Thanks Terpe for the explanation.
Re the double taxation agreements 'choosing where one pays tax.'
Certainly the agreement which exists between Spain and UK does not allowing any choice about where one pays tax. If one is physically in Spain for 183 days per year, or has their main residential home or their centre of business activities in Spain then they must make a tax declaration on their worldwide assets in Spain.
In the agreement UK/Spanish (there are many variations with agreements with other countries) income from rental property in UK and Government employee pensions (Police, military etc) are taxed in UK. As too, in part, is the interest on bank/building Society accounts. If the bank will not pay interest gross, Nationwide for example is one which will not pay interest gross, then the bank stop 20%. If one is living in Spain they can recover 8% of that. The remaining 12% is retained by the UK taxman, but it can be used to off-set tax payable in Spain.
The UK/Spanish agreement has the effect that if one has a Government employee pension in UK, which is as I said, is taxed at source, it is ignored in Spain and thus one get full tax relief on all other income. This means that around the first 7,000 euros is tax free. If one lives in UK then the State Pension is added to ones other income, and although it is paid tax free, it is nevertheless taxed (if ones income exceeds the relief allowance) as it becomes part of ones gross income.
