Blogs in this series

Life in Culebrón is a very British view of life in a small village in Alicante province, my experience of Spain, of Spaniards and sometimes of the other Britons who live nearby. The tabs beneath the header photo link to other blogs written whilst I was living in other parts of Spain, to my articles written for the now defunct TIM magazine and to my most recent photo albums.

Thursday, May 12, 2016

What that Franklin chappie said

I don't really mind taxes. That doesn't mean that I like handing over my hard earned but I approve of the idea. I'm much keener on the model where we pay the taxes and, with them, our governments attempt to provide healthcare, education, infraestructure and all the rest than I am on the model where everyone looks out for themselves and to hell with the rest.

Anyway. For the past six years or so I've been getting a pension from a final salary pension scheme that I paid into for most of my UK working life. Because that money comes from a quasi government source the agreement between Spain and the UK was that it was exempt of Spanish taxes but taxed, at source, in the UK. Normally Spanish residents have to pay tax on their worldwide income here. In reality my pension is so small that it has never exceeded the personal UK allowance so, although Customs and Revenue send me coding notices and I get P60s and what not, I don't actually pay any tax on it. I also have a pension top up from some secondary UK scheme that I paid in to. That produces about £360 a year. That money is declared and taxed in Spain.

This being taxed in the UK had an advantage. It gave me two lots of personal allowances - one for the UK and one in Spain. Of course the tax people realised this and for the 2015 tax year - the tax year in Spain is a normal calendar year - they closed this "loophole". We are now sorting out the 2015 tax bills. The amount of my UK pension now has to be added to my Spanish earnings. The principal of no double taxation is maintained because any tax paid in the UK would be deducted from my Spanish tax bill.

I had a slightly complicated tax year in 2015 because I was technically self employed for a while. I'm having to use an accountant to sort it out rather than just accepting or amending the online draft tax declaration that the Spanish revenue people sent me back in April.

The accountant I use sent me a WhatsApp the other day to say it looked like I owed a bit less than 400€. This is not good but it's not heartbreaking either. It did make me wonder about the people who have decent pensions from the UK though: the ex police, ex military, time served civil servants etc. I've just had a quick look and it seems that the UK personal allowance is around £11,000 so if that suddenly becomes taxable at a mixture of the starting Spanish rate of 19% plus the portion that goes into a higher bracket charged at 24% (and my arithmetic is correct) then they are going to be facing an extra tax bill of just short of 3,000€.

I suspect that could be a bit of a hammer blow for lots of the pensioners here.

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