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Tax procedures for various pensions

Could you explain the difference between government, private and state pensions, and how they are taxed?

A government pension is paid by the government for services to the government (for example to former civil servants, nurses and soldiers). Note however that even within sectors typically concerned by ‘government’ pensions, such as education, there may be variations – for example a teacher may receive a government or private pension depending on the type of school they taught at and who pays the pension. As a French resident, UK government pension income is declarable in France but is taxable in the UK.

The UK old age state pension (paid by the government to qualifying people who have reached UK state pension age) as well as income from pensions derived from work and from private pensions generally is not considered ‘government’ pension income and are taxable in France.

As a French resident receiving a UK state pension you will have paid or been credited with National Insurance contributions during your lifetime and it therefore follows as per the double taxation treaty that the UK will contribute towards your healthcare in France and you are not dependant on the French social system. If you do not draw the state pension you will be charged, as well as French income tax, an additional sum in social charges/tax at a rate which depends on your previous year’s income and this will be applied to all your UK private pensions.

Pension lump sum drawdown taken in its entirety is taxable in France but is taxed at a reduced flat tax rate.

Pension lump sums taken periodically and not in entirety are also taxable in France and are assessed along with your other pensions and taxed at the ordinary rates of tax as per your total income (and the increased revenue may put you in a higher tax bracket).

Due to the double taxation agreement any tax deducted at source in the UK for private pensions, state pensions or pension lump sums since you became French tax resident can be reimbursed.

This question was answered by Olaf Muscat Baron who is a Fellow of the Chartered Association of Accountants UK, a French expert comptable and an International tax advisor. He is the principal accountant of Fiscaly, an accountancy firm based in the Dordogne.

See or call 09 81 09 00 15

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