tax due on UK house sale if reinvested in property in Spain

[Lavanda]

Phew! Long thread title ...

Is the current situation still the same as a few years ago? If a person, resident in Spain, sells a UK property, their only UK property which up to then had been their main residence, and puts 100% of the proceeds into a Spanish property intended to be their main residence, are those proceeds still exempt from tax in Spain? There's no tax due in the UK.

Also, if a person becomes an official Spanish resident halfway through a tax year from when does their liability to Hacienda start?

Thanks.

[fincalospinos]

This is correct providing that the house has been sold within 3 years of moving to Spain.

[El Cid]

Assuming that your UK house qualifies as your permanent residence (under Spanish rules that means that you must have been living in it for 3 years) then, assuming that you buy the new house in Spain within 2 years of selling the UK house, you will not be liable for Spanish CGT if you roll over the total proceeds of the UK sale.

You become tax resident in Spain when you spend more than 183 days in one calendar year in Spain and you will be considered tax resident for the whole of that year.

If you spend more on the new house than the proceeds from the sale, that will be considered to be an investment in your (new) principal residence and the amount invested can be claimed against income tax up to a maximum investment of 9015. If you own the house jointly and declare separately you can both claim the deduction of 15% of the investment. If you take out a mortgage you can continue to treat this as an investment and claim the deduction on both the capital and interest payments.

Sid

[toddcl]

So. As I already own my Spanish home but are not resident yet. I should sell my UK house and hang around for a while to make sure I do not cop for Spanish tax before becomming resident.

[El Cid]

Yes, sell in the UK before you become resident in Spain and there will be no tax to pay.

Sid

[toddcl]

Thanks Sid

[Lavanda]

He! He! That's what we managed to do. I just wanted to check before we fill in the forms - not that it would have made a difference to HOW we fill in the forms. We just would have known what to expect. Thanks, Sid.

[Bongtrees]

What happens the other way around?

selling perm. home in Spain and buying a home back in the UK?

[Lavanda]

CGT and other taxes in Spain, as applicable, then buy in the U.K. as normal, I suppose.

[El Cid]

There are two ways you can avoid CGT on the sale of the family home.

As a tax resident, if you are over 65 there is no CGT.

If you are under 65 you can avoid all tax if you reinvest in another family home. That home does not have to be in Spain so you can move back to the UK and pay no tax.

In both cases, to qualify as your permanent home you must have lived in it AND been tax resident for 3 years.

The mechanics are simple. You enter the sale of the Spanish home on your tax declaration but you can defer any tax for 2 years (or until you buy the new home). When you finally buy the new home you put that on your declaration and pay any tax due (none if you have reinvested all the proceeds of the sale).

Sid

[Lavanda]

Thanks, Sid, and that, I take it, is one good reason to file a tax return each year - even if the amount is zero.