Britons in France: 5 financial planning resolutions for 2021

In this month's money column, Bill Blevins offers tips for ensuring your financial wellbeing post-Brexit

2 January 2021
A close-up of a 5 euro note. Bill Blevins offers 5 Financial Planning Resolutions for Britons in France post-Brexit
By Bill Blevins

Although January is a good time to reflect upon the last 12 months and set goals for the New Year, this year it feels different.

With all of us affected in some way by the global health pandemic, we look forward to drawing a line under 2020 and enjoying better days ahead. Lockdowns have shrunk our world, prompting many of us to re-evaluate our priorities and reshape our habits.

You may have already taken steps to improve your health but have you taken a good look at your financial wellbeing?

You can benefit from fine-tuning your tax, investments, pensions and estate planning at any time but Brexit means there are important New Year’s resolutions for Britons in France.

1. Resolve to check your residence position

Are you now lawfully resident in France? To lock in the right to remain and access associated citizens’ benefits post-Brexit, UK nationals must be able to demonstrate they were settled here before the end of 2020.

Others may only be allowed to spend up to 90 days in France in a 180-day period without a visa.

Remember: you must continue to meet French residence rules to retain rights under the Withdrawal Agreement. This generally means spending at least 183 days a year in France, so take care not to forfeit your residence by spending too much time in the UK or elsewhere.

2. Resolve to check your tax planning

French legal residents will almost certainly be deemed tax residents too. Make sure you understand your position, especially if you are new to France or plan to spend part of the year abroad.

Once you are living in France, your financial planning should be set up for you as a French resident. You need to structure your investments and wealth in the most suitable way to minimise taxation – here, the UK and wherever you have financial interests – and meet your obligations.

Although Brexit itself should not affect taxation, there are some circumstances where it may be affected.

Related: Brexit and France - How visas, residency cards work in 2021

UK bonds, for example, are set to lose beneficial tax treatment as non-EU/EEA assets in France. In this event, consider moving capital to arrangements which provide full tax benefits in France.

Today, with the “automatic exchange of information” regime well underway, it is more important than ever to get cross-border tax planning right.

More than 100 countries – including France and the UK – are sharing data on residents’ overseas income and assets. Both the French and UK tax authorities have started following up on undeclared foreign income.

Cross-border tax planning is complex, and penalties for getting it wrong can be severe, so take specialist advice for peace of mind.

3. Resolve to review savings and investments

Your savings and investments should be structured appropriately for your life in France, as well as your current circumstances, time horizon, needs, aims and risk tolerance. Check you have adequate diversification to avoid over-exposure to any given country, asset type, sector or company.

Besides diversification, the key is to find the right balance of risk and return for your peace of mind.

Many Britons in France persist with arrangements that are actually better suited to a UK resident, so it is worth reviewing your UK assets to check their suitability now you are living in France, including how they affect your tax bill.

Is your portfolio overweight in UK investments at the expense of diversification? Are your savings all in sterling, placing your income at the mercy of exchange rate fluctuations? Will you or your UK provider be restricted from managing accounts now the UK has left the EU? Can you take advantage of more tax-efficient opportunities available to you as a French resident?

4. Resolve to review your pension planning

With more UK pension freedom than ever, take time to review your options.

Currently, under certain circumstances, French residents can take UK pensions as a lump sum and pay just 7.5% tax in France. These funds could then be re-invested into tax-efficient arrangements for France, such as a suitable assurance-vie, which could offer flexibility and estate planning advantages.

Or could you benefit from moving UK pensions to a Qualifying Recognised Overseas Pension Scheme?

While it has been confirmed that French residents can continue to transfer tax-free post-Brexit, there is a chance that further down the line the UK government could start applying its 25% overseas transfer charge to EU QROPS.

Before making any decisions, take care to do what is right for you and avoid pension scams with personalised, regulated pensions advice.

5. Resolve to review your estate planning

Is your legacy on track to go to your chosen heirs according to your wishes, with minimal taxation? Certain heirs could face up to 60% in French succession tax, so make sure you understand the rules in France, and anywhere else you have assets and heirs.

Also, review the pros and cons of using the EU succession regulation Brussels IV to override France’s “forced heirship” law, which automatically passes up to 75% of your estate to your children.

Related: Brexit updates for Britons in France in January 2021

6. Resolve to have regular reviews

Reviewing your financial affairs at least once a year helps keep things compliant and up to date. Tax and financial rules can change at any time – especially in France – which may affect the tax efficiency, or even legality, of your existing arrangements.

There may also be new opportunities for French residents that you could find beneficial.

Consider too if any recent changes in your personal and family circumstances mean you should adjust your arrangements. Did you welcome any new family members or are there any upcoming major life events, such as retirement or a divorce in the family, that warrant a rethink of your plans?

For a truly effective strategy, and to ensure it is suitable for your life in France, consider how your tax planning, investments, pensions and estate planning work together. You will benefit from talking to a specialist adviser with in-depth knowledge of the local tax regime and its interaction with UK rules.

They can help you take advantage of available opportunities to do what works best for you and your family during these challenging times and beyond.

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.

Fast-track your knowledge of financial rules and regulations in France with our Help Guides

Income Tax in France 2020

Property Wealth Tax in France

Inheritance Law and Wills in France 

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