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If you live in or are thinking of moving to Valencia, Alicante, or Castellón, there’s good news: the regional government has approved fresh tax cuts that could save you money.
Building on last year’s changes, the new rules (set out in Law 5/2026) trim income tax, double the wealth tax exemption, and make inheritance and gift tax more generous.
Income Tax Going Down
In Spain, your income tax bill combines a national rate and a regional rate. The Valencian government has cut its portion, which means lower overall rates for residents.
What’s changing?
The lowest rate drops from 18.5% to 18.3% in 2026, then to 18.2% in 2027
The top rate falls from 54% to 53.85% in 2026, then to 53.75% in 2027
Most bands in between will see similar small reductions
These cuts apply to wages, pensions, and rental income. Savings and investment income rates are set nationally and haven’t changed.
Valencian Income Tax Rates (Combined State + Regional)
| Income Band | Previous Rate | New 2026 Rate | 2027 Rate |
| Up to €12,000 | 18.5% | 18.3% | 18.2% |
| €12,000 – €12,450 | 21.5% | 21.2% | 21.1% |
| €12,450 – €20,200 | 24% | 23.7% | 23.6% |
| €20,200 – €22,000 | 27% | 26.7% | 26.6% |
| €22,000 – €32,000 | 30% | 29.6% | 29.5% |
| €32,000 – €35,200 | 32.5% | 32% | 31.9% |
| €35,200 – €42,000 | 36% | 35.5% | 35.4% |
| €42,000 – €52,000 | 38.5% | 37.9% | 37.8% |
| €52,000 – €60,000 | 41% | 40.4% | 40.3% |
| €60,000 – €62,000 | 45% | 44.4% | 44.3% |
| €62,000 – €72,000 | 47.5% | 46.9% | 46.8% |
| €72,000 – €100,000 | 49% | 48.6% | 48.5% |
| €100,000 – €150,000 | 50% | 49.85% | 49.75% |
| €150,000 – €200,000 | 51% | 50.85% | 50.75% |
| €200,000 – €300,000 | 52% | 51.85% | 51.75% |
| Over €300,000 | 54% | 53.85% | 53.75% |
Rates shown are combined state and Valencian regional rates
Wealth tax allowance doubles
This is the big one for wealthier residents. The Valencian wealth tax exemption is jumping from €1 million to €2 million per person starting 31st December 2026.
What does this means?
A couple could shield €4 million combined through personal allowances
Plus up to €600,000 extra for their main home (€300,000 each if jointly owned)
That’s potentially €4.6 million protected from wealth tax
One catch: Spain’s national “Solidarity Tax on Large Fortunes” still kicks in if your net assets top €4 million, so very wealthy individuals may still face some wealth-related taxes.
Inheritance and Gift Tax improvements
The rules for passing assets to family members are getting more flexible:
Family business relief expanded
The 99% tax relief for family businesses now covers more relatives
Previously limited to direct family; now extends to collateral relatives up to fourth degree (including first cousins)
This helps keep family businesses intact across generations
New tax credits for wider family
25% credit on inheritances and gifts between siblings, aunts, uncles, nephews, and nieces
Rising to 50% from June 2027
Bottom Line
The Valencian Community is becoming increasingly tax-friendly, especially for wealthier residents and families planning to pass on assets.
That said, lower rates don’t automatically mean a lower tax bill. If you’re a UK national living in Spain, you still need to navigate:
- Spanish income, wealth, and inheritance taxes
- UK Inheritance Tax (IHT)
- Cross-border UK pension and investment rules
- Property ownership in multiple jurisdictions
Tax rules in both Spain and the UK are forever changing – it’s worth reviewing your arrangements to make sure you’re not paying more than necessary.
Key dates to remember!
Income tax cuts: January 1, 2026 (with further cuts 1st January, 2027)
Wealth tax exemption increase: 31st December, 2026
(applies to 2026 tax returns filed in 2027)
Inheritance tax credit increase: June 2027
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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