Do I have to Pay Tax in Spain on My UK Pension?

Navigating the financial obligations as a British expat living in Spain can be a complex task. One of the most pressing questions that arises is – do I have to pay tax in Spain on my UK pension?

Generally, if you’re a resident in Spain, you’re obliged to pay taxes on your worldwide income, which includes your UK pension. There are, however, some variations depending on the type of pension you receive.

For UK state pensions and annuities, they are taxable in Spain if you are a resident there. Therefore, you should declare this income on your Spanish tax return. Fortunately, thanks to the double taxation agreement between Spain and the UK, you won’t be taxed twice on the same income.

For private pensions, including lump sums, the situation can be more complicated. Part of the pension may be tax-free, and the remaining amount is typically subject to the progressive tax rates in Spain, which can be lower than those in the UK.

It’s also crucial to be aware of the Modelo 720 declaration. This Spanish law requires residents to report assets held outside of Spain if they exceed €50,000. This includes pensions and can incur heavy penalties if not correctly reported.

But remember, Spanish tax laws are complicated and can change frequently, and the interpretation can vary depending on your specific circumstances. Misunderstanding the rules can lead to significant tax liabilities and penalties.

If you’re unsure about your tax obligations in Spain on your UK pension, professional advice is invaluable. Chorus Financial’s team of specialists have an in-depth understanding of both Spanish tax laws and UK pension rules. They can provide personalised advice to ensure you meet your tax obligations while maximising your retirement income.