30% tax alert may spark rush for PEL savings

This will affect assurances vies worth more than €150,000 per person and Plans Epargne-Logement (PELs), which are used by people saving for a house or for major works.

The move could spark a rush to open a PEL as Finance Minister Bruno Le Maire said any opened before January 1, 2018, would remain free of income tax for 12 years (although social charges at 15.5% would still apply).

Although interest rates are low at 1% and the plans face social charges, one added bonus of a PEL is a prime (grant) of up to €1,525 if it is used for a property purchase using a PEL-linked mortgage of up to €92,000 at 2.2%.

Funds opened from January 1, 2018 will face a flat-rate levy on all interest of 30% and this rate will also apply to funds that are more than 12 years old... where the present tax/social charge take of 39.9% (15.5% + 24%) will fall to 30%.

For assurance vies, the change affects only those with savings of more than €150,000. At present, for funds held for more than eight years, interest up to €4,600 a year/person is not taxed and higher gains are taxed at a 7.5%. Next year people with funds totalling more than €150,000 face 30% tax on the interest on the part over the limit.

Meanwhile, the government has said it intends to ‘stabilise’ the interest rate on popular Livret A funds at 0.75% for two years and not let it change with other rates. People can have a single Livret A – free of tax/social charges – worth up to €22,950.