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2021 will start as 2020 ended: with the coronavirus pandemic dominating the news. The COVID-19 crisis will carry on having a knock-on effect on the economy over the coming year. However, it’s not all bad news. There will be some good news too. Paul Whitelock has been taking a look at what we can expect over the coming months.
Income tax to increase for highest earners
Income tax (Impuesto sobre la Renta de las Personas Físicas – IRPF) will increase by up to 3% – from 23 to 26% – for those who earn more than 200,000€, with those whose salaries exceed 300,000€ paying a further 2%. This measure will affect 36,194 taxpayers and bring 580€ million in revenue for the tax office in 2022.
I don’t think this change will affect too many of us!
Higher tax on assets over 10€ million
Tax on assets will rise from 2.5 to 3.5% for fortunes of over 10€ million. Nevertheless, regional authorities have control over the collection or otherwise of this tax. In some regions, like Madrid, it is reimbursed 100%.
Again, I don’t think too many of us will be troubled by this tax increase!
Spanish pensions to go up
Non-contributory pensions and benefits will rise by 1.8%, the remainder by 0.9%. The increase will equate to an average of 9€ per month for contributory pensions. This means that the average pension will be 1,024€ a month in 2021. The minimum pension – allowance for widows/widowers under the age of 60 – will be 522.40€/month and the maximum retirement pension will be 2,707.49€/month. Non-contributory pensions – where citizens have either not contributed at all or not contributed over enough years – will rise to 402.70€/month.
BUT …..
Personal pension tax allowance to be reduced
The personal tax allowance for pensions will be reduced from 8,000 to 2,000€. This measure will generate an additional 490€ million for the tax office in 2021 and 2022.
This will potentially affect lots of foreign residents. The only exceptions will be those of us who pay taxes on our pensions in our country of origin, eg. government /civil service pensions paid in the UK. We will continue to pay through the PAYE system.
Minimum wage frozen
This week the government approved an extension to the current minimum wage (Salario Mínimo Interprofesional – SMI), leaving it at 14 payments of 950€, although increases during the course of the year have not been ruled out. In 2020, the SMI went up by 50€.
Minimum subsistence income to increase
The 160,000 households that currently receive the minimum subsistence income (Ingreso Mínimo Vital or IMV) will see this increase by 1.8%, which equates to 12 payments of 469.80€ for the lowest band and 1,033.60€/month for the highest band.
Electricity bills will start to go down
The fixed costs of electricity bills have been frozen by the government until at least April 1st. From this date, electricity bills will be subject to new legislation designed by the CNMC (Comisión Nacional de los Mercados y la Competencia – National Commission on Markets and Competition) which will simplify the different rates for different times of day. In theory, this should reduce bills and allow consumers to save electricity much more efficiently. Until then, with the fixed costs frozen, any increases or decreases will depend on the price of energy on the wholesale market. In December, for example, electricity rose by 7% compared with the previous year, making the average bill just over 63€.
This is really good news. One company, Endesa, has been ripping off many customers for years by charging full price for all electricity consumption, irrespective of the time of day. This is apparently not illegal! I reckon Endesa has overcharged me by about 1,200 € over the last 10 years. I’ve now switched to another provider which treats its customers fairly.
Mains gas to go up
The price of natural gas for all those consumers on the government-regulated TUR tariff will rise by an average of 5.97%. This is the first price rise since the third quarter of 2018. The price of TUR 1, for clients using gas to heat their water, will go up by 4.6%, while the TUR 2 price for clients who also use gas for their central heating, will rise by 6.3%. In spite of the apparent price rise, for the average consumer of each tariff, annual bills on the new TUR1 and TUR2 schemes will actually equate to a year-on-year drop of 2.3% and 5.2% respectively compared with January 2020.
Let me know if you understand this!
No change for bottled gas
The 12.5kg butane gas bottles used in eight million homes across Spain will still cost 12.68€ at the beginning of the year, a price that will be maintained for at least the first month.
Rail fares frozen
Rail fares will not go up in 2021, as Renfe tries to stimulate demand in a year that will see new competitors in the high-speed rail sector.
Airfares reduced
After the collapse of air travel because of the pandemic, Enaire, Spain’s air space operator, will again drop air navigation costs next year – by 11% within mainland Spain and by 8.5%, for the Canary Islands.
A nice move, but if we can’t fly, what difference will it make?
Buying a car will be more expensive
The EU Worldwide Harmonised Light-duty Vehicles Test Procedure (WLTP) regulation for measuring emissions comes into force on January 1st, meaning that the licence tax will go up for cars with emissions in excess of 120g (approximately 80% of all vehicles). An estimated 5% rise is expected.
Cheaper motorway tolls
Motorway tolls will decrease in 2021, in accordance with the automatic formula agreed with the government in 2002 on the basis of two criteria: the Indice de precios de consumo (IPC) – Consumer Prices Index (CPI) from October to October and evolution of the volume of traffic. Both indicators have dropped this year because of the coronavirus pandemic, so tariffs will drop by around 0.11%. It is the first price drop after three years of price increases.
In addition, from September 1st another 640km of motorway will become free to use, although none of them are around here.
Telefónica increases Movistar Fusion prices
From 18 January, Telefónica will increase its Fusion tariff by between 2€ and 3€ a month, in line with what the company announced in November 2020. Everything else, including landline tariffs, will remain the same. Some operators already increased prices during the last quarter; others have not yet revealed their plans for 2021.
Higher VAT on soft drinks
Next year’s Spanish budget includes an increase in IVA (Impuesto sobre el Valor Añadido) on fizzy and sweetened soft drinks from 10% to 21%. As justification for this increase, the treasury has cited a need to promote a healthy lifestyle. Both the OECD and the European Commission have encouraged governments to limit reduced VAT levels for these types of products. The government expects to collect an extra 340€ million in 2021 thanks to this measure.
Oh, well ….. we’ll just have to switch to alcohol!
