Non-Resident Income Tax (NRI) after Brexit: A Guide for Britons.

At SouthernWe understand the challenges faced by British property owners on the Costa del Sol post-Brexit, especially in terms of taxation. Since the UK's exit from the EU, regulations have changed significantly, affecting the way in which the UK's tax system is applied. Non-Residents Income Tax (IRNR). With years of experience in property management, we are here to clarify how these changes impact our UK clients, so that they can meet their tax obligations without hassle.

IRNR Guide for UK landlords

What is the IRNR?

The Non-Residents Income Tax (IRNR) is the tax that applies to people who, without being resident in Spain, earn income in the country. If you are British and you own a property in Spain from which you earn rents or other income, you must comply with this tax.

Main changes after Brexit

As of 1 January 2021, British citizens are no longer considered residents of the European Union (EU), which has significantly changed the way their income is taxed in Spain:

1. Tax Rate Increase

• Before BrexitAs a UK resident, you paid 19% on your income in Spain.
• After Brexit: The tax rate has now been raised to 24%. This affects both rents and gains on the sale of property.

ExampleIf you rent your house in Marbella for €1,000 a month, you will now pay €240 in taxes under the new rate of 24%, compared to €190 before Brexit.

2. Loss of Expense Deductions

• You used to be able to deduct expenses related to your property, such as repairs or mortgages.
• NowYou can no longer deduct these expenses as a non-EU resident.

ExampleIf you spent €300 on the maintenance of your flat in Malaga, all income will now be taxed without deduction.

3. Loss of Exemptions

• Some income that was previously exempt for EU residents, such as gains on the sale of assets, will now be subject to IRNR.

ExampleIf you sell a property in Estepona and make a profit of €50,000, it will now be fully taxed.

The Double Taxation Convention: A Breath of Fresh Air

The Double Taxation Convention between the UK and Spain ensures that you do not pay tax twice on the same income. You will still have to pay IRNR in Spain, but you will be able to reclaim this amount when you file your UK tax return.

CouncilKeep all documents and receipts for taxes paid in Spain to avoid problems when claiming them in the UK.

What happens if you sell your property in Spain?

If you decide to sell your property on the Costa del Sol, you will have to pay a capital gains tax, which is now 24%. However, if you are over 65 and have lived in the property as your main residence for at least three years, you may be exempt from this tax.

Hypothetical CaseYou bought a villa in Fuengirola for €200,000 in 2010 and sell it in 2024 for €300,000. As a non-UK resident, you will pay 24% on the gain of €100,000, which is equivalent to €24,000.

How to declare IRNR

The IRNR is declared using the Model 210which is submitted quarterly if you have regular income such as rents, or annually for non-recurring income.

CouncilConsider hiring a tax advisor in Spain to avoid mistakes and ensure that you declare your income correctly.

What If You Don't Rent Your Property?

Even if you do not rent your property in Spain, you will still have to pay IRNR on the imputed rent. This tax is based on the cadastral value of the property and is usually 1.1% of it, taxed at the rate of 24%.

ExampleIf the cadastral value of your flat in Benalmádena is 150.000 €, the imputed rent will be 1.650 €, and the tax will be 396 € per year.

Conclusion: Stay Compliant and Enjoy Your Property on the Costa del Sol

Although Brexit has complicated tax obligations for British homeowners in Spain, keeping up to date with the new rules will allow you to continue enjoying your home on the Costa del Sol without tax worries.

Final CouncilConsult a tax advisor to ensure you are complying correctly with the law and to take advantage of any exemptions or treaties that apply to your situation.

With these key points, managing your taxes as a non-resident in Spain becomes much clearer. Whether you rent out your property or just use it for holidays, stay informed and enjoy your home on the Costa del Sol!

If you need more information about Brexit and how it affects your life in Spain, you can consult this article on its effects on the purchase of your home. And if you need a more specific one, in this other one we tell you about the residence permits for British citizens in Spain.