ou don’t want to pay tax twice. Nobody does. That’s the whole point of this agreement — to stop the UK and Spain both taxing the same money like a pair of jealous siblings. In theory, it works. In practice, it gets messy.
Here’s what it actually means if you live in Spain and have income from the UK.
You’re taxed where you live (mostly)
If you’re tax resident in Spain — i.e., you live there more than 183 days a year — then Spain becomes your tax home.
That means you declare worldwide income to the Spanish tax agency (Agencia Tributaria). Pensions, rental income, dividends, everything.
Doesn’t matter if you earned it in Croydon. Spain wants to know. And they want their slice.
But you won’t pay double
That’s where the UK–Spain Double Taxation Convention kicks in.
Signed in 2013, still in force post-Brexit. It stops both countries taxing the same income twice.
How? Two main ways:
- Spain gives you credit for tax already paid in the UK
- Or Spain exempts certain income entirely, depending on the type
But here’s the catch: it’s only clean when the paperwork is right. If you forget to declare something in one country, or get your residency status wrong, it unravels fast.
Examples that catch people out
- UK state pension: Taxed in Spain, not UK (even though it’s from the UK gov’t).
- Private UK pensions: Also taxed in Spain (if you live there).
- Government service pensions (military, NHS): Still taxed in the UK, but you must declare them in Spain too. Spain won’t tax them, but they will use the amount to calculate your tax band (taxable base).
- UK rental income: Still taxable in UK, but also declared in Spain. You get a tax credit, but exchange rate, timing, and expenses must match.
- UK dividends: Usually taxed in Spain, not UK. Again, declare and apply relief.
- ISAs: Not recognised in Spain. You’re taxed on gains, interest, dividends — full whack. It’s like they don’t care what HMRC told you.
What you actually have to do
- Fill in the Modelo 720 (overseas asset declaration) if your foreign accounts/investments exceed €50k
- Report UK income on your Spanish return — even if it was already taxed
- Use a tax adviser who understands both systems — not just one
- Keep UK tax certificates for all income sources (pensions, rent, etc.)
It’s fiddly. And absolutely not optional. The Spanish tax agency cross-checks with UK data now. They get alerts. You don’t want to find out they’ve flagged you.
What if you’re not Spanish tax resident?
If you spend less than 183 days a year in Spain, and haven’t registered as a tax resident, your UK tax obligations continue as normal.
But — and here’s the grey zone — if you own property in Spain and don’t rent it out, you’re still liable for non-resident imputed income tax on it. Spain just loves a good tax.
Currency conversions matter
Spain wants everything reported in euros.
But your UK pensions and rents come in pounds.
So now you’re tracking monthly FX rates, deciding when to convert, storing every Santander PDF in a folder you’ll never organise.
There’s no perfect way. But whatever rate you use (monthly average, official exchange rate), stick to it and be consistent. And explain it if challenged.
Brexit didn’t kill the treaty
The Double Taxation Agreement survived Brexit. It was a separate bilateral treaty and still stands.
But the automatic data sharing between tax agencies? That actually increased post-Brexit.
In short: they talk now. A lot.
Some useful links
- UK–Spain Tax Treaty (gov.uk)
- Agencia Tributaria – Modelo 720 guide (es)
(Spanish site, needs patience and Google Translate.)
Don’t try to DIY this if your setup is complex
One pension? Maybe you manage.
Three pensions, a rental, and a frozen UK SIPP you forgot about? Get a pro.
The fine for getting Modelo 720 wrong used to be ridiculous. Even now, they don’t take kindly to forgetfulness. And unlike the UK, you don’t always get a warning letter. Sometimes they go straight to fines.
People assume the tax treaty is a get-out-of-jail card. It’s not. It just stops double payment — not admin, not audits, not bureaucracy.
If you’re earning across borders, you need to behave like someone who is.
