Many people who dream of buying property and living in France have to wait until they retire. Some of course find work in France, but this may not work for you. Another option, depending on what work you do, is to live in France but continue working in the UK.
Again, this is only possible for some people, but depending on what your profession is, could it work for you? It has become easier to achieve over the last decade or so, with flights to regional airports and good internet access. If you do a lot of your work on the computer, some people find they are able to work from France much of the time and visit the UK as and when needed. This could be for a couple of days most weeks, or once or twice a month, or even less frequent, depending on their situation.
Supposing this would be possible for you, what are the tax implications?
First of all you need to determine if you will become tax resident in France or not.
Under French domestic rules, you will be deemed to be resident in France for tax purposes if you fulfil any of these tests –
1. France is your main residence or home. This is the place where your close family (spouse and minor children) live, regardless of where you yourself spend most of the time.
2. France is your principal place of abode, which usually means that you spend more than 183 days in France a year.
3. Your principal activity is in France.
4. France is the country of your most substantial assets.
However you also need to be aware of the UK domestic residency rules, applied under the Statutory Residence Test, as spending time in the UK could mean you are tax resident there, especially if you have other ties like property. In this case the double tax treaty will determine where you are resident for tax purposes.
If you are tax resident in France, you are liable for French tax on your worldwide income, gains and wealth. Your estate’s beneficiaries are also liable for French succession (inheritance) tax if you die as French resident.
However, the UK/France double tax treaty provides that generally French residents working in the UK pay UK tax on the income derived from the work done in the UK. The income is not taxed directly in France, but it still needs to be added to your other income for the year to determine your overall tax rate. You then receive a credit equal to the French tax and social charges that would have been due. Therefore, in effect, you do not pay tax in France on your UK income, but it does increase the rate of tax you pay on the income that is taxed directly in France.
Since the income is generated in the UK it is liable for UK income tax. You need to declare it and pay tax as usual. Social security (national insurance) contributions are more complicated, unfortunately.
If you only work in one EU country, you are usually liable to pay social security in that country. If you work in more than one EU country, if a substantial part of your activity is
carried out in the country you are resident in (usually 25% or more of your working time or remunerated activity), then you pay social security in that country. So if most of your activity is carried out in France you will need to pay French social security contributions.
This will entitle you to French state health care. However if you are employed your employer will need to be registered with the French social security authorities and employer contributions are much higher in France than in the UK.
If, however, you do not carry out a substantial part of your activities in France, then social security is paid where the employer’s registered office or place of business is located.
Besides income tax and social security, you also need to be aware that if you are a French resident, all your other income – bank interest, investment income etc – will be liable for French tax. Investment income is charged at the scale rates of income tax, ranging from 14% for income between €9,690 and €26,764 to 45% for income over €151,956. As mentioned, even if it is not taxable in France, your UK earned income will be included in the calculation of your tax band for other income. Social charges of 15.5% will also apply to investment income.
If the wealth of your household exceeds €1,300,000 you will also be liable to the annual wealth tax on assets over €800,000. You would need to review your savings and investment structures as what is tax efficient in the UK is usually not tax efficient in France. With specialist advice and careful planning, you can use French compliant opportunities to reduce tax on your investments and wealth, and could end up paying less tax in France than you did in the UK.
Your situation will be unique, so you need to seek personalised advice.
Blevins Franks is the leading international tax and wealth management advisers to British nationals living in Europe. Contact: 0800 668 1381 Freephone UK, 0805 112 163 Freephone France, firstname.lastname@example.org or visit www.blevinsfranks.com for more information.
Tax rates, scope and reliefs may change. Any statements concerning taxation are based upon our understanding of current taxation laws and practices which are subject to change. Tax information has been summarised; an individual is advised to seek personalised advice.