UK Military pension and moving to Spain??

I have searched the previous posts and can't find any info on UK military pension recipiants

moving to Spain. If someone can re-direct to a thread thanks in advance.

My question simply is: do recipiants of UK military pensions, have their pension entitlement

frozen on  moving abroad (in particular Spain), or are the same benefits available i.e. annual increase/ index linking etc?

cheers.

As far as i am aware they are treated the same as Civil Service, police etc. ie index linked etc etc.

If you are going to be resident it may be worth enquiring if your services pension is trated the same as my civil service pension ie. it always has to be taxed in UK. It means that if you become tax resident in Spain you get the benefit of 2 tax allowances.  Your civil service pension taxed in UK and receiving UK tax allowance. State pension or any other income  paid tax free to Spain and taxed here in Spain effectively tax free in my case.

Jean

Hi Jean,

Can you enlighten me further re. state UK pension, who do I pay tax to UK or Spain?

Thank you

1.  Your pension will be subject to the same rules as UK, that is, you will continue to receive the annual increments and it will continue to be index linked.

2.  These pensions are taxed at source and will be paid to you after tax is taken away in UK.  You do not even need to declare this income in Spain but ensure you keep your annual P60 issued by Xafinity so that you can prove tax has been paid.

3.  You cannot get this pension paid free of tax in UK.

4.  If you are having the money paid into a bank in Spain, ensure you do it through Xafinity.  You will receive a better exchange rate and will pay no charges for this. 

Ioned1

Spain is in the EU, so pensions paid to us here are index-linked etc (not the case if you move to Australia, for example, as we looked into that option a few years ago).  John receives an Army pension, which is paid tax-free into his bank account here in Spain, as is his state pension.  We both have Civil service pensions paid into UK banks, which are of course taxed in the UK.   Unfortunately, with the current economic situation, there weren't increases to the Army and civil service pensions, but if there had been we would have been eligible for them.

Sue

Hi Kathy

If you are resident in Spain you should pay tax in Spain on your worldwide income.

However, if you receive certain govt pensions such as Civil Service or police thay MUST always be taxed in UK. You therefore receive  UK tax allowance against civil service pension  plus a Spanish tax allowance against the state pension.

The Spanish tax allowances are about 5000 euros for under 65  and about 6000 over 65. These are not the exact figures but give a rough idea. I understand there are allowances against mortgage on main residence, dependants etc but as they do not apply to us I do not have any details.

Jean

Hi Jean and sue thank you for the replies, very enlightening.

Bobaol, what I was most concerned with was whether I had to pay not only tax in the UK which is taken out at source but pay in Spain also. (I am talking about State pension only)  Can you please enlighten me on Xafinity?

Many thanks and regards Kathy

UK state pensions are classed as income.  If you are resident in Spain, you should declare it as income and you will given a Spanish allowance to offset it against.  You need to inform the DWP in UK and they will pay the pension free of tax. Personal allowances for Spanish income tax purposes are €5,151, which increases to €6,069 for persons over age 65 and €6,273 for persons over age 75.

You then pay tax at 24% on income above those allowances up to the next level of 28% at €17,707 (so you need to earn €22858 before you pay the higher rate.  Then up to €33,000 (odd) before the 37% rate kicks in. (so, income of €38,000 plus to pay this rate).

If you are not resident in Spain and continue to get your STATE pension (which is classed as earned income, unlike the forces and civil service pensions) then you should keep the P60 you will receive from the DWP to prove you have paid tax on it  (there is a dual taxation system between Spain and UK which means you do not pay tax to both countries).

Xafinity is the paymaster which pays occupational pensions (forces, civil service, NHS etc).  Note that NHS pensions are NOT classed as civil service pensions and must be declared for tax purposes along with the state (OAP) pension.

Hi Bobaol

This is not a straightforward topic, which is why we are trying to find somebody here who understands both Spanish and UK tax rules to discuss it further!  My state pension is paid to me here in Spain tax-free, however I also have a civil service pension (paid in the UK) and private pension (paid into my Spanish account), both of which are taxed at source!  I haven't received a P60 for the state pension, only my other two.

We assume that when you say there are no charges when you are paid through Xafinity you are referring to receiving charges for a Spanish bank account.  John received a letter about his Army pension when he changed from a UK bank to a Spanish one, stating that there would be a small monthly administrative charge for this.  The exchange rate though is a good one!

 Sue

Thankyou bobaol, much appreciated

Although UK state pension is taxable it is not taxed at source, you will receive an annual notice advising you how much it is going to be for the coming  tax year. If you receive any other pensions/earnings your tax code will take into account the state pension. If you become  tax resident in Spain you would have to arrange with the Inland Revenue for this to be adjusted. Civil Service pensions are taxed at source but the UK and Spain have double taxation agreements so tax wont be paid twice on the same pension.

Hi all

Once you are officially tax resident in Spain the UK tax office will send you a form telling you which part(s) of your income, if any, are still taxable in UK.

There is a non UK resident section at the HMRC who can answer queries their tel number is 0151 210 2222

Jean

Actually, suemac, it should be quite straightforward.  It all depends on whether you are resident or not.  If you are resident, all pensions less civil service, forces, fire service etc pensions, should be declared for tax purposes in Spain.  That includes occupational pensions (not including the aforementioned which do not have to be declared for tax purposes) NHS pensions, private pensions etc.  You should receive these with no tax deducted in UK.  You have to fill in a certificate E101 which will then cancel all tax liability in UK except for the forces pensions. 

This income is then added together and your personal allowances taken off before you pay tax on anything above the limit in Spain.

You will not receive a P60 from your state pension unless you ask for one (Don't know why, all other pension providers send one out automatically).  You can, however, retain your bank statements as the tax taken will be shown on there (example: payment £200 then PGOTax £57 - or something like that). 

Yes, I meant no charge from your Spanish bank for paying pensions directly in.  The admin fee is (or was) £4 a month but the exchange rate is almost the commercial rate so you make on that.  

However, as the original question was regiard UK Military pensions, I think that has been answered fully ie tax deducted at source and annual pay rises (if any - rises are calculated on the inflation rate in Sep/Oct the previous year and paid in April - hence no pay rise this year as inflation was negative back in Sep/Oct).

Hi

To become tax resident in Sapin I needed a letter from the Spanish Tax Office -Hacienda- accepting me as tax resident in Spain. I then had to complete form FD9 to submit to HMRC.

I used a company to do all the paperwork for me. They completed the Spanish tax return and liaised with Hacienda on my behalf. It cost 310 euros in total but by the time it was sorted I had 18 months tax refunded by HMRC so it was worth doing.

Unfortunately I think anyone thinking of doing this now has missed the chance of submitting Sapnish tax return for 2009 - deadline was 30 June- but could be worth checking.

NB I only profited because I have a Civil service pension, it will not work for everyone.

Jean

Hello I am moving to Spain in Apr 13 i will get a Military Pension mthly but have it paid into my English Bank and transfer money when i need it i know that i will have to pay tax on it.  Should i inform the HMRC in the UK that i am moving to Spain? When i get a job in Spain i will then also pay Spanish tax do i inform the Spain tax people about my Military Pension?

You cannot opt to have the tax paid in Spain.  Military pensions (along with others) are taxed at source in UK.  They will not be taxed in Spain.   

It will form part of your Global income but will not be taken into account for tax purposes in Spain.  It will be totally ignored.

bobaol thank you very much.  so i do not have to inform HRMC about moving to Spain then. 

 Well, I informed them but purely so I can get tax notifications by post etc.  They will continue taking the tax off your Military pension whether you tell them or not.  You will have to tell them when you eventually get round to the State Pension but that is so they won't add it to your Military pension for tax purposes.  

thanks for all your replys.  But how will spain know that i have an income if i do not tell them. Because at the moment this money will go into my English account and will only go to my spain account when i transfer it?