Brits moving to Spain beware of unexpected UK tax bills on rent, property sales and pensions if strict HMRC deadlines are missed

1. Rental income from a UK propertyIs UK rent still taxed once you live in Spain? Yes, whatever your residence status. It’s the most common reason British expats in Spain still deal with HMRC every year.

Under the non-resident landlord scheme, your letting agent must deduct basic rate tax before the rent reaches you. That deduction is a flat 20% (rising to 22% in 2027/28) with no personal allowance taken into account.

The better route for most landlords is to submit form NRL1 so the rent is paid to you gross. You then file a Self Assessment return each year, claiming your expenses and, as a British national, your personal allowance.

One date to note: from 6 April 2027, property income gets its own rates of 22%, 42% and 47%, two points above the main rates.

What happens when you sell a UK home from Spain? You must report the sale to HMRC within 60 days of completion, even if there’s no gain and no tax to pay.

UK residents only report when tax is due. Non-residents report every sale of UK property. Miss the 60 days and the penalties start at £100 and build from there.

You only pay tax on the gain arising from 6 April 2015 meaning that if you purchased the property pre 6 April 2015, there is real benefit in selling as a non-resident.

If the property was your main home at some point during ownership Private Residence Relief can cover the years you lived in it.

Action point: open a Capital Gains Tax on UK property account and report within 60 days of completion.

The UK and Spain double tax treaty gives Spain the sole right to tax private pensions, workplace pensions and the state pension.

Government service pensions, such as civil service, NHS, military and teaching pensions, are taxable only in the UK unless you are a Spanish national.

Your pension provider will keep deducting UK tax under PAYE until HMRC tells them otherwise. You have two ways to deal with that.

Option 1, the NT code, so no UK tax comes off.

Complete form Spain-Individual, obtain a Spanish certificate of tax residence for treaty purposes from Agencia Tributaria, and send both to HMRC. Once the claim is approved, HMRC can authorise an NT code for your pension provider and the provider can pay you gross.

Option 2, the tax return, to reclaim what was deducted.

Let the UK tax come off, then register for self-assessment, file a return with SA109 pages and HS304 pages reclaiming tax paid on the pension income as a lump sum from HMRC. You should attach the Spanish certificate of residence to the tax return for proof that you are resident in Spain and thus entitled to treaty benefits.

Action point: form Spain-Individual for an NT code, or a Self Assessment return to reclaim.

If all of your work is done in Spain, there is no UK tax to pay on it, but your employer will keep deducting PAYE until HMRC says otherwise. Again, you have two routes.

Option 1, the NT code, so no UK tax comes off. Send HMRC form P85 once you have left. HMRC issues your employer an NT code so nothing is deducted, and refunds any PAYE already taken in your leaving year.

Option 2, the tax return, to reclaim what was deducted. Register for self-assessment, file a return with the SA109 residence pages and reclaim the UK tax after the tax year ends. You will need this route anyway if you spend any days working back in the UK, because those days stay taxable here.

Action point: form P85 for an NT code, or a Self Assessment return to reclaim.

5. Filing a UK tax return

Do you still need to file a UK tax return from Spain? If you have UK rent, UK workdays, UK self-employment or any other taxable UK income, yes. You’ll also need one in the year you move, to claim split-year treatment so that only the UK part of the year is taxed as a resident.

Non-residents file the SA100 with the SA109 residence pages. HMRC’s free online service can’t handle the SA109, so you file on paper by 31 October or through commercial software or an adviser by 31 January and tax is due by 31 January too.

As a British national you keep the £12,570 personal allowance as a non-resident, and the return is where you claim it.

Action point: check whether you need to file and if you do, file by 31 October on paper or 31 January through software.