Will My UK Pension Be Taxed in Spain?

As a British expat living in Spain, you might wonder about your UK pension’s tax obligations. The critical question is – will my UK pension be taxed in Spain?

The general rule is that if you’re a tax resident in Spain, your worldwide income, which includes your UK pension, will be subject to Spanish income tax. The tax rate will depend on the amount of your income and can range from 19% to 47%.

Your UK state pension and private pensions will fall under the ‘general income’ category in your Spanish tax return. However, certain pensions, like civil service pensions, may still be taxed in the UK.

A relief is available under Spanish law for those who receive a ‘lump sum’ payment from their pension scheme. This allows you to claim a tax reduction of 40% on lump sums received, provided certain conditions are met.

If you decide to move your UK pension into a QROPS (Qualified Recognised Overseas Pension Scheme) or a SIPP (Self-Invested Personal Pension), it’s important to be aware that different tax rules may apply. For instance, QROPS can offer tax benefits, including potential exemptions from UK inheritance tax. However, withdrawals from your pension may still be subject to Spanish taxation.

The UK-Spain Double Taxation Agreement ensures you won’t be taxed twice on the same income. Any tax you pay in Spain can be offset against any UK tax liability on the same income.

Given the complexity of international taxation, it’s highly recommended to seek professional tax advice when dealing with pensions overseas. The expert team at Chorus Financial can provide advice and guide you through the intricacies of managing your UK pension in Spain, ensuring you’re tax-efficient and compliant with local regulations.