Spanish Inheritance Tax for UK Property Owners

Spanish succession tax is paid by the beneficiary (the person receiving the inheritance), not by the estate. This is the opposite of the UK system, where IHT is deducted from the estate before distribution. Each beneficiary is assessed individually, which means two children inheriting equal shares may pay different amounts depending on their personal circumstances.

The calculation follows four steps:

• Step 1 — Net inheritance value: Calculate the gross value of the Spanish assets, deduct allowable debts and expenses (mortgage, funeral costs, outstanding taxes).
• Step 2 — Personal reduction: Apply the relevant reduccion personal based on the beneficiary's relationship to the deceased (Group I to IV — see below).
• Step 3 — Apply the tax scale: The remaining taxable amount is taxed at progressive rates from 7.65% to 34% under state rules.
• Step 4 — Apply the multiplicador: A multiplier of 1.0 to 2.4 is applied based on the beneficiary's pre-existing wealth and their relationship to the deceased. Close family with modest wealth pay the base rate (1.0x); distant relatives or those with significant existing assets pay up to 2.4x.

Crucially, the Spanish regions (comunidades autonomas) have the power to modify these rules significantly. Andalusia has exercised this power very favourably for close family members.

Beneficiaries are classified into four groups, which determine both their personal reduction and the multiplicador applied:

Group	Relationship	State Personal Reduction	Multiplicador Range
Group I	Children and adopted children under 21	EUR15,957 + EUR3,991 per year under 21 (max EUR47,859)	1.0000 - 1.0000
Group II	Spouse, children over 21, parents, grandparents	EUR15,957	1.0000 - 1.0000
Group III	Siblings, aunts, uncles, in-laws	EUR7,993	1.5882 - 2.0000
Group IV	Cousins, unrelated persons, unmarried partners*	EUR0	2.0000 - 2.4000

*Unmarried partners in Andalusia can register as a pareja de hecho (registered partner) to qualify for Group II treatment, but the registration must be done before death occurs.

The multiplicador increases the tax based on the beneficiary's pre-existing wealth:

Pre-existing Wealth	Groups I & II	Group III	Group IV
Up to EUR402,678	1.0000	1.5882	2.0000
EUR402,678 - EUR2,007,381	1.0500	1.6676	2.1000
EUR2,007,381 - EUR4,020,771	1.1000	1.7471	2.2000
Over EUR4,020,771	1.2000	1.9059	2.4000

These are the state-level rules. Andalusia overrides many of these figures with far more generous provisions.

Since 2018, Andalusia has progressively improved its inheritance tax regime to become one of the most favourable regions in Spain. The key Andalusian provisions for 2025-2026 are:

• EUR1,000,000 personal reduction for Group I and II beneficiaries (spouse, children, parents, grandparents). This replaces the much lower state reductions and means that inheritances up to EUR1 million per beneficiary are effectively exempt for close family.
• 99% tax credit on the remaining liability for Group I and II beneficiaries whose taxable base (after the EUR1 million reduction) does not exceed certain thresholds. In practice, this means most spousal and child inheritances on the Costa del Sol are tax-free or nearly so.
• Primary residence reduction: An additional 99% reduction on the value of the deceased's primary residence (up to EUR122,606 per beneficiary) for Group I and II beneficiaries who retain the property for at least three years.
• Life insurance reduction: A 100% reduction on life insurance proceeds received by the surviving spouse (up to EUR9,195).

Important: These Andalusian benefits apply when the deceased was resident in Andalusia or when the property is located in Andalusia and the EU/EEA non-discrimination rules are applied. Following the Welte and subsequent EU Court of Justice decisions, UK nationals can generally claim regional benefits even as non-residents — but this area remains subject to interpretation and you should take professional advice.

Let us assume a UK couple own a property in Marbella worth EUR400,000. The husband dies, and the wife inherits his 50% share (EUR200,000). She has pre-existing wealth below EUR402,678.

Under Andalusian rules:

Step	Calculation	Amount
Gross inheritance	50% of EUR400,000	EUR200,000
Less: personal reduction (Andalusia)	EUR1,000,000 (Group II spouse)	-EUR200,000
Taxable base		EUR0
Spanish succession tax due		EUR0

The EUR1 million Andalusian reduction completely eliminates the tax on a EUR200,000 inheritance by the spouse.

Under state rules (without Andalusian benefits):

Step	Calculation	Amount
Gross inheritance		EUR200,000
Less: state personal reduction (Group II)		-EUR15,957
Taxable base		EUR184,043
Tax at state rates	Progressive rates 7.65%-34%	~EUR31,100
Multiplicador (Group II, low wealth)	x 1.0000	EUR31,100
Spanish succession tax due		~EUR31,100

The difference is stark: EUR0 under Andalusian rules versus approximately EUR31,100 under state rules. This is why the location of your Spanish property within Spain matters so much for inheritance planning.

Same scenario — a EUR400,000 Marbella property — but now the owner dies leaving the property equally to two adult children (Group II). Each child inherits EUR200,000. Both have pre-existing wealth below EUR402,678.

Under Andalusian rules (per child):

Step	Calculation	Amount
Gross inheritance	50% of EUR400,000	EUR200,000
Less: personal reduction (Andalusia)	EUR1,000,000 (Group II child)	-EUR200,000
Taxable base		EUR0
Spanish succession tax per child		EUR0

Under state rules (per child):

Step	Calculation	Amount
Gross inheritance		EUR200,000
Less: state personal reduction (Group II)		-EUR15,957
Taxable base		EUR184,043
Tax at state rates		~EUR31,100
Multiplicador	x 1.0000	EUR31,100
Spanish succession tax per child		~EUR31,100

Under Andalusian rules, both children inherit tax-free. Under state rules, the combined bill would be approximately EUR62,200 — a powerful illustration of why Andalusia is an attractive region for property ownership from an inheritance perspective.

UK domiciled individuals are subject to UK inheritance tax (IHT) on their worldwide assets, including Spanish property. Spanish succession tax applies to Spanish-situs assets regardless of the owner's domicile. Without relief, the same property could be taxed twice.

The UK and Spain do not have a specific inheritance tax treaty, but unilateral relief is available under UK domestic law (IHTA 1984, s.159). In practice, this means:

• Spanish succession tax paid by the beneficiary can be credited against the UK IHT liability on the same asset.
• If the Spanish tax exceeds the UK IHT on that asset, no UK IHT is due — but the excess Spanish tax is not refundable.
• If the Spanish tax is lower (as is typical with Andalusian benefits), the difference is payable in the UK.

The interaction requires careful professional advice because the two systems operate differently: UK IHT is paid by the estate; Spanish ISD is paid by the beneficiary. Timing, valuations, and exchange rates all affect the credit calculation.

Key planning point: For a married couple where the UK nil-rate band (GBP325,000) and residence nil-rate band (GBP175,000) shelter the estate, the Spanish property may effectively bear only Spanish succession tax — which, in Andalusia, could be zero for close family.

There are several practical steps you can take to minimise the combined UK and Spanish inheritance tax burden on your Spanish property:

• Make a Spanish will: This is the single most important step. A separate Spanish will dealing only with your Spanish assets dramatically speeds up the inheritance process and avoids costly delays. It costs approximately EUR150-EUR250 to prepare with a Spanish lawyer. Make sure it does not accidentally revoke your English will — use clear wording limiting the Spanish will to Spanish assets only.
• Consider joint ownership carefully: Owning the property 50/50 with your spouse means only half the value passes on the first death. Under Andalusian rules, the surviving spouse's EUR1 million reduction covers most property values comfortably.
• Review life insurance: A Spanish life insurance policy can provide liquidity to cover any succession tax due, avoiding the need to sell the property. Premiums are typically modest for term cover on a Spanish property value.
• Registered partnership: Unmarried couples should consider registering as a pareja de hecho in Andalusia to ensure Group II treatment. Without registration, the surviving partner falls into Group IV — no personal reduction and a 2.0x multiplicador.
• Company ownership — proceed with caution: Buying through a Spanish SL company can avoid Spanish succession tax on the property itself (because you inherit company shares, not real estate). However, the annual running costs (EUR3,000-EUR5,000+ per year for accounting, corporate tax returns, and compliance) and the loss of the main-residence exemption for capital gains make this impractical for most UK buyers of holiday homes or retirement properties. It may suit very high-value portfolios (EUR1 million+) where the annual costs are proportionate.

Always take advice from a solicitor or tax adviser qualified in both UK and Spanish tax. The interaction between the two systems is sufficiently complex that advice from only one jurisdiction invariably misses something important.