France plans major tax breaks for family gifts

Families could pass on much more money to children and grandchildren tax-free next year under measures in France’s draft 2027 budget. 

The current tax-free allowance of €31,865 per giver and recipient would rise to €100,000 under an amendment voted through by MPs. 

Notaire Thierry Cahen, from Besançon, said: “This represents a rare, time‑limited opportunity for families financially able to make significant gifts and genuinely motivated to support children, grandchildren, or nieces/nephews during their active years. 

"They can transfer capital at a very low and predictable tax cost, while remaining within a framework that the tax authorities themselves recognise as desirable and not abusive.

“Planning ahead, including a review of family objectives, available allowances, and the interaction with other tools, will be essential to make the most of this favourable window.”

The measure applies to gifts from givers under 80 to adult children or other direct descendants, or nieces and nephews if the giver has no descendants. It renews every 15 years and can be combined with other gift tax allowances, including the separate €100,000 parent-to-child allowance.

The government had proposed raising the  allowance to €50,000, and only until June 30. 

MPs doubled it by adopting a far-right amendment and extended the measure to the end of 2027. Both changes could still be altered or removed as the budget moves through parliament. Larger gifts could also be taxed more lightly. 

A temporary reduced 6% rate would apply to up to €100,000 of cash gifts to the same family members aged under 50, instead of the usual progressive rates. 

It is expected to apply to amounts above tax-free allowances, and the giver’s age would not matter. 

Tax on gifts from residents of France is payable by the recipient, including, for example, relatives in the UK. However, if the giver pays the tax, this is not seen as another taxable gift. 

The changes mean that, depending on other significant gifts in the last 15 years, two parents could give their child as much as €400,000 tax-free next year, compared to a usual tax-free amount of €263,730, saving nearly €24,000 in tax.

If they pass on an additional €50,000 each, this would be taxed at a total of around €6,000 instead of €20,000, saving another €14,000.

Under budget plans, income tax bands would rise by 2.1% in 2027, in line with inflation, so taxpayers whose income has grown by a similar amount should not see their bills go up. 

The government says this would protect 20 million households from higher bills and stop half a million paying tax for the first time. Bands are usually raised each year, but this is not obligatory.

Families could also now find it easier to get an interest-free home loan (prêt à taux zéro). 

These are currently aimed mainly at first-time buyers, but the loans would be extended to households expecting a child or with a child under three, even if they already own a home. MPs on the finance committee went further, approving an amendment to include families with children under five and to remove the means test. 

The government is also seeking to improve public finances by €43billion through spending cuts and revenue-raising measures, aiming to reduce the public deficit to 5% of GDP next year.

They are contained in two bills going through parliament: the draft finance law and the draft social security finance law.  Both are still being debated by MPs and senators, so details might change. 

Owners of furnished rentals who declare under the régime réel (actual expenses) system could see their tax bills rise. The amount of depreciation they can deduct from rental profits would be capped at 2.5% of the property’s depreciable value, and a maximum of €7,000 a year, or 1.5% and €5,000 a year for holiday lets. 

Some highly personalised assurance vie policies, notably some based in Luxembourg, would also have to meet stricter conditions to keep their French income tax advantages and to remain outside the estate for inheritance tax. 

The policy must be funded with cash, rather than existing investments, hold only the kinds of assets French insurance law allows, and avoid funds containing assets linked to the policyholder, beneficiaries, their family or their companies. 

For example, if someone owns a company and arranges for a specially created foreign life assurance fund to invest in that comp-any’s shares, this would be disqualified from the tax advantages. By contrast, someone who holds an ordinary Luxembourg assurance vie policy invested in diversified funds would not be affected simply because the insurer is based in Luxembourg.

People with certain long-term medical conditions (affections de longue durée) have been spared after MPs rejected a plan to make half of their sick pay subject to income tax. 

On health, the social security budget proposes a second year of an exceptional 2.05% tax on complementary health insurers (mutuelles). 

The social security budget was rejected by MPs on October 23 after they voted against its revenue provisions. It will now pass to the Senate in its original government form, meaning several measures remain under discussion.

Patients in areas short of doctors could benefit from extra payments to those who volunteer to work there. 

The France Santé healthcare network would also expand to 5,000 labelled facilities by the end of 2027. 

These are new or existing surgeries and health centres that offer access to a doctor and a nurse, open at least five days a week and charge standard rates. 

The government proposes limiting inflation-linked increases to French basic pensions in 2027, targeting people with combined pensions above €1,260 a month. 

Above this threshold, basic pensions could rise by less than inflation or be frozen, with details to be set by decree.

The threshold takes account of both basic and complementary retirement pensions from compulsory schemes. The legislation does not clarify whether foreign state pensions would count. 

MPs voted against higher tax on pensioners

If you receive a pension and pay French income tax, a proposed cut to your tax allowance has been removed from the draft budge. However, it could still come back.

Usually, 10% of your pension income is deducted before tax is calculated, up to a maximum €4,439 per household. The government wanted to lower that to €3,000.

Households with more than €30,000 a year in pensions would have been  affected, starting from the 2027 declaration on 2026 income. This would have included foreign pensions that are taxable in France, such as the UK state pension.

To give an example, a household with €35,000 in pensions would have had €500 more of its income taxed, because its allowance would have dropped from €3,500 to €3,000. The extra tax payable on amounts over the allowance depends on income and family size.

The right-wing Droite républicaine group, which tabled the amendment removing the measure, said it would not only have affected the well-off. For example, a couple each on a minimum wage-level pension would have paid about €200 more a year, the group said. 

MPs voted to remove the measure, but the government had expected it to raise €1.4billion, and it could be reinstated later. We will report any changes.

The expected 2027 tax bands * 

Up to 11,844 – 0%

Then to 30,200 – 11%

Then to 86,353 – 30%

Then to 185,737 – 41%

Then 45%

* Applied to taxable income after application of the family quotient parts.