For any British expat, retiree, or person planning to move to Spain while receiving a UK pension, understanding the tax implications is fundamental. The post-Brexit scenario has added new layers of complexity, but the core principles of the Double Taxation Agreement (DTA) between Spain and the UK remain your most important safeguard.
This guide explains how your pension income is taxed, how to avoid paying tax twice, and how to ensure full compliance to avoid costly mistakes.
Key Takeaway: The goal of the tax treaty is to ensure you don’t pay tax twice on the same income. However, this protection is not automatic. You must correctly declare your British pensions to the Spanish tax authorities.
How are UK Pensions Taxed in Spain?
For tax residents in Spain, the treatment of your UK pension income varies by type. Understanding these distinctions is the first step towards tax compliance.
- UK State Pensions: This income is taxed exclusively in Spain.
- Occupational and Private Pensions: These are also taxed in Spain for Spanish tax residents.
- Government Service Pensions: Pensions for past UK government service (e.g., civil servants, military, police) are generally taxed only in the United Kingdom. However, this income must still be declared in Spain for «progression purposes,» which can affect the tax rate applied to your other income.
Are You a Tax Resident in Spain?
Your tax obligations are determined by your residency status. You are considered a tax resident in Spain if you meet any of the following criteria:
- You stay more than 183 days per calendar year in Spain.
- Your main center of economic or professional interests is located in Spain.
As a tax resident, you are subject to taxation in Spain on your worldwide income, which includes most types of UK pensions.
How to Declare UK Pensions and Avoid Double Taxation
Correctly declaring your assets and income is essential to avoid penalties and benefit from the DTA.
- Notify HMRC: To avoid taxes being withheld in the UK on your state and private pensions, you must inform the British tax authority (HMRC) of your tax residency in Spain by filing the DT-Individual form.
- Declare Assets Abroad (Modelo 720): If you are a resident in Spain, you must declare foreign assets, including pension funds, valued at more than €50,000 using Modelo 720.
- File Your Spanish Income Tax Return (Modelo 100): All foreign pension income must be declared on your annual Personal Income Tax (IRPF) return, Modelo 100.
Personal Income Tax (IRPF) Brackets on Pension Income (2025)
Income from foreign pensions is treated as general income and is subject to progressive tax rates. The state brackets for 2025 are as follows:
- Up to €12,450: 19%
- €12,450 – €20,200: 24%
- €20,200 – €35,200: 30%
- €35,200 – €60,000: 37%
- Over €60,000: 45%
Note: These rates can vary slightly depending on your Autonomous Community.
Frequently Asked Questions (FAQs) for British Pensioners
Can I be taxed twice on my UK pension in Spain?
No, the Double Taxation Agreement is designed to prevent this. If you correctly declare your UK pension income in Spain as a tax resident, you will not pay taxes on the same income in the United Kingdom (with the exception of government service pensions).
What is the best way to receive my UK pension in Spain?
This involves strategic considerations like currency exchange and tax-efficient withdrawal methods. Seeking professional advice is highly recommended to optimize your income.
Do I have to declare my UK state pension in Spain?
Yes. If you are a tax resident in Spain, your UK state pension is taxable here and must be declared on your annual Personal Income Tax (IRPF) return (Modelo 100).
What about transferring my pension to a QROPS?
Transferring a UK pension to a Qualifying Recognised Overseas Pension Scheme (QROPS) is still possible but more complex after Brexit. You must assess the 25% Overseas Transfer Charge (OTC). It is crucial to seek specialized legal advice before making a transfer.
Don’t Navigate International Tax Complexity Alone
An incorrect interpretation of the Spain-UK tax treaty can lead to significant penalties. At LexTax, we act as your «translator of complexity,» providing clear and practical tax strategies for international clients.
Whether you are planning your retirement, need clarity on residency rules, or have doubts about your tax filings, our team of experts is here to help.
Contact us today for a personalized tax consultation and take the first step towards financial peace of mind in Spain.