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Researched by volunteer Philip Carroll.
The other day there was a long discussion about how the UK government pension would be used when calculating tax.
I have written extensively regarding this over the past couple of years. I posted that based on a government pension of £11,000 and a state pension of £6,000 the tax due would be circa €235, with another poster stating categorically that I was wrong and it would be €1,524, tax on the full amount of the state pension, as the personal allowance would be used by the Government pension.
After creating a draft tax return I have to record that my figure was wrong, and the correct figure (for Valencia) should be €247.88. In my defence it was nearly midnight, and I was using a calculator (and my fingers).
Comment from member: I declared my government pension this year, tax bill went from 500 to 2000 euros, ouch
Philip Carroll The extra amount you have to pay really depends upon the amount and mix of your income. So, as an example
Income of £14k Government pension and state pension of £6k. Normally with a state pension of £6k this would well below the allowances allowed in Spain. However, adding the Government pension to work out the marginal tax rate to be applied, means that you would pay around €426.
However, changing the mix slightly makes a big difference. So the same total of £20k but made up £10k government pension and £10k state and other income would result in an additional €1,050 (approx).. Normally tax on £10k would be around €925 but because the marginal rate is higher, the tax payable under the new system would result in tax in Spain of around €1,975
If you are filling out the form yourself, or your gestor is not quite sure where to declare the UK Government pension, you need to report it in Box 470 of the Padre system. This box is for “Renta exentas, excepto para determinar el tipo de gravamen”.
