I have been living in Spain for nearly 5 years, My income is derived from a local government pension (which has to be taxed in the UK) and income from my wife through Incap Benefit and Industrial injuries benefit, neither of which are taxable in the UK. My wife is due to reach pension age next year and obviusly will receive a state pension from the UK. This will be taxable here in Spain but she will also be entitled to her IIB which is non taxable . Would it be best for me to contact the Spanish authorities now or wait until she receives a pension

Nice to see someone being proactive about paying tax in Spain!.

You say your wife receives her pension next year 2009 so the tax on that income will not be payable until you do the Declaracion de Renta in 2010 payable around May/June of that year.

On that basis I dont think there is anything you can do now - in fact I think the Spanish tax AEAT will think it rather strange if you try and start talking to them now as it is so early!

Dont forget you also need to contact the UK tax people (again nearer the time) and sort out your FD9 forms to get her UK tax exemption and a code of NT (No tax)

For info:
SPANISH TAX (AEAT)

http://www.aeat.es

Mostly in Spanish but you can download forms (solictudes/modelos)

Non residents:
Ir al portal de:
Select and click

Residents:
Click: Ciudadanos

Try also:

http://www.spainaccountants.com