Brexit is coming
Yes. Finally, Brexit is definitely coming but I feel like nobody is really sure about how is it going to taste. That is why I would like to give some good news for the tax wise people.
Inheritance Tax before Brexit
Nobody knows whether will be a provisional period of time before Brexit is fully in force. And this applies also for taxation regulations in my opinion. The situation now is that if an English person pass away their direct beneficiaries (spouse and children) have to pay the taxes the same as both the Spanish or EU members citizens. With regards to the Inheritance Tax this has almost disappeared on many Spanish regions. At least there are applicable many personal allowances rather high for spouse and children. In the Valencian region the spouse and each children have a personal allowance of €100,000.00. This is more than enough in most cases to not pay any Inheritance Tax at all.
Inheritance Tax after Brexit
When Brexit is here and in force the situation for the English will change dramatically. And the personal allowance that was of €100,000.00 before will be reduced to not even €16,000.00. And the difference is huge. Besides, the Inheritance Tax rates are progressive and increasingly depending on the value of the estate.
English property owners in Spain
As the situation is the risk of facing a very expensive Inheritance Tax soon is quite high. Many British have homes in Spain. And properties are very valuable assets. So the risk is clear to see. Besides, the risk is even higher as during the real estate boom years the tax office updated rapidly the rateable values of the properties. And the rateable values of these homes are now are in many cases even higher than the market values. And this fact makes the Inheritance Tax higher as it is based on the rateable value.
Possible solution
So an easy solution is to donate the property to your spouse (if they will remain EU member citizens after Brexit) or your children now and benefit from the favourable Inheritance Tax rules applicable so far. You can keep a life interest on the property which so from a practical point of view nothing changes at all because the file interest right will allow you to let the proprety if you wish. When the time comes your beneficiaries will have to pay Inheritance Tax for the life interest value set at the time of the donation which is usually very low therefore the Inheritance Tax bill be zero or very low. And they will really appreciate it as the saving will be of thousands of Euros.
Thank you
Thank you for your time and attention and I hope this information is of use. You are very welcome to share if you liked it.
Warning
Please, note that this is general information. This is not specific legal advice. It is advisable to seek legal advice for any specific legal issue.