State Pension and Spain
Spain is within the European Economic Area, so your UK State Pension continues to be uprated each year. You receive the same annual increases as someone living in the UK, including any benefit from the triple lock. This is guaranteed under the UK-EU Trade and Cooperation Agreement reached after Brexit.
You claim your State Pension through the International Pension Centre. Payments can go directly to a Spanish bank account in euros, or to a UK bank account in sterling. If you opt for a Spanish account, the exchange rate is set at the point of conversion, which means your income will fluctuate with the GBP/EUR rate.
How Is Your UK Pension Taxed in Spain?
Under the UK-Spain double taxation agreement (DTA), most UK pension income is taxable only in Spain once you become a Spanish tax resident. This applies to both private pensions (SIPPs, workplace pensions) and the State Pension.
You need to apply to HMRC for relief from UK tax using the appropriate double taxation form. Until you do this, HMRC may continue to deduct UK tax from your pension payments, and you would need to reclaim it.
Spanish Income Tax Rates (2026)
| Taxable Income Band | Tax Rate |
|---|---|
| Up to €12,450 | 19% |
| €12,451 – €20,200 | 24% |
| €20,201 – €35,200 | 30% |
| €35,201 – €60,000 | 37% |
| €60,001 – €300,000 | 45% |
| Over €300,000 | 47% |
Note that autonomous communities in Spain can adjust these rates, so the exact tax you pay may vary depending on whether you live in Andalucia, Catalonia, Valencia, the Canary Islands, or elsewhere.
The 25% Tax-Free Lump Sum
You can still take a 25% pension commencement lump sum (PCLS) from your UK pension while living in Spain. Under UK tax rules, this lump sum is tax-free. The UK-Spain DTA generally treats it as not taxable in Spain either, but Spanish tax interpretation can vary. It is essential to confirm the treatment with a Spanish tax adviser before taking a lump sum, particularly for larger amounts.
Should You Transfer Your Pension to Spain?
Most UK expats in Spain keep their pension in a UK SIPP or personal pension and draw income from it. This approach has several advantages:
- UK SIPPs offer a wide range of investment options at competitive fees
- You retain UK regulatory protections (FCA, FSCS, Financial Ombudsman)
- No overseas transfer charge to worry about
- Flexibility to return to the UK if your plans change
Transferring to a QROPS may be worth considering if you have a very large pension and want to hold it in euros to eliminate exchange rate risk, or if you have specific estate planning needs. Because both the UK and Spain are in the EEA (Spain) or have the post-Brexit agreement framework, the 25% OTC would not apply to a transfer to an EEA-based QROPS.
The Beckham Law (Special Expat Tax Regime)
Spain’s Special Tax Regime for Inbound Workers, commonly known as the Beckham Law, allows qualifying new residents to pay a flat 24% tax rate on Spanish-source income for up to six years. To qualify, you must not have been a Spanish tax resident in the previous five tax years and must move to Spain for work purposes.
Pensioners generally do not qualify for the Beckham Law since it requires employment or directorship in Spain. Even if you do qualify, UK pension income is foreign-source, so it may not benefit from the flat rate anyway. Do not rely on the Beckham Law for pension planning without specific tax advice.
Wealth Tax and Solidarity Tax
Spain has a wealth tax (Impuesto sobre el Patrimonio) on worldwide net assets above a threshold. The threshold and rates vary by autonomous community. In addition, there is a temporary Solidarity Tax on large fortunes (Impuesto Temporal de Solidaridad) for net assets above €3 million.
Your UK pension pot in drawdown may be counted towards your taxable wealth in Spain. However, uncrystallised pension pots (those you have not yet accessed) may be treated differently. This is a complex area that requires specialist advice.
Currency and Exchange Rate Risk
If your UK pension pays in sterling but your living expenses are in euros, you face ongoing exchange rate risk. A weakening pound means less purchasing power for your pension income. Strategies to manage this include:
- Using a specialist currency transfer service (rather than your bank) to get better exchange rates
- Setting up regular transfers at fixed rates using forward contracts
- Holding some investments in euro-denominated assets
- Maintaining a buffer of euros to avoid converting at unfavourable rates
Residency and the 183-Day Rule
You become a Spanish tax resident if you spend more than 183 days per year in Spain, if your centre of economic interests is in Spain, or if your spouse and dependent children live in Spain. Once you are tax-resident, Spain taxes you on your worldwide income.
If you split your time between the UK and Spain, be very careful about the 183-day rule. It is possible to be tax-resident in both countries simultaneously, though the DTA provides tie-breaker rules to determine which country has primary taxing rights.
Planning Checklist for Moving to Spain
- Check your NI record and pay any voluntary contributions to maximise your State Pension before you leave
- Apply for an S1 form for Spanish healthcare access
- Appoint a Spanish tax adviser (gestor fiscal or asesor fiscal) before your move
- Notify HMRC that you are leaving the UK and apply for DTA relief on pension income
- Review your pension provider — check they will continue to service your account while you are overseas
- Consider currency risk and set up a specialist transfer account
- Understand your Modelo 720 obligations for overseas asset reporting
For a comprehensive pre-move guide, see our retiring abroad pension checklist.