UK owners of Spanish holiday homes face significantly higher tax bills following Brexit, say leading tax advisory firm Blick Rothenberg.
Robert Pullen, tax partner at the firm, explained, “From 1 January 2021, UK based owners of Spanish real estate will suffer a 24% tax rate on income, after the previous 19% tax rate expired when the transition period ended on 31 December. This is a swingeing increase of over a quarter, a direct result of the Brexit vote being implemented, and the UK being seen as a non-EU country.”
Pullen added, “In addition to the higher tax rate, the Spanish tax authorities will no longer permit any expenses to be deducted, meaning the gross income will be taxed – this could be a huge increase, disproportionate to any real profit made.
To take a simplified example, if income of €1,000 per week was generated for 6 months over the holiday season, that’s gross income of €24,000 per year. If expenses of €14,000 were incurred, and ignoring any allowances, a tax bill of €1,900 would have been payable before Brexit. After Brexit, that jumps to €5,760 – three times as much.
Whether this also has an effect on the local property market, factoring in the fluctuating GBP-EUR exchange rate, remains uncertain. There will be many unexpected tax implications of Brexit – this is just one.”