Spanish Tax on UK Rental Property

Hi Sharon and Mike,

If correct, this may have implications for me too, as I also rent out property in the UK.

If you're already registered for Self-assessment, you should be receiving regular updates from HMRC.  Their website shows that the UK still allows certain expenses to be offset against rental income:

https://www.gov.uk/guidance/income-tax-when-you-rent-out-a-property-working-out-your-rental-income

There has been a change in some UK tax relief schemes, but unless you're earning rental income in excess of £50k p.a., I don't believe these will affect you.

So I'm wondering whether it's Spain's recognition of expenses that has changed?  Historically, they have always been more generous than HMRC, allowing certain improvements, as well as maintenance, to be offset.  I haven't heard of any changes in this regard within the Spanish tax system, but I will email my tax advisor and ask that question.

I'm registered with HMRC as a Non-resident Landlord - are you guys?  Also, I assume any tax that you're paying on your rental property in the UK is being offset against any tax liability you have in Spain?

I'll update this thread when I receive a response from my tax advisor.  Many thanks for the "heads up".

Kind regards,

Kim

Thanks Kim - yes we are registered as non resident landlords in the uk and our accountant says the rules in the uk haven’t changed. It’s the rules in Spain confusing us (as usual) and we want to ensure we are doing things correctly.

Will look forward to hearing your tax advisors comments

Many thanks

Sharon

Just a thought, could this be a confusion with not being able to claim any expenses against a Spanish tourist let?

Hi Cheryl,

It could be, if Sharon and Mike are letting out a Spanish property, but their post is about UK property rental - so if their tax advisor has confused the two things, they need a new tax advisor! 

I've written to my tax advisor at Abaco and queried it.  Hopefully, between us, we can get this clarified 🤞

Kind regards,

Kim

Hi Sharon and Mike,

This is what I asked my tax advisor at Abaco yesterday:

"A friend's tax advisor has told her that she can no longer offset expenses, i.e. maintenance costs, landlord's insurance, etc., against her UK property rental income.  I have checked HMRC's website and this is not correct, so I wonder whether her advisor is referring to a change in the Spanish tax system, rather than the UK?"

and this is the response I've received this morning:

"As a Spanish resident, you can still deduct costs from UK rental Income, but this has been withdrawn for British Non Residents renting their property in Spain, due to BREXIT."

So Cheryl's assumption was spot-on.  Probably best if you clarify with your tax advisor what she told you, as it appears to be irrelevant to your circumstances, unless you're also renting out property in Spain.

Kind regards, 

Kim

Thank you so much Kim that is a great help and we will speak to our advisor again.

We do not rent out Spanish property only uk.

Much appreciated 

Sharon

My Spanish lawyer has just requested a spreadsheet of all our UK rental expenses for our 2021 tax return as we have 4 UK properties that we pay tax on in Spain. The rental income profit is initially taxable in the UK, but as it falls below mine and my husband's joint personal allowance, there is no tax due in the UK; so the liability transfers to Spain. The expenses can definitely be offset against the tax liability, especially the mortgage interest which needs to be declared separately to the other general expenses. 

Thank you Jane, that’s reassuring too.

Regards

Sharon