Where to go in July?

I'd head to northern Spain--Galicia or Asturias maybe?
Are you open to car or prefer public transport. Either is possible, they would just be different trips.
Or, lean in to the heat and fly to Mallorca.

Switzerland.

Iceland in the Schengen zone.

Since you will already be in Spain have you considered Northern Spain aka "Green Spain"? It's quite the contrast compared to the south and centre of the country, and looks more like Ireland mixed in with the Alps. The weather is much more temperate too, more like what you would find in Switzerland.

From medieval villages, to the picturesque wine regions, the emerald waters of Bay of Biscay, the culinary delights of the Basque country, the Celtic culture of Galicia, and finally the towering jagged peaks of the Picos de Europa, Northern Spain has something for everyone and is less touristy than the rest of Spain.

Here is a good article with stunning photos on Asturias, one of the great regions of Northern Spain:
https://www.nytimes.com/2020/11/02/travel/asturias-spain.html

Comparing summer month temperatures, it is much cooler in Scandinavia than Madrid - cooler and considerably more expensive. As summer is the high travel time to that region, expect crowds in larger cities (Copenhagen, Oslo, Stockholm).
I am very partial to Spain, so, when I'm there, I never want to leave. Northern Spain's summers are much more forgiving than central and southern Spain - and keep in mind the cultural diversity of Spain is among the greatest assets of that wonderful country.

Ireland and N Ireland

Many posters complain a lot about the heat in Southern Europe in the Summer.

I live in Georgia, where I grew up and don't find the temps in Spain, Italy and Greece to be oppressive in the Summer. It is what you are used to that counts.
Further, I lived in Augsburg, Germany for four years and love the area, but the Winters were long and we couldn't wait to go south to Italian Spring. I would never pay to fly to Northern Europe in the Winter and freeze my rear off.

Head north in midsummer. Ireland, Scotland, anywhere in Scandinavia, Lithuania, Latvia, Estonia.

Flights from Spain to any of these places are cheap, quick, and easy, and they are all awesome.

I'd hit a Baltic cruise. They're very well priced and the cheapest way to see the major cities in Scandinavia.

There are at least 3 budget European airlines that can get you to Copenhagen inexpensively.