Brexit & Spanish Property Tax 2026: What British Owners Need to Know

Since the United Kingdom left the European Union on 31 January 2020, British owners of Spanish property have been classified as third-country non-residents for tax purposes. This reclassification has had direct and significant consequences for how they are taxed on their Spanish real estate — from higher rates to the loss of expense deductions.

The Tax Impact of Brexit on British Property Owners in Spain

Before Brexit, UK residents benefited from the same tax treatment as citizens of any other EU member state. They paid the reduced 19% tax rate and could deduct allowable expenses from their rental income. After Brexit, both of these advantages were lost overnight:

Tax Rate: From 19% to 24%

As non-EU residents, British property owners in Spain now pay a flat 24% tax rate on all types of non-resident income, instead of the 19% rate that applies to EU/EEA nationals. This is a 26% increase in the effective tax rate. The higher rate applies to:

• Imputed income (tax on empty or owner-occupied properties)
• Rental income (both long-term and short-term/holiday lets)

Capital gains from property sales are taxed at 19% regardless of residency, so the rate difference does not apply to sales.

Expense Deductions: Eliminated

This is arguably the most costly change for British landlords renting out their Spanish properties. Under EU rules, non-residents from EU/EEA countries can deduct directly related expenses from their gross rental income before tax is calculated. These deductible expenses include mortgage interest, community fees, property insurance, IBI (local property tax), repairs and maintenance, management fees, and depreciation.

After Brexit, British owners cannot deduct any expenses from their rental income. They pay 24% tax on the full gross rental income, with no allowances whatsoever. This creates a dramatically higher effective tax burden, especially for properties with significant ongoing costs.

Real-World Example: The True Cost of Brexit for a British Landlord

Consider a British citizen who owns an apartment in Marbella. The property generates EUR 18,000 per year in rental income and has EUR 6,000 in deductible expenses (mortgage interest, community fees, insurance, IBI, and repairs).

• Before Brexit (EU treatment): Tax base = 18,000 - 6,000 = 12,000 EUR. Tax = 12,000 x 19% = EUR 2,280
• After Brexit (third-country treatment): Tax base = 18,000 EUR (no deductions). Tax = 18,000 x 24% = EUR 4,320
• Annual increase: EUR 2,040 more per year — an 89.5% increase in the tax bill

Over a 10-year period, this British owner would pay approximately EUR 20,400 more in Spanish taxes than they would have under EU rules.

Imputed Income: Also Affected

Even if you do not rent out your Spanish property, the higher rate applies. For a property with a revised cadastral value of EUR 200,000:

• EU rate: 200,000 x 1.1% x 19% = EUR 418
• Post-Brexit rate: 200,000 x 1.1% x 24% = EUR 528
• Difference: EUR 110 more per year

The UK-Spain Double Taxation Agreement (DTA)

The double taxation agreement between the United Kingdom and Spain remains in force after Brexit. This bilateral treaty was originally signed in 1975 and has been updated several times since. Its key provisions for property owners are:

• Article 6 (Income from Immovable Property): Spain has the primary right to tax income from property located in Spain, including rental income and imputed income
• Article 13 (Capital Gains): Spain has the right to tax gains from the sale of Spanish property
• Article 22 (Elimination of Double Taxation): The UK must grant a credit for Spanish taxes paid, preventing the same income from being taxed twice

Critically, the DTA does not reduce the Spanish tax rate applied to British non-residents. It only ensures that you are not taxed twice on the same income. Spain applies its domestic rates (24% for non-EU) and the UK then gives you a credit for the Spanish tax paid.

Reporting to HMRC: Your UK Tax Obligations

British owners of Spanish property must declare all Spanish rental income and capital gains on their UK Self Assessment tax return. Here is how this works in practice:

• Rental income: Declare on the Foreign Property Income pages of your Self Assessment (form SA106). You can claim credit for the Spanish tax paid via the Foreign Tax Credit Relief
• Capital gains: Declare on the Capital Gains pages. Credit for Spanish tax paid on the gain can be claimed
• Imputed income: Spanish imputed income tax does not have a direct UK equivalent. However, you should still report it for the purpose of claiming the foreign tax credit
• Self Assessment deadline: 31 January following the end of the UK tax year (e.g., for the 2025-26 UK tax year, the deadline is 31 January 2027)

If the UK tax liability on the same income exceeds the Spanish tax credit, you will owe the difference to HMRC. If the Spanish tax exceeds the UK liability, the excess credit is generally lost (it cannot be refunded by HMRC).

Will This Change? The Legal Landscape

Several legal challenges and political discussions are ongoing regarding the tax treatment of British non-residents in Spain:

• EU-UK Trade and Cooperation Agreement (TCA): The TCA signed on 24 December 2020 did not include provisions on personal taxation. This means the tax disadvantages were not addressed
• Potential bilateral agreements: There have been discussions about a supplementary UK-Spain agreement to restore some EU-era tax benefits, but nothing has been concluded as of 2026
• Legal challenges in EU courts: Some tax experts argue that the denial of expense deductions to non-EU residents may violate the free movement of capital provisions (Article 63 TFEU), which apply to third countries as well. However, no definitive ruling has been issued

For now, British property owners should plan on the basis of the current rules: 24% tax rate with no expense deductions.

Strategies to Minimise the Impact

• Review your ownership structure: In some cases, holding property through a company or trust may offer advantages, though this introduces corporate tax considerations and should be evaluated by a professional
• Optimise rental periods: Carefully manage occupied and vacant periods to balance rental income against the imputed income tax on empty periods
• Claim all UK tax credits: Ensure you claim full Foreign Tax Credit Relief on your UK Self Assessment to avoid paying tax twice
• Consider Spanish residency: If you spend more than 183 days per year in Spain, you may qualify as a Spanish tax resident and benefit from a completely different (and potentially more favourable) tax regime
• Seek specialist advice: The interaction between UK and Spanish tax systems is complex. A cross-border tax adviser who understands both jurisdictions can identify planning opportunities specific to your situation

SpainTaxForm: Expert Support for British Property Owners

At SpainTaxForm, we have extensive experience handling Modelo 210 filings for British property owners post-Brexit. Our system automatically applies the correct 24% rate and generates all the documentation you need for your HMRC Self Assessment. We understand the unique challenges British owners face and provide clear guidance throughout the process.

Sources

• 1AEAT — Non-Resident Income Tax (IRNR)
• 2UK-Spain Double Taxation Convention (1975, as amended)
• 3HMRC — Tax on Foreign Income (HS264)
• 4HM Government — Living in Spain: Guidance for UK Nationals
• 5EU-UK Trade and Cooperation Agreement (TCA), 24 December 2020