Once you’re tax resident in France, you are liable for French tax on your worldwide income, gains and property wealth. A common problem for those who still hold UK assets is that the income they provide can also be liable to UK tax.
There is a treaty between France and the UK designed to avoid double taxation, but you need to fully understand this treaty to establish which country you pay your taxes to, and where your income must be declared.
Here, we look at how three different types of UK income is taxed in France.
1. Income derived from UK investments
ISAs and Premium bonds may be tax-free in the UK, but France does not offer the same relief. Gains from cash and share ISAs are fully taxable there, and Premium Bonds are not viewed the same as betting and gambling winnings (which are tax-free in France), as the initial investment is not at stake.
There is a flat rate of 30% applied to most investment income in France, which includes the 17.2% social charges. You could only pay tax at normal scale rates if you were classed as a low-income household.
Interest and dividends received from the UK must be declared within 15 days of month end, with the 30% tax paid in full. This is offset against the tax due on your tax return, and again, if you are a low-income household, you can avoid this advance payment altogether.
2. Renting out UK property
Any income earned through the rental of a UK property will be directly taxed in the UK.
However, as a tax resident of France, you must also include these earnings when declaring your taxable income for the year on your French tax return. You will then be refunded in the form of credit that is equal to French tax and social charges.
3. Income from UK pensions
UK pension income is usually taxable only in France, and is added to your other income for the year and taxed accordingly. This is with the exception of UK government service pensions that are only taxed in the UK, although these must still be declared on your tax return.
For 2022, these scale rates range from 11% (income over €10,225), to 45% (income over €160,336), with a potential extra 3% or 4% for higher income above a certain threshold. There is a 10% deduction which is capped at €3,912 per household.
Social charges at 9.1% are payable in addition, but are reduced to 7.4% for low pension income, and you are completely exempt if you hold Form S1.
UK tax residents benefit from a 25% tax-free allowance known as ‘Pension Commencement Lump Sum’, but as a French tax resident, you will not be afforded this. Although lump sums are taxed in France as pension income, you may be eligible for a fixed rate of 7.5% if certain conditions are met.
If you meet the specific criteria, you may also be able to withdraw your pension in its entirety under the UK pension freedoms. This could then potentially be reinvested into a much more tax-efficient structure in France.
Whichever direction you choose to take with your pension, it is important to seek expert regulated advice so that you are positioned to make the best choice for your circumstances.
Tax planning for the future
There are tax-efficient investment vehicles available to you as a French resident, such as an assurance-vie, which carries benefits beyond simple tax savings, but can help with your estate planning as well.
Speak to a specialist cross-border adviser who has a deep understand of the French tax regime, its interaction with UK taxation, and the tax planning opportunities available to you in France. They can review the way your assets are held, and recommend the most tax-efficient routes possible, for moving to France and living there.
Blevins Franks are experts at helping British expatriates make the most of their wealth in the most tax-efficient way possible. We provide integrated, cross-border advice on tax planning, estate planning, investments and UK pensions. Our overriding aim is to give you peace of mind that your financial affairs are in order, for today and the future, for yourself and your family and heirs. We can also guide you through the new residence rules post-Brexit. We have ten offices across France and our advisers would be happy to discuss your plans to move to France and how we can help.
+44 (0)20 7389 8133
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; individuals should seek personalised advice.
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