Tax Calculator
UK Sole Trader vs Spanish Autonomo
An online calculator to compare the tax burden of self employed people in the UK and Spain.
IMPORTANT!
This was created in 2014. You are able to edit the rates in the fields below yourself to reflect the current tax laws if you wish, but I make no guarantees that any of the calculations or advice below is still relevant.
Enter Your Business Details Here
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In the UK, if you are below the VAT threshold you don't need to charge VAT. In Spain, you always need to charge VAT. Since the consumer only cares about the total price, the burden of paying VAT falls on the business.
Monthly Results (based on tax year 2014 - 2015)
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UK Sole Trader |
Spanish Autonomo |
| VAT |
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| Pre-tax profit (after VAT) |
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| Social Security / National Insurance |
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| Income Tax |
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| Total Deductions (including VAT) |
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| Net Profit |
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100% (€235) higher profit in the UK.
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Advanced Configuration (yearly)
Edit this to alter the rates for income tax, social security, VAT, and currency exchange.
Can I choose whether to pay taxes in either country?
Probably not. If you live and operate your company from either the UK or Spain for 183 days or more of the year, you are considered to be resident in that country and will need to pay taxes there.
If you don't stay for 183 days in any one country, you could check the
UK government guidelines to figure out your situation.
Why did I make this?
I've driven myself crazy trying to figure out if I can become a Spanish resident and use my hard earned savings to bootstrap a small business without paying a prohibitive amount in taxes and social security. Spain is a great country to live but the tax system seems almost designed to discourage the starting of small businesses. After reading countless online discussions I've realised this is common source of pain for both British and Spanish people thinking of going into business in Spain.
There are two main problems:
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Spain requires a minimum of about €250 / month social security payments every month. This isn't so bad once you are generating a reasonable profit, but if your revenues are small while starting up, which may take years, this could kill your business.
In contrast, the minimum National Insurance contribution in the UK is only £2.75 / week (about €15 / month), and it's even possible to exempt yourself from this if you don't earn much.
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Spain requires you to charge VAT at 21% no matter how small your turnover is. In the UK, you don't have to charge VAT until your turnover reaches £81,000 (€102,000) per year. Technically the VAT is payed by the customer, but in reality, the customer is only aware of the final price, so the burden actually falls on the business to cover the cost of paying the VAT.
These two problems conspire to make bootstrapped consumer businesses especially difficult to start in Spain. This calculator is designed to:
- Compare tax in the UK and Spain for your current or projected revenue and expenses.
- Show how hostile the Spanish tax system is to the early stages of bootstrapping. You need to make gross profits of €325 just to break even, compared to €15 in the UK.
- Help to get the facts straight myself. I'm relying on savy readers to please email me if you spot any mistakes or areas that should be clarified.
UPDATE: New EU Laws Will Remove VAT Threshold
From January 2015, sellers of electronic services to customers in EU countries will need to charge VAT relavant to the country where the customer is based. To make this simpler, VAT MOSS (Mini One Stop Shops) are being set up which require you to 1. determine the permenent address of each of your EU customers and 2. register for VAT even if if you're below the threshold in the UK. Once registered, your business will need to charge VAT everywhere, even when selling within the UK. Alternatively, you can remain within the UK VAT threshold and simply refuse to sell to customers in other EU countries.
Read more:
Caveats
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I am neither a lawyer nor an accountant so please don't treat this as professional advice. I offer no guarantees of its accuracy, but I want to improve it and will gladly accept your corrections. I'm an entrepreneur mainly focussed on making informed decisions for my own business.
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Spanish income tax (IRPF) and social security (seguridad social) can vary slightly depending on the county (communidad autonoma), I've used general rates on wikipedia. Feel free to edit the Configuration section above with figures appropriate to your location.
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It's possible to use a limited company (sociedad limitada) instead of being a sole trader. This is more complicated but allows you to pay even fewer taxes in the UK. I'm not sure what difference it makes in Spain.
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Spain has lower living costs than the UK. Property in London is particularly expensive to rent or buy.
