Tax impacts of Brexit

What Brexit did not change

In many ways Brexit did not impact tax matters, as the Franco-British tax treaty that prevents, for example, the same income being taxed in both countries has no link to the EU.

The Brexit Withdrawal Agreement (WA) and Trade and Cooperation Agreement (TCA) helped to maintain the pre-Brexit status quo in areas which could otherwise have changed.

S1 healthcare cover for state pensioners was guaranteed to continue for Britons living in France both before 2021 by the WA and since 2021 by the TCA. 

The latter comes with a proviso – its social protection section is open to renegotiation after 15 years; it also allows for either side to cancel it. However, should this happen it is stated that any rights of people “regarding entitlements which are based on periods completed or facts or events that occurred before [it] ceases to apply shall be retained”.

If S1s had not been maintained, UK pensioners would likely have moved to health coverage under France’s Puma system. They would have been treated as attached to the French Assurance Maladie system, therefore losing a right to a related exemption on French social charges on foreign pension incomes.

The automatic ‘setting aside’ of ‘exit tax’ (see 'Exit tax explained') for wealthy business people leaving France was kept. A 40% allowance on dividend income was kept for shares in UK-based firms. 

Both UK residents and UK S1 holders living in France who are not a burden on the French social security system were able to continue to benefit from reduced social charges on property capital gains, rental income and, in the case of residents of France, investment income.

What Brexit did change

1. Non-residents who live in a non-EU/EEA state (such as the UK) and who sell property in France worth more than €150,000 and bought less than 30 years ago must use a ‘fiscal representative’ to oversee capital gains issues. 

This incurs a fee of around 0.5% of the sale price including taxes (this can be offset against the capital gain). This is in addition to any capital gains tax and social charges collected by the notaire. 

Since Brexit this applies to UK residents selling a French second home.

 2. Initially, Brexit had no impact on the rules on transferring UK private pension funds into a Qualifying Recognised Overseas Pension Scheme (Qrops) and a 25% overseas transfer charge continued to be waived by the UK for transfers into a scheme based in the EEA.

However, in 2024 the UK stated it was ending this waiver with immediate effect on October 30 (it still applied for transfers before that date). An exemption continues if you are resident in the same EU/EEA country as the Qrops – but there are no Qrops in France. 

3. Certain capital gains tax exemptions only apply to EU/EEA countries or nationals (so, no longer to the UK/Britons).

For example, if a former resident of France who is of EU/EEA nationality moves abroad, they may sell their former French home and not have to pay capital gains tax on a gain of up to €150,000. Conditions exist for this. 

A similar exemption relating to the sale of a former main home by the end of the year following a move abroad remains for those moving to the UK. 

4. Gifts to UK charities can no longer attract a French tax credit. 

5. French plan d’épargne en actions (PEA) share accounts, which benefit from tax advantages, can no longer contain UK shares. French assurance vie (AV) policies containing UK-listed funds which were invested in before 2021 are still acceptable but new British funds can no longer be bought within a French AV. 

6. Gains from UK life assurance no longer benefit from the option of special fixed libératoire tax rates linked to length of ownership, a low 7.5% tax rate for gains relating to investments after September 27, 2017 into AV policies over eight years old or the special allowances against gains for policies held for more than eight years. 

There is one exception to this, now, for policies that were less than eight years old at the end of the Brexit transition period (January 1, 2021), from the point when they reach eight years old and then during the nine months after that.  You can read more about the post-Brexit rules at this link: tinyurl.com/Bxt-tax-rules.