UK Inheritance Tax for Expats Living in Spain: What You Need to Know

Since 6 April 2025, UK IHT has been based on long-term residence (LTR) rather than domicile. Your worldwide estate may therefore remain subject to UK IHT for several years after leaving the UK.

Spain also charges inheritance tax, with liabilities depending on the beneficiary, the assets inherited and the applicable regional rules.

This guide to UK inheritance tax for expats living in Spain explains how both systems interact and what high-net-worth individuals with assets and beneficiaries across the UK and Spain should consider when planning their estates.

Do You Pay UK Inheritance Tax on Spanish Property?

Since 6 April 2025, former UK residents can remain subject to UK IHT on worldwide assets after leaving the UK, depending on their long-term residence status. Determining your UK residence history, including under the Statutory Residence Test, is therefore important.

You are generally a UK LTR for IHT purposes if you have been a UK resident for at least 10 of the 20 tax years immediately preceding the relevant tax year. If you die while holding LTR status, your non-UK assets, including Spanish property, may be subject to UK IHT.

LTR status does not necessarily end when you become a non-UK resident. A post-departure tail period can keep worldwide assets within UK IHT scope, with its duration determined by your previous UK residence:

Transitional provisions may apply to individuals who were already non-UK resident when the new regime took effect. Their previous UK residence and domicile position may therefore remain relevant.

For example, a British expatriate who spent more than 20 years resident in the UK before relocating to Spain may remain subject to UK IHT on worldwide assets for up to 10 tax years after departure, subject to the applicable rules. During that period, both their UK investment portfolio and Spanish property may remain within UK IHT scope.

Once you are no longer LTR, UK IHT exposure is generally limited to UK-situs assets, subject to statutory rules and exclusions. These can include:

• UK real estate, including UK property
• Shares in UK companies
• UK bank accounts
• Certain interests in UK-situs property held through trusts

Trusts, including discretionary trusts, gift trusts, discounted-gift trusts and loan trusts, require separate consideration. Their UK IHT treatment depends on the underlying assets, settlement arrangements and relevant residence rules.

From 6 April 2027, most unused UK pension funds and pension death benefits will be brought within the deceased’s estate for UK IHT purposes, subject to the applicable legislation and exclusions. Their treatment depends on the deceased’s IHT position rather than simply where the pension scheme is registered.

Even after UK IHT exposure on overseas assets ends, Spanish property may remain subject to Spanish inheritance tax.

Is There Inheritance Tax in Spain?

Spain imposes inheritance and gift tax (Impuesto sobre Sucesiones y Donaciones, or ISD) on individuals who receive assets or rights through inheritance or succession. The tax can apply to:

• Spanish property
• Bank accounts
• Investments
• Business interests
• Life insurance proceeds

Spanish inheritance tax depends on the beneficiary’s circumstances and the location of the inherited assets:

• Spanish tax residents can be taxed on worldwide assets they inherit.
• Non-residents can be taxed on assets and rights situated in Spain.

For inheritance tax in Spain for non-residents, the deceased’s residence, the beneficiary’s residence and the location of the assets can determine both the tax exposure and which regional rules apply.

What Are the Differences Between UK and Spanish Inheritance Tax?

The two systems differ in how tax is assessed, who pays it and which reliefs are available.

• Who pays the tax: Spanish IHT is generally charged to each beneficiary on the value received. UK IHT is normally calculated on the deceased’s estate before distribution.
• Tax rates: Spanish IHT is progressive, with the liability influenced by the amount inherited, the beneficiary’s relationship to the deceased and, under applicable rules, their existing wealth. The standard UK IHT rate is 40% on the taxable estate above the available nil-rate band and any applicable residence nil-rate band, although other rates and IHT reductions can apply.
• Regional differences: Spain’s Autonomous Communities can apply their own allowances, reductions and rebates. UK IHT rates and allowances generally apply across the UK.
• Spouse exemptions: UK law generally exempts qualifying transfers between spouses and civil partners, although limitations can apply depending on long-term UK residence status. Spain has no equivalent universal spouse exemption, although many regions provide substantial relief for spouses.
• Family relationships: Spanish reliefs can differ significantly between spouses, descendants, more distant relatives and unrelated beneficiaries. UK IHT places particular importance on the spouse or civil partner exemption alongside other qualifying reliefs.

These differences can affect how much each beneficiary receives, particularly where an estate includes substantial UK and Spanish assets.

Can UK Expats Pay Inheritance Tax in Both the UK and Spain?

Yes. UK expatriates living in Spain may face inheritance tax in both countries on the same assets. There is no comprehensive UK-Spain inheritance tax treaty, although domestic foreign tax credit provisions may provide relief.

The 2013 UK-Spain double taxation agreement covers income tax and capital gains tax, but not inheritance tax. Both countries may therefore have taxing rights over the same assets:

• Spain taxes Spanish-situated assets where the relevant statutory conditions are met and can tax Spanish-resident beneficiaries on worldwide inheritances.
• The UK generally taxes UK-situs assets regardless of the deceased’s residence status and can tax worldwide assets where the deceased remains an LTR, including during the applicable post-departure period.

If both countries tax the same asset, UK unilateral relief may be available under domestic legislation.

In the UK, Sections 159 and 160 of the Inheritance Tax Act 1984 provide relief for qualifying foreign taxes on property also subject to UK IHT. Credits are subject to statutory conditions and limits, including the UK IHT attributable to the relevant property.

Spain provides a domestic foreign tax credit under Article 23 of Ley 29/1987. For qualifying beneficiaries taxed on worldwide inheritances, relief may be available for certain overseas inheritance taxes relating to foreign assets or rights, subject to statutory limits.

The two systems do not necessarily provide matching relief. UK IHT is generally assessed at estate level, while Spanish inheritance tax is assessed on individual beneficiaries. The assets involved, their location and the taxpayer liable for each charge must therefore be considered when assessing available credits.

Example: How UK and Spanish Inheritance Tax Can Apply to the Same Estate

Consider a British expatriate who has lived in Spain for five years after spending more than 20 years resident in the UK. Their estate includes a UK investment portfolio, Spanish property and investments held elsewhere.

If they die while still within the UK’s LTR period, their worldwide assets may remain subject to UK IHT. Spanish-resident beneficiaries may also be liable for Spanish inheritance tax on the assets they receive, including those situated outside Spain.

Both jurisdictions could therefore tax the same assets. Although foreign tax credits may be available, the relief will depend on the assets, their location and the applicable domestic rules.

This illustrates why the deceased’s UK IHT position and each beneficiary’s Spanish tax position must be assessed together. Double taxation relief may not eliminate the full liability, making asset-level analysis important when planning high-net-worth estates with cross-border assets.

How Much Is Inheritance Tax in Spain?

Under Spain’s state framework, progressive inheritance tax rates range from 7.65% to 34%. The final liability depends on available allowances, the beneficiary’s relationship to the deceased, their existing wealth and applicable regional reliefs.

The state figures below are a starting point. Autonomous Communities can apply different allowances and reliefs, substantially changing the tax payable.

Each beneficiary may qualify for a state allowance based on their relationship to the deceased:

Applicable regional rules can modify these amounts.

The following table summarises the state rate scale. It combines several statutory bands and should not be used to calculate an individual liability.

These are progressive marginal rates rather than a single percentage applied to the full inheritance.

An ISD multiplier is then applied to the calculated tax, taking account of the beneficiary’s pre-existing net wealth and relationship to the deceased.

Under the state framework, the multipliers are:

The multiplier generally increases for beneficiaries with greater existing wealth and for those more distantly related to the deceased.

How Much Is Spanish Inheritance Tax Across Different Regions?

Spain’s 17 Autonomous Communities have significant powers to modify inheritance tax. Two beneficiaries receiving the same inheritance from an equivalent relative may therefore face different liabilities depending on the applicable region.

Under Spanish inheritance tax laws, the relevant Autonomous Community is determined by statutory connecting factors, not simply where the property is located. Where the deceased was resident in Spain, their regional habitual residence is generally central, subject to the applicable five-year residence rules and provisions for cross-border inheritances.

The following table illustrates some regional differences:

A reduction in the taxable inheritance and a rebate against the resulting tax liability have different effects.

Regional rules and allowances can change. The applicable Autonomous Community provisions should therefore be confirmed when assessing inheritance tax liability alongside potential exposure to UK IHT.

How Do Spanish Succession Laws Affect UK Expats?

Inheritance tax determines the tax payable, while succession law governs who inherits the estate.

Spain recognises forced heirship, known as legítima, which can restrict how assets are distributed.

Under the general Spanish Civil Code, part of the estate is reserved for forced heirs, principally children and descendants or, where there are none, parents and other ascendants.

Where children or descendants inherit, the reserved share system generally divides the estate into three parts:

• Legítima estricta: One-third reserved equally for children or descendants.
• Tercio de mejora: One-third that can be allocated among descendants according to the testator’s wishes.
• Tercio de libre disposición: One-third that can be distributed freely.

Separate succession regimes apply in several Autonomous Communities, including Catalonia, the Basque Country, Galicia, Navarra, Aragón and the Balearic Islands.

Under the EU Succession Regulation (Brussels IV), which applies in Spain, succession is generally governed by the law of the deceased’s habitual residence unless a valid choice of nationality law has been made.

A UK national can choose the law of their nationality to govern succession, despite the UK’s departure from the EU. This choice should be clearly expressed in the will, although the Regulation also permits it to be demonstrated by the terms of a disposition upon death.

A valid election may affect the application of Spanish forced heirship rules but does not remove Spanish inheritance tax obligations or override all other property and family-law provisions. Care is also needed where different legal systems within the UK may apply.

UK expatriates should therefore consider how Spanish succession rules interact with their existing wills and intended distribution of assets as part of their cross-border estate planning.

Cross-Border Estate Planning for UK Expats Living in Spain

Estate planning for UK expatriates in Spain requires coordination between both jurisdictions. Arrangements established under UK rules may have different legal or tax consequences after relocation.

Key considerations include:

• Coordinate your wills: Consider whether separate UK and Spanish wills would simplify estate administration. Where separate wills are used, they should not unintentionally revoke one another and should include an appropriate nationality-law election where necessary.
• Reassess UK trust structures: Spain does not generally recognise common-law trusts in the same way as the UK. Spanish tax treatment depends on the trust terms, the rights of settlors and beneficiaries, and the underlying assets or distributions. Discounted gift trusts and other UK IHT arrangements may not achieve their intended outcome after relocation and warrant specialist review.
• Review pension arrangements: From 6 April 2027, most unused pension funds and pension death benefits will be brought within the deceased’s estate for UK IHT purposes, subject to applicable rules and exclusions. Pension withdrawals, gifts, restructuring and beneficiary nominations should be assessed for their potential UK and Spanish tax consequences.
• Assess life insurance policies: Spanish inheritance tax may apply to qualifying death benefits, depending on policy ownership, the insured person and the beneficiary. UK policies payable to Spanish-resident beneficiaries may require particular attention.
• Review UK and Spanish assets: Property, investments, bank accounts and business interests should be considered together. Direct ownership, company interests and trust-held assets can have different tax and succession consequences. Asset location is also relevant.
• Consider lifetime gifts: Transfers intended to reduce UK IHT exposure can trigger Spanish gift tax or other immediate liabilities. The UK’s seven-year gifting rules do not determine the Spanish treatment.
• Monitor residence status: Review your position under the LTR framework and post-departure period, including any transitional provisions.
• Align beneficiary arrangements: Ensure pension nominations, life policies and other beneficiary arrangements remain consistent with your intended estate distribution and tax position.

When Should UK Expats Review Their Estate Planning Arrangements?

A review is particularly relevant before relocating to Spain, when approaching the end of the UK’s LTR period, or following changes in family circumstances, asset ownership or beneficiary arrangements.

Existing UK trusts, pension structures and lifetime gifting plans should also be reassessed where Spanish residents could alter their intended treatment.

An integrated estate review can help identify overlapping UK and Spanish tax liabilities, unsuitable structures and gaps in succession planning.