Thinking about buying a home in Spain? Or would renting be the smarter move?
On the surface, buying seems like the obvious choice. Affordable property. A warm climate. A place to call your own.
But hold on. Post-Brexit rules, taxes, and inheritance laws complicate things. What looks like a great investment might come with hidden costs.
So before you decide, let’s break it all down.
The hidden cost of buying in Spain: Inheritance Tax
Nobody likes to think about it, but if you buy property in Spain, your heirs will have to deal with Spanish inheritance tax (ISD).
And unlike in the UK—where the inheritance tax threshold is £325,000 with a flat 40% rate—Spain’s system is progressive, complicated, and varies by region.
Who pays?
- Spanish residents: Taxed on worldwide assets.
- Non-residents: Taxed only on assets in Spain (including property).
- Spouses & children: Pay lower rates.
- Distant relatives/non-family members: Much higher tax.
📌 Spanish Inheritance Tax Rates (2024)
| Inheritance Amount (€) | Tax Rate (%) |
| Up to €7,993 | 7.65% |
| €7,993 – €31,956 | 7.65% – 10.2% |
| €31,956 – €79,881 | 10.2% – 15.3% |
| €79,881 – €239,389 | 15.3% – 21.25% |
| €239,389 – €398,778 | 25.5% |
| €398,778 – €797,555 | 29.75% |
| Over €797,555 | 34% |
So if you inherit a €300,000 property, the tax rate could be between 21.25% and 25.5%.
That’s €63,750+ in taxes—just for inheriting a home.
Where you buy matters: Regional tax reductions
Some regions in Spain offer massive tax breaks.
| Region | Spouse/Children Reduction | Other Beneficiaries |
| Andalusia | 99% exemption | 0-20% reduction |
| Madrid | 99% exemption | 10-15% reduction |
| Catalonia | 99% reduction up to €500,000 | 10-20% deduction |
| Valencia | 50-75% reduction | 10-15% deduction |
| Balearic Islands | 99% exemption up to €700,000 | 20-50% reduction |
| Canary Islands | 99.9% exemption | 10-30% discount |
Example:
If you buy property in Madrid, Andalusia, or the Canary Islands, your heirs could pay almost nothing in inheritance tax.
If you buy in Valencia or Catalonia? Expect to pay more.
How to reduce inheritance tax on Spanish property
✅ Have a Spanish Will – Simplifies inheritance and avoids legal headaches.
✅ Gifting property before death – Can reduce taxes if done strategically.
✅ Buy property in joint names – Spouses pay tax only on 50% of the home.
✅ Life insurance – Can help heirs cover tax costs without selling the property.
Renting vs. Buying: What’s the smarter move?
✔️ Buying makes sense if:
- You’re selling UK property and reinvesting the cash.
- You want a forever home and plan to pass it down.
- You’re buying in a low-tax region like Madrid or Andalusia.
❌ Renting might be the smarter choice if:
- You don’t want to deal with inheritance tax.
- You prefer flexibility—moving between cities, trying out different areas.
- You don’t want the upfront costs (mortgage, taxes, legal fees).
The bottom line
Buying a home in Spain isn’t just about price. It’s about understanding long-term financial consequences.
Renting avoids inheritance tax headaches and gives you flexibility.
Buying can be a great investment—but only if you plan ahead.
So before making the move, do the research, pick the right location, and think about the future.
💬 Thinking about buying or renting in Spain? Drop your questions below! 👇
