With the ever-changing worldwide economy, fluctuating stock markets and interest rates, it is not easy to keep track of what is happening and its effect on your money. However, there is one thing that it is certain – we all have to pay tax. The French taxation system is different to what you are used to in the UK and there are some important facts to know before you make the move to France, or if you are already resident in France and therefore liable for French taxes.
Taxation experts Blevins Franks have put together a quick guide to French tax to help you keep your tax liability to a minimum – five top tax tips for UK residents moving to France and five top tax tips for British people who are now living in France.
Tax tips for UK residents moving to France:
1. Before you leave, make sure you complete and return HMRC Form P85, “Leaving the UK – getting your tax right”, to inform the UK tax authority of the of the date you plan to leave the UK. The form can be downloaded from www.hmrc.gov.uk.
2. Obtain a forecast from the Department of Work and Pensions of your entitlement to a state pension and if you need to make additional Class 3 NI contributions to obtain your full entitlement. You need 30 “qualifying years” of full NI contributions to get the maximum basic pension.
3. Take any tax free cash lump sums from your private pensions while still UK resident. Since 2011 lump sums taken from UK pension schemes are taxable in France.
4. The tax benefits of holding Stocks & Shares and Cash ISAs will no longer be available to you once you are French resident. You should therefore consider realising any gains, free of UK income or capital gains tax, before you make your move. There are re-investment options available through other deposit and investment products which are more tax-efficient for French residents.
5. There is no substitute for taking advice, relevant to your specific circumstances, from a qualified adviser who is regulated in the UK by the Financial Conduct Authority and who is familiar with taxation and investments in France and the wider EU.
Tax Tips for UK expatriates tax resident in France:
1. On becoming French tax resident it is your responsibility to make yourself known to the tax authorities and to declare fully your income, capital gains and wealth. Once you have made your first return your local tax office should automatically send you a form in future years.
2. Tax full advantage of French tax free bank accounts for immediate access deposit funds. The main accounts are the Livret A, (maximum holding €22,950 per person) and the Livret de Développement Durable, (maximum holding €12,000 per person).
3. Take steps to place long term investment funds in tax efficient structures to keep taxable income to a minimum. “Unsheltered” investment income is liable to income tax and social charges and may also be liable to healthcare contributions, if you do not qualify for free access to the French system.
4. French inheritance tax may not be as bad as you fear. The allowances for assets passing to children may be lower than the UK but so are the rates. There are ways of reducing, and possibly removing, any liability to French inheritance tax on assets passing to children.
5. “Do as the French do”. They take active and sensible steps to avoid unnecessary taxation. Seek advice from a qualified financial adviser, fully authorised in France, who will have access to a range of solutions and products tailored to your specific circumstances and needs.