Manage your new life in France and reap the benefits
If you are new to living in France or in the process of organising your move here, you probably have a list of jobs to get through. This needs to include reviewing your tax, financial and estate planning. Do not let this stagnate far down the list. It is important to adjust your wealth management for your new life here and spending a little time on it now should reap dividends and give you peace of mind. If you have been living here for a while, then think about the last time that you reviewed your financial planning? Are you sure it is up-to-date and specifically designed for your life in France?
Residence has become an even more important issue for UK nationals living in France with Brexit fast approaching.
The UK and EU27 have committed to maintain existing residency rights for Britons and EU nationals who are ‘lawfully residing’ within either area before the withdrawal date.
But what does ‘lawful residency’ mean in practice? How close can you get to demonstrating this before the Brexit transition period comes to an end?
There are some steps you can take to support your residence position in France, such as registering with the local healthcare system, changing your driving licence, introducing yourself to local authorities, informing your UK financial institutions that you have left etc.
But very importantly, you need to submit your annual tax return/s in France.
Make sure you understand the rules for French tax residency and, if you meet any of them, that you correctly declare your worldwide income, gains and wealth, as required by French tax law.
If you hold assets or receive income in another country, follow the double tax treaty rules so you pay tax in the right place.
While France has a reputation as a high tax country, this has improved a little with the 2018 tax reforms. It is worth reviewing your investment assets to see how you can take full advantage. In any case, the tax regime offers opportunities to lower your liabilities, from the ‘parts system’ for general income, to tax-efficient arrangements for your savings and investments.
Do not presume that what was tax efficient in the UK is tax efficient in France.
You may need to convert existing arrangements to others designed for French residents. Some investment arrangements here allow you to reduce your annual taxable income (without necessarily reducing actual income) which can make a considerable difference to your tax bill.
If you have not yet moved to France, it is worth investigating whether you are better off, tax-wise, selling your UK home while still UK resident or waiting until you live in France.
Be aware that the way you hold your property could have unexpected tax and inheritance consequences. If you opt for joint ownership, should it be en indivision, en tontine or governed by a specific choice of marriage regime (France has several of these). Or should you buy through a Société Civile Immobilière (SCI), a special type of French company?
If you have not bought property yet, explore all these options first – the best one for you will depend on your family situation and aims.
If you are planning to buy a luxury property or own a few different ones, bear in the mind that you will have to pay French wealth tax if your household’s worldwide property portfolio amounts to over €1.3million - although there is a five-year exemption for overseas property.
Inheritance taxes and estate planning
Will the right money go to the right hands at the right time? France has very different inheritance tax and succession laws to the UK, so to ensure your wishes are carried out, you should check to see if you need specialist advice.
Succession tax can be high, up to 60% for distant or non-relatives, but there are often ways to lower this liability for your heirs.
French succession law imposes forced heirship. UK nationals can use the EU succession regulation to opt for UK succession law (but not tax) to apply to their estate, but make sure you understand how this works and the potential consequences to establish if this is the right route for your family.
Your investment portfolio
Review all your savings and investments to check they are suitable for you now. Are you holding the right spread of assets to meet your objectives, time horizon and risk tolerance? Do you need to hold more assets in euros and diversify away from UK shares and bonds?
For peace of mind, obtain an objective analysis of your risk profile, then ensure the mix of assets you have in your portfolio is entirely suitable for you and your needs.
Retirees should review their pension funds and the options available today to consider how to maximise their retirement savings.
Living in France presents some opportunities. As a non-UK resident, you may be able to transfer your funds out of a UK scheme and into a Qualifying Recognised Overseas Pension Scheme (QROPS) which can provide various benefits. But explore all options before determining which is best for you.
Under certain circumstances, France only levies 7.5% tax on pension lump sums. This could enable you to move the capital into more tax-efficient arrangements but this is only suitable for some people, depending on their position. Do not risk your retirement savings; take professional, regulated advice.
The sooner you review your finances, the sooner you can get on with enjoying life in France. For the best results, consider all the above essentials in conjunction with each other.
Often one will impact upon another, so working on them in isolation could have unexpected consequences.
Ultimately, you want peace of mind that all your affairs are in order and designed in the best way for your wishes. You need to ensure you have all the facts and understand your options, so this may mean taking professional guidance.
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.