linda Coyle

I was watching a programme last night and saw that, in Spain,if a spouse passes away the surviving spouse has to pay tax to keep the house. my question is:- say for example the house is valued at £250,000 - no mortgage - house in joint names - how much would this tax be for the surviving spouse? The surviving spouse then writes a will leaving the house to children - when the surviving spouse passes away, do the children then have to pay inheritance tax? Sorry it's a morbid subject, but hopefully any answers might be beneficial to other people planning the move

Mitzyboy

Well its correct that when inheritence tax is payable that the assets can't be sold to meet the bill, but between spouse there are allowances, subject to certain criteria.

Without going into too much detal, if the house is in joint names for instance, which imho it should be, then my understanding is that you will only have inheritence tax on half of the property value. If the survivor doesn't sell the house for ten years then the inheritence tax is reduced by up to 95%. The survivor must have held a residence permit for 3 years and the home must be your principal residence.

But I think this reduction only applies up to a certain property value, something like €120k. So if the property is valued at €240k, you still pay tax on €120k

Inheritence tax varies between about 7 and 34%, depending on the tax base value

If you are leaving your home to a non resident, i.e. children in the UK, then yes you pay on the lot and you have to find the monies first

Fred James

A few additional points:-

You also have to have lived in the house for 3 years.

The 120k only applies to your inheritance so if the house is valued at 240k you would still get an allowance of 120k as you only inherited 120k.

In Andalucia the allowance is 99.9% and in fact if you inherit less than 125k then there is no tax to pay and no obligation to retain the house for 10 years.

There are other special rules in other regions and IHT is effectively slowly being abolished on typical family inheritances.

chrismortley

I was also led to believe if there was any outstanding mortgage,this was deductable from any IHT.
Can you or anyone else verify that for me please ?

Chris

Rosemary

Fred I vaguely remember reading somewhere that the age of the surviving spouse also affects the payment of inheritance tax is that right or have I got the wrong end of the stick?

Rosemary

linda Coyle

Thanks for your replies, this has cleared it up for me a bit. Just needed to know as obviously we would have to get life assurance to make sure there was cash available to pay the tax - didn't know how much the tax would be.

kevinbeddow

Some of you will know that I have been asking Questions on this subject before,well its just happened to me.
Because I have just inherited a house in Majjorca and just spoken to my solicitor,I am not a relative and have no relationship with the family,my IHT is 36% witch means if you have a house worth 400k then the bill would be 160k
It is being Valued today and I am hoping they give me a Low Val of 700 as apposed to the 1Mil mark,still I now have to find 320k for IHT but I have till May to do it!Any advise on How to get Loans for this would be great?

Fred James

Yes of course. The value of the asset is the part you own - a debt will be deducted from the value.

A word about values. It is up to the inheritor to declare the value of their inheritance on the relevant tax form. That value can be whatever you choose to put on the form but it may be challeged by the taxman.

They have a simple way of calculating an "acceptable" value and it is based on the current catastral value. For Andalucia there is a website where you can calculate the value. The factor used to calculate the value varies from place to place. You enter the catastral value and the location and it computes the value. I assume similar calculations are made in other autonomous regions.

It is here http://tinyurl.com/2tyjtz

That said, this is not an absolute value - the taxman reserves the right to calculate it whatever way he chooses but it's a good starting point. Obviously if it was recently purchased the declared value on the escritura may well have to be used if it is significantly larger. This is clearly an area where good professional advice at the time could save a lot of tax.

scampicat

What if someone inherits a house and simply does not have the money to pay the tax?????

Fred James

Yes Rosemary, I think it is probably the wrong stick.

The over 65 rule is for Capital Gains Tax. If you are a resident and have owned the house for 3 years no CGT is payable.

For IHT, the 95% reduction applies to a spouse or children irrespective of age.

However if there is a brother or sister who has lived with the deceased for 2 years then they get the same allowances but only if they are over 65.

Mitzyboy

Yes apparantly originally it was aimed at small businesses, as there were many incidences of businesses going bust as they couldn't deal with the inheritence situation.

Yes, I did mean that the €120 allowance applied even if the house was valued at €240, just didn't make the point very well

Bri and Katee

Karen and I have been discussing this quite a bit lately, the whole issue just seems so unfair.

One of the options we came up with would be to actually sell the property when we reach the age of any infirmity (say 70y.o)between us and then maybe rent or move back to the UK to be near younger relatives.

Does this sound feasable? Its a crying shame that we wanted to move to spain for a better life in retirement yet the more we hear the more we wonder if we have done right! So many taxes, so few years left to get your head around them all!

scampicat

We will definitely sell up at some point. We'll probably be spending at least half our time in the UK in about 1-2 years, and will probably sell completely when my husband is 65 in 2014 (so we don't have to pay any tax).

Can I ask my question again? What happens if someone inherits and just doesn't have the money to pay the tax? Or the wherewithall to raise a short-term loan?

For example if someone on benefits inherited?

Bri and Katee

I suppose like the spanish seem to do, you could give up your right to inherit. It was told to us by a friend that the reason you see so many derelict properties outside of towns is for that reason. The next of kin do not wish to pay the tax so refuse the inheritance of the property!

big wheels

I never thought of that. It could well explain the number of large houses left empty to decay for years around our town.