How to take financial control in the face of Brexit
They say the only certainties in life are death and taxes; at times like these, this has never seemed more true!
There is still much we do not know about what the future will bring for UK nationals living in France.
There are also many things we do know for sure. Even where questions remain about how things will work post-Brexit, there are steps you can take today to protect your position.
Residence and associated benefits
If you do not yet have settled status in France, this is the very first action to take.
Although the French government has allowed extra time for Britons to regularise their residence status post-Brexit, this should be done urgently.
The process can take time, so do not risk leaving it too late to benefit.
For UK nationals who have already secured permanent residence status in France, your right to remain and enjoy the same benefits as today will be uninterrupted for as long as you continue to meet the conditions of residence.
As the France-UK double tax treaty is independent of the EU, the existing tax treatment of French residents will not change with Brexit, nor with any other external influence (other than a rewrite of the treaty itself).
But the way you structure your assets and wealth can make a significant difference to the way you are taxed.
UK assets and investments
If you retain UK assets and investments – as many expatriates do – you could attract higher taxation as a French resident post-Brexit.
The first case is where non-EU/EEA assets are treated differently in France.
When the UK leaves the bloc and investments like UK bonds and life policies become non-EU/EEA assets, they may not qualify for the full beneficial tax treatment given to assurance-vie and EU capital redemption bonds, such as fixed rates and tax credits.
But this is not just about Brexit.
As soon as you become non-UK resident, retaining UK-based savings and investment structures may no longer be the most tax-efficient option.
All UK-source interest, income and dividends received – including from ISAs – also become liable to taxes in France for residents here.
Meanwhile, if you have kept hold of UK property, you may have suffered a higher tax burden in recent years.
This includes new capital gains tax liability for non-UK residents and a stamp duty surcharge on second homes.
Remember: for French residents, UK and other overseas property is considered when calculating the €1.3million threshold for the French real estate wealth tax liability.
In any case, it is inadvisable to be overinvested in the UK region or property assets or any other one area.
To minimise risk, spread your interests across various geographical areas, sectors, markets and asset types in line with your risk profile.
Take time to explore alternative investment options that may be more tax-efficient for French residents, and that may also provide further benefits such as wealth tax mitigation and estate planning advantages.
Most types of UK pensions are taxable only in France for residents here, and can therefore currently be accessed without paying UK taxes. Brexit itself will not change this, but the UK could gain more freedom to recoup taxes from expatriate pension withdrawals and transfers.
The 25% ‘overseas transfer charge’ may indicate things to come. Currently, French residents are only penalised if transferring UK pension funds to Qualifying Recognised Overseas Pension Schemes (QROPS) outside the EU/EEA – otherwise transfers are tax-free – but the scope may widen post-Brexit.
If you are considering transferring, review your options now under current rules.
Taking UK-regulated, personalised pensions advice is vital to establish the most suitable approach for your personal circumstances and goals.
When you are spending euros daily in France, taking income in sterling can prove expensive, especially with Brexit volatility. So should your savings and income be in sterling or euros?
There is no simple answer, but generally it is sensible to have both. Look for investment structures that offer flexibility to hold investments in more than one currency and convert when it suits you.
You could, for example, hold currencies to fit different purposes – euros for spending in France and sterling for UK expenses and your legacy for UK heirs – and adjust them as your circumstances change.
You can obtain currency flexibility for your pension funds through a suitable QROPS; or for investment capital, through an assurance-vie.
Not all products offer currency flexibility and there are many different types of options based in various jurisdictions, not just France.
These variations can make a huge difference to the advantages offered, so seek expert advice.
An assurance-vie issued in Luxemburg, for example, would benefit from French tax advantages and protections afforded to EU countries.
If it includes a multi-currency feature, you are not tied to keeping all your investments in euros, even if the assurance-vie is from an EU country.
Taking control outside of Brexit
Anytime and anywhere, tax and residence rules are subject to change, especially as governments come and go.
Could a change of UK government, for example, impose more taxation on Britons who have built up their wealth, or remove allowances for UK nationals abroad? Could France extend its wealth tax?
While you cannot account for what’s unknown, if you have a robust wealth management plan in place with regular reviews, you will be in the best position to adapt accordingly.
Talk to a specialist adviser who has in-depth knowledge of the French tax regime and its interaction with UK rules.
They can help you take advantage of available tax, investments, pensions and estate planning opportunities to ensure you do what works best for your personal situation, today and for the future.
This article is by Bill Blevins of Blevins Franks financial advice group who also writes for the Sunday Times on overseas finance. He is co-author of the Blevins Franks Guide to Living in France (www.blevinsfranks.com).
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.