British landlords with holiday homes to let in Europe will face extra taxes after Brexit.
Paying more tax is an unforeseen consequence of Brexit that thousands of property owners will have to face.
So far, the worst deal for British taxpayers owning property in Europe looks to be in Spain, which also happens to be the favourite overseas destination for Brits chasing the sun and a more laid-back lifestyle.
The bad news comes wrapped in Spain’s property tax rules for non-residents.
These rules mean British expats living in Spain and paying local income and capital gains taxes will continue to pay the same taxes as locals.
But property owners paying taxes in Britain become subject of non-resident rules when the UK leaves the European Union.
Find out the details on where UK expats live.
Income tax hike on rents
The minute Brexit takes effect, income tax rates for British property owners rise from 19% to 24%.
Although taxes are higher, the biggest drawback is non-EU residents cannot offset any business expenses against rental income.
Landlords should remember Spain allocates a taxable notional rent of up to 2% of the property’s rateable value each year taxed at 24% for non-EU residents that will apply to homes left empty after Brexit.
If the home is rented out, tax is paid quarterly.
Selling a property also comes with more tax after Brexit.
Besides British capital gains tax, CGT will be due in Spain with the amount paid subject to the double taxation agreement between the two countries.
No tax discussions
Spanish tax rules dictate a withholding tax of 3% the property value is retained by the buyer if the seller is not resident in Spain, although the money is refunded in some circumstances.
Taxes on income and gains are not included in the Withdrawal Agreement negotiated by Prime Minister Boris Johnson, but the likelihood is the status quo will remain during the transition period.
Neither Britain nor Spain have indicated how tax matters will be sorted out after Brexit.
British taxpayers with properties in other EU countries will face similar problems as they cease to become European citizens on Brexit and become subject to non-resident tax rules.
Other taxes on buying and selling homes are also due, plus an equivalent to the UK council tax levied by the local authority. These are property related rather than applied to individuals, so should not change for non-residents after Brexit.
Get Financial Advice
We can put you in contact with a qualified specialist expat financial advisor based in your location. Click the button below to get the expert advice you need to make the best financial decisions.
Below is a list of related articles you may find of interest.