With early and careful planning, you can prevent costly mistakes and make the most of tax-efficient opportunities when moving to France.
By Jason Porter
1. Where will you be taxed?
You need to establish the date you become resident and liable to French taxation on your worldwide income, gains and estate. Be wary of UK rules that can make you tax resident again without realising it.
2. How much tax will you pay?
French income tax ranges from 14% to 45% with additional ‘social charges’ of up to 15.5% on most income. Planned changes from 1 January 2018 include:
- A fixed 30% rate for investments worth €150,000+ (€300,000+ for joint policies)
- An increased maximum of 17.2% for social charges
- Wealth tax of 0.5%-1.5% on property only (rather than all taxable assets) valued over €1.3 million.
With suitable planning, it might even be possible to pay less tax in France than you did in the UK.
3. How should you hold savings and investments?
Do not assume that what was tax-efficient in the UK is the same in France. ISAs, for example, are taxable in France. Review your investments to ensure they are suitably diversified and structured appropriately for your new circumstances.
4. What is the right currency mix for you?
Once in France, your expenses will mostly be in euros, so keeping savings in sterling exposes you to exchange rate fluctuations. Consider flexible structures that let you diversify by holding investments in multiple currencies.
5. What are your property options?
When is the best time to buy and sell property in either country to limit taxation? You will need to factor in the date French residence commences and UK residence ceases. You should also understand your property ownership options in France and how they affect your succession and wealth tax liabilities.
6. What should you do with your UK pensions?
In certain circumstances, it is possible to withdraw UK pensions as a lump sum and pay just 7.5% French tax. You could re-invest capital into tax-efficient arrangements for France. Alternatively, expatriates can transfer pension funds into a Qualifying Recognised Overseas Pension Scheme (QROPS) for tax efficiency, flexibility and estate planning benefits.
Before making any pension decisions, it is vital to take regulated, professional advice tailored for your unique circumstances.
7. Is your estate planning suitable?
French succession law and taxes work very differently from the UK. If you leave assets to step-children or non-relatives, they can face succession taxes as high as 60%. Beware also the ‘forced heirship’ rules that automatically distribute up to 75% of your estate to your children, whatever your intentions. The ‘Brussels IV’ EU regulation lets you apply relevant UK law instead, but take care to understand all the implications first.
While answering these questions can provide peace of mind that your financial affairs are in order, cross-border taxation is complicated. Take personalised, expert guidance for the best results.
Jason Porter is Business Development Director at Blevins Franks – the leading international tax and wealth management advisers to UK nationals living in Europe. Contact Jason at firstname.lastname@example.org
You can find much more information on retiring to Spain and other European destinations by going to www.retiringtoeurope.com. There you can download the complete 276-page guide.
Summarised tax information is based upon our understanding of current laws and practices which may change. Individuals should seek personalised advice.