Where it’s taxed
Under the UK–Spain Double Taxation Agreement, the UK State Pension is taxable only in Spain once you are Spanish tax resident, and the UK should not be taxing it directly. Spain taxes residents on their worldwide income, so if you live in Illes Balears the pension counts toward your Spanish tax return. Because a foreign payer such as the UK’s Department for Work and Pensions is not required to withhold Spanish tax, the lower €15,876 filing threshold applies (2024/2025 figures) rather than the €22,000 threshold used when a single Spanish employer withholds correctly – so even a modest State Pension can bring you within the filing obligation, especially once combined with any other income.
How Spain taxes it
Spain treats the UK State Pension as general income. The final tax you pay depends on:
- your total annual pension amount
- your age
- your region of residence, which for you is Balearic Islands
- the personal and age-related allowances you qualify for
Spain applies a personal allowance (mínimo personal). Balearic Islands increases the standard state personal and age-related allowances (normally €5,550 a year, rising to €6,700 from age 65 and €8,100 from age 75) by 10%. Because the State Pension is often a UK expat’s only income and the amount is modest, this often means the final tax bill for someone living in Illes Balears is very low, or in some cases, zero.
Ways to reduce or avoid unnecessary tax
Since the State Pension is frequently a UK expat’s only income, the main steps are:
- Check the UK isn’t taxing the pension. The State Pension is normally paid gross with no UK tax withheld, so this usually only becomes an issue if other UK income, such as a workplace pension, is being taxed to collect tax on the State Pension as well. If so, submitting HMRC form Spain-Individual (the UK–Spain double taxation relief form) along with a Spanish tax residency certificate confirms your treaty position and stops the UK from taxing it.
- Claim all Spanish personal and age-related allowances you are entitled to.
- Make sure Balearic Islands’s higher personal allowance is applied when your return is filed, rather than the lower state default, as this can reduce the taxable amount further.
- Report the pension correctly. Convert each payment using the official Banco de España/ECB exchange rate on the date it’s received, rather than a single annual average, and classify it as employment income (rendimientos del trabajo), to avoid overpaying.
Talk to an adviser about your pension in Illes Balears
Every situation is different. Book a short, no-obligation call and we’ll walk through exactly how your UK State Pension is taxed while you live in Illes Balears.
This is not tax, legal, or accounting advice. Expats Pension Review is a regulated financial services provider (see our Regulations page) – not a firm of accountants or tax advisers – and nothing on this page constitutes personalised tax, legal, or accounting advice for your circumstances. Spanish and UK tax law, allowances, thresholds, and double-taxation treaty provisions change frequently, vary by autonomous community, and depend on facts specific to you, including your residency status, total worldwide income, family circumstances, and the timing and source of your pension payments, none of which this general guide can account for.
The information on this page may be incomplete, out of date, or inapplicable to your situation by the time you read it, and must not be relied upon when preparing or filing a tax return, claiming an allowance or deduction, or making any other financial or legal decision. Before acting on anything described here, you must obtain independent advice from a qualified, licensed accountant or tax adviser (asesor fiscal) registered to practise in Spain and, where relevant, a UK tax adviser.
Expats Pension Review accepts no liability whatsoever for any loss, tax liability, penalty, interest, or other consequence, direct or indirect, arising from reliance on this content in place of professional advice from an appropriately qualified accountant or tax adviser.