reply.  Yes, I found those rates online before I posted, and did a quick calculation.  I'll have to re-check - it seemed that my net income would be 21% lower - a massive hit.

I'll bear in mind the lower bills, plus I'd be mortgage free (which I'm not at present).  I suppose I'll have to determine what my actual disposable income is now, compared to what it would be in FV.  I hate doing sums!!

[Johnrgby2]

Hi Gattaca66
Thanks for your reply.  Yes, I found those rates online before I posted, and did a quick calculation.  I'll have to re-check - it seemed that my net income would be 21% lower - a massive hit.

I'll bear in mind the lower bills, plus I'd be mortgage free (which I'm not at present).  I suppose I'll have to determine what my actual disposable income is now, compared to what it would be in FV.  I hate doing sums!!

You have to also bear in mind, there are allowances to set off against tax as in but not as generous as The UK we currently have circa 14800 euro or there abouts in allowances, it is best to speak to a professional.

[Sir Real]

Thanks John

I took a closer look at tax bands and allowances today.  Looks like it would cost about â,¬360 a month more to pay Spanish taxes, not the 20% odd I originally thought.  Not great, but do-able. Against that, I'd be mortgage-free, and as Gattaca says, there's the lower cost of living. 

As you suggest, I'd take professional advice before making an irrevocable decision.  My income tax is uncomplicated.  I currently have a tax adviser do my UK returns, which started when a CGT issue was outside my comfort zone.  Previously I did my own, and could easily revert to doing so again, as there's little difference most years.  (In calculating it I mean, not in the figures!).

Point above is, I don't think I'm too far adrift on my present calcs, even if it's +/- 10%, but best to be sure.  No rush, as I have to sell-up first, and I don't expect a very buoyant property market for a while...