Social Charges on Investments and Capital Gains Post-Brexit: 17.2% or 7.5%?

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Social Charges on Investments and Capital Gains Post-Brexit: 17.2% or 7.5%?

Since Brexit, UK residents have been subject to the full ‘non-EU’ rate of 17.2% social charges on investment income and capital gains in France. However, new legislation has granted Brits the right to an exemption, reducing that rate to 7.5%. Here’s what you need to know.

Am I liable to pay French tax on my investments and capital gains in France?

While many French tax liabilities depend upon whether you are tax resident in France or the UK, if you have income from French sources (for example, investment income), you will be liable to pay French taxes on this income. If you sell your second home in France, you will also be liable to pay French capital gains tax, even if you are a UK resident.

As well as submitting a French tax return and paying French income tax, you will also be liable to pay French social charges (social security contributions) on any investment income and capital gains. As the rates of social charges in France are much higher than income tax rates, this is generally the most significant payment to take into account.

How much are the social charges on French investments and capital gains?

French social charges on investments and capital gains are calculated based on three different rates with a maximum total of 17.2%:

  • CSG (Contribution sociale généralisée or Generalized social contribution) –9.2%/0%
  • CRDS (Contribution pour le remboursement de la dette sociale or Contribution to the repayment of social debt) – 0.5%/0%
  • Prélèvement de Solidarité (Solidarity tax) – 7.5%

The same rates of social charges apply to both residents and non-residents; however, for non-residents affiliated with another EU or EEA social security system, there is an exemption from the CSG/CRDS taxes. Essentially, this means that EU residents only pay the 7.5% solidarity tax on any investment income or capital gains.

Should Brits pay 17.2% or 7.5% social charges post-Brexit?

The big question as the UK left the EU was whether or not this exemption would still apply to British residents. From January 2021, Brits were no longer entitled to the exemption on CSG/CRDS social charges, leaving them liable to pay the full 17.2% on any investment or capital gains income.

However, there was question over the legality of this, and whether or not the Trade and Cooperation Agreement (TAC) between the EU and UK (signed in December 2020)  protects the rights of  UK residents from these additional social security liabilities.

The good news is that, as of February 2022, the French tax authority has published a revision of their tax guidance regulations, stating that UK residents can continue to benefit from the social charges exemption. This exemption applies under the following conditions:

  • You are a national or legal resident of the United Kingdom
  • You are affiliated with the British social security scheme
  • You are not covered by the French social security scheme

Social Charges on Investments and Capital Gains Post-Brexit: 17.2% or 7.5%?

The above changes are good news for UK residents with investments or property in France. Providing that you are a legal UK resident, pay your social security contributions in the UK, and do not benefit from the French social security scheme, you will from now on be subject to social charges of 7.5% only on any investment income or capital gains in France.

If you have already paid 17.2% social charges on investment income or capital gains in France since 1st January 2021, you may also be entitled to claim a refund. It’s a good idea to do this sooner rather than later, as there is a two-year window on claims.

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Comments

  •  Susan Dowling
    2022-08-30 11:30:07
    Susan Dowling
    Hello What is the situation if you are french residents, have rental income from the UK which we are taxed on in the UK, but declare in France yearly. We are holders of an S1 but have been charged 7.5% on our rental income and savings interest. Is this correct ?

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  • Sabrina
    2022-04-06 07:05:50
    Sabrina
    Hello there! Thanks for sharing info about "Social Charges on Investments and Capital Gains Post-Brexit"

    REPLY

  •  Louise
    2022-03-05 06:33:44
    Louise
    Thank you. A very useful article. But how does one prove you are 'affiliated to the British social security system'? I am being asked by a tax agent, SARF, for a form A1 or S1 as part of my French property sale. But these are not forms we have as UK residents. Is a P60 sufficient, if this simply means, you must show you pay national insurance contributions in the UK?

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    • Zoë Smith
      2022-03-09 01:28:28
      Zoë Smith
      Hi Louise,
      Our partners at Blevins Franks have kindly answered your question for us: "For dividends, interests and royalties, the proof of a UK residence can be made with the completion of an Affidavit of residence in Form 5000.
      There is no standard documentary proof in case of the sale of a property located in France by a UK tax resident. However, the British taxpayer will have to prove that he is affiliated to the UK NHS and that he is a UK tax resident. A copy of an NHS number, a letter of the GP practice showing he is affiliated to the UK NHS system, a copy of the tax return will be elements that help proving an individual is a UK tax resident."
      Hope this helps! Zoe

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  • greg Bull
    2022-03-04 04:51:02
    greg Bull
    Hi Zoe, Do you know what is definition of investment income...is this just in property eg rents. Many Brits have bank accounts in France and some may be getting a (very small) interest on deposits. Im assuming this doesnt count. Anyway French banks dont seem to have informed anyone about this. Many thanks Greg

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    • Zoë Smith
      2022-03-09 01:25:50
      Zoë Smith
      Hi Greg,
      Our partners at Blevins Franks have confirmed that 'investment income' includes: "interests, dividends, income and gains from investment bonds, and rental income". If you have a regular bank account in France, it is unlikely that you are earning interest, however, if you have savings accounts in France, you may be liable for social charges on any interest.
      Best regards, Zoe

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  • Carolyn Bentley
    2022-03-02 04:36:24
    Carolyn Bentley
    Would this reduced rate of social charge on capital gains apply if you have reached state pension age in the UK and no longer pay National Insurance? I am a UK resident and a second home owner in France. I have paid more than my maximum years of contribution whilst working but now receive the UK state pension so the NI contributions stop. We may consider moving to a bigger holiday home in France at some point but the huge costs including the social charge are putting us off!

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    • Zoë Smith
      2022-03-03 10:22:03
      Zoë Smith
      Hi Carolyn, This reduced rate is offered to UK residents covered by the UK's social security scheme, which would include British pensioners. Good news for many British second home owners, I'm sure! Best regards, Zoe

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