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Inheritance and tax Paul Davies

is a partner at wills, trusts and probate law fi rm Lane-Smith & Shindler Call 0845 658 4848

or visit Inheritance tax on Spanish resident’s estate

My mother (a widow) has lived in the Costa Blanca since November 2004. She is a UK

passport holder but a Spanish resident. She has made a will in both the UK and Spain. She has no mortgage and very little money in a Spanish bank account – all her savings are in the UK. She is the sole person on the deeds to her property. I have heard that the Spanish government would be entitled to 40 per cent of the value of her home on her death. Is this correct? Also how does this affect my Mum’s savings? JACKIE EARL, BY EMAIL

In the UK, as a general rule of thumb, single people with assets worth less than £325,000,

or married couples with assets of less than £650,000, are not subject to inheritance tax. The rates and allowances in Spain however

are less generous. When your mother passes away, Spanish inheritance tax will be payable on all your Mother’s assets situated in Spain – and if you and your brother were also resident in Spain, it would also be payable on her assets outside Spain. The rate of tax varies depending on the size of the net estate and the relationship between the benefi ciary and the deceased. The tax-free allowance is relatively small but unlike in the UK, each benefi ciary has a separate allowance. Tax is then levied on a sliding scale. The fi rst ‘slice’ of value subject to tax at a lower rate than the last ‘slice’ of value. The tax is then subject to a multiplier depending on the relationship of the benefi ciary to the deceased and the value of the estate. The top rate of tax applicable to a child of the deceased with a substantial estate is 40.8 per cent, but that would not be the average rate applying to

the whole estate – only the rate applying to the top ‘slice’ of value in the case of a higher value estate. One way in which you may be able to reduce Spanish inheritance tax is if your mother takes a mortgage against the property and deposits the proceeds in a bank account outside Spain.

If your mother retains a UK domicile then her estate may also be subject to inheritance tax in the UK. Any money she has in bank accounts in the UK is subject to inheritance tax regardless of domicile. Since the method of calculation is different, there may not be any UK inheritance tax payable, in addition to which UK inheritance tax on your mother’s property will be reduced (possibly to zero) on account of the Spanish tax payable.” You may also fi nd it benefi cial to talk to an adviser in Spain to get a better idea of the amount of Spanish tax likely to be payable.

Mortgages Thomas Foster

is an international mortgage consultant at international mortgage broker Baydonhill Call 020 7594 0584 or visit

Financing our move across the Channel

My wife and I are planning to move to France. In order to do this, we need to sell our house in Sussex and use the proceeds to fund our French home. However, if we can we would prefer to wait until – hopefully - the Pound strengthens against the Euro before we sell up. Is there any way we can arrange things so we can do this and still secure a French mortgage? JANE MORGAN, BY EMAIL

In a word, yes. But there are several things you need to consider beforehand. I would

advise you to take out a mortgage with a French bank. Then you would not have to use Sterling, and if circumstances allow, you could rent out your Sussex property. This approach would provide you with the means to cover your UK mortgage payments until the UK

property market picks up again. You could then sell your UK property at a more favourable price than you’re likely to achieve in the current market. It is advisable for UK residents to keep a foothold in the country by renting out their fi rst property to tenants. You then have a base to return to if the move to France doesn’t work out as planned. It is less of a long-term commitment than selling up completely. In addition, UK rental income can be transferred directly to pay the French property mortgage (or service an existing UK mortgage). It is also important to be aware

of the fi nancial criteria you’ll need to meet to secure a French mortgage. You will need to

provide evidence of what is defi ned as ‘consistent income’, either from a permanent role or through self-employment. Proof of income needs to be demonstrated for at least two consecutive years if you are self-employed and for three months if you receive a salary, before an application will be considered. The fact that you already have a UK property with accumulated equity will also work in your favour.

When selecting a French mortgage, look for a mortgage without a redemption penalty. This will ensure that if you subsequently pay the mortgage off in its entirety (for example by using the equity you receive through the sale of your UK home), you will not be subject to a charge for doing so.


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