Inheriting Property in Spain: What UK Residents Need to Know About Spanish Inheritance Tax in Medvilla Spanje

Inheriting Property in Spain: What UK Residents Need to Know About Spanish Inheritance Tax

20.07.2025

Owning a holiday home or second residence in Spain is a dream for many Brits. But when that property is inherited, the dream can quickly become a legal and financial challenge. In Spain, inheritance tax (Impuesto sobre Sucesiones y Donaciones) still applies – even to non-residents. And while the UK no longer taxes foreign property directly on inheritance, you could still face significant costs if you don’t plan ahead.

Here’s what you need to know about inheritance tax on Spanish property for UK residents – and how to reduce your heirs’ tax burden.

1. Spanish Inheritance Tax Still Applies – Even to Non-Residents
If you inherit property in Spain, you are subject to Spanish inheritance tax, regardless of where you live or your nationality. Spain’s tax system is regionalised, meaning each of the 17 autonomous communities sets its own rules, rates, and exemptions.

Key points:
Favourable regions like Andalusia, Valencia, Madrid, the Balearic Islands, and the Canary Islands offer generous exemptions (sometimes up to 99%) for direct descendants (children, spouses, etc.).

Less favourable regions such as Catalonia and Murcia may impose higher tax rates with fewer allowances.

Inheritance tax is paid by the heir in Spain – not by the estate, as is common in the UK. This often comes as a surprise.

2. UK Inheritance Tax (IHT) May Still Apply
The UK taxes your global estate if you are considered UK-domiciled, regardless of where your assets are located. This means that Spanish property is still part of your UK IHT calculation, taxed at up to 40% on the value above the nil-rate band (currently £325,000, or up to £500,000 with the residence nil-rate band).

Double Tax Relief
The UK and Spain do not have a specific inheritance tax treaty, but unilateral tax relief is available. If Spanish inheritance tax has been paid, this can be offset against the UK IHT liability – but only up to the amount of UK tax due on that same asset.

3. How to Reduce Inheritance Tax on Spanish Property
Without the right planning, your heirs could face double taxation or be forced to sell the property to cover the tax bill. Consider these strategies to minimise the impact:

Lifetime Gift (Schenking / Donation)
Gifting property during your lifetime can be tax-efficient in some Spanish regions.

Regions like Andalusia, Murcia, and Valencia offer up to 99% reductions in gift tax for close family members.

Spain also imposes a capital gains tax (CGT) of 19% on the difference between the property’s acquisition value and its current value – even on gifts.

Co-ownership at Purchase

Buying the property jointly with children or other heirs means only their portion is taxed upon your death. This can significantly reduce inheritance tax liability.

Bare Ownership / Usufruct Arrangements
In the UK, life interest trusts and similar setups are common for estate planning. In Spain, however, usufruct (life interest) is taxed upon the death of the life tenant – which can lead to an unexpected tax bill for heirs. This makes it less tax-efficient in Spain compared to the UK.

4. What If the Deceased Was a Spanish Resident?
If the deceased was a tax resident in Spain, then only Spanish inheritance tax applies. This can be beneficial if the deceased lived in a region with low or no inheritance tax. However, other Spanish taxes may still apply – including gift tax and capital gains tax on lifetime transfers.

Final Thoughts: Inheriting Spanish Property as a UK Resident
Inheriting a property in Spain is not as straightforward as it might seem. Between regional tax rules in Spain and UK inheritance tax obligations, heirs can face significant financial exposure.

What You Can Do:

  • Plan early with a cross-border estate planning expert.
  • Consider gifting or co-ownership structures if the region allows.
  • Review domicile status and UK IHT exposure.
  • Check regional rules in the area where the Spanish property is located.

Need help navigating Spanish inheritance tax as a UK resident? Our team of legal and tax specialists offers tailored guidance for Brits with property in Spain. Contact us today to secure your legacy — and protect your heirs from costly surprises.