However well we have settled into our new life in France, most UK nationals living here continue with some British habits, whether that is a Sunday roast with all the trimmings or watching UK TV channels and sport.
Some ties are hard to lose and there is comfort in familiarity.
Likewise, many British expatriates keep hold of UK investment assets, whether bank accounts, shares or property, as well as pension funds.
You might have accumulated Premium Bonds and individual savings accounts (ISAs) over the years, or bought shares in UK companies, and prefer to hang on to them because they are familiar and feel like a safe option.
But are these suitable investments for your new life in France? Are they tax-efficient here?
As a tax resident in France, you are liable for French tax on your worldwide income, gains and property wealth. Income earned from UK assets is also liable to UK tax in most cases.
You need to carefully follow the France/UK double tax treaty to establish where you should pay tax and where you need to declare it (you can pay tax in one country but might need to declare it in both).
UK rental income and government service pensions are not directly taxable in France, but you still have to include them as part of your taxable income – a credit is then given for the French tax and social charges liability. This applies even if no actual tax is paid in the UK.
Conversely, UK bank interest earned by French residents is taxable only in France.
With UK dividends and real estate gains, tax paid in the UK is offset against your French liability. If your French tax bill is higher than the UK’s, you will pay the difference.
UK investment income
Income derived from ISAs and Premium Bonds is tax-free in the UK, but this advantage is lost once you live in France.
Income and gains from cash and share ISAs are fully taxable here. Although betting and gambling winnings are tax-free in France, this does not apply to Premium Bonds since the initial investment is not at stake.
Review your other UK investments too, such as shares, unit trusts and investment bonds, to establish whether France offers a more tax efficient way of holding your capital.
In France, most investment income, wherever earned, is taxed at a flat rate of 30% (including 17.2% social charges). This applies to interest, dividends, capital gains on sale of shares, etc.
Low-income households can pay tax at normal scale rates instead. Lower social charges also apply if you hold the S1 form.
If you receive interest or dividends from the UK, you must declare the income within 15 days of the month end and pay 30% of the amount received. This is offset against the tax due on your tax return. Lower-income households can avoid this advance payment.
UK rental income
If you are resident in France and rent out UK property, the income is directly taxed in the UK. You must include it as part of your taxable income in France, and you will receive a credit equal to French tax and social charges.
UK pension income
Pension income from UK funds is generally taxable only in France, at the scale rates of income tax.
For 2022, these range from 11% for income over €10,225 to 45% for income over €160,336, with a potential extra 3% or 4% for higher income.
You receive a 10% deduction (maximum €3,912 per household).
Social charges of 9.1% are payable on top (reduced to 7.4% for low pension income), but you are exempt if you hold the S1 form. Note, however, that UK government service pensions are only taxable in the UK, not France, though you still declare it in France.
French residents do not benefit from the 25% tax-free ‘pension commencement lump sum’ that UK residents get. Lump sums are generally taxed as pension income in France.
Under certain conditions, you may be eligible for a fixed 7.5% income tax rate.
If you meet the criteria, and can withdraw your entire pension as one sum under UK pension freedoms, this can present opportunities.
You could potentially re-invest the capital into a tax-efficient arrangement in France and pay less tax overall.
With all pension decisions, take regulated advice and carefully consider your options to establish what would work best for you – do not risk your long-term financial security.
The French tax regime is completely different to the UK’s, so any tax planning set up there is unlikely to be effective here. There are very tax-efficient investment vehicles available to residents of France.
An assurance-vie, for example, can prove highly beneficial if you choose the right one, with benefits extending beyond tax savings, particularly when it comes to estate planning.
Speak to a locally based wealth management adviser to confirm what taxes you should be paying and where.
They can review the way you hold your assets and can also recommend tax-efficient alternatives for France.
It’s not all about tax
Taxation is not the only reason to review your savings and investments.
Ensure they are suitable for your life in France, future expectations, objectives, time horizon and risk tolerance. Too many people have portfolios which are no longer suitable for them.
Finally, but importantly, Brexit dissolved the automatic ‘passporting’ rights that enabled cross-border transactions between EU member states through shared financial regulation.
This means that UK advisers, banks and financial providers may no longer, legally, be able to service clients who are in the EU.
In any case, a UK adviser may not have the deep understanding of the French regime necessary to provide the most tax-efficient financial planning solutions.
Local knowledge from a France-based adviser will prove invaluable.
Tax rates, scope and reliefs may change. Any statements concerning taxation are based upon our, Blevins Franks, 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.
Author: Rob Kay, Blevins Franks. Blevins Franks provides tax and wealth management advice.