France’s 2026 draft budget was unveiled yesterday (October 14) and is aimed at creating some €30 billion of savings and limiting debt to 4.7% of GDP.
Prime Minister Sébastien Lecornu, in his general policy speech to the Assemblée nationale announced a suspension of planned pension reforms until at least the upcoming presidential election.
This ended the threat of the Socialist Party tabling a vote of no confidence against him and potentially ousting him and his new cabinet.
He is now expected to survive similar motions from the far-left and far-right, due to be heard on Thursday, to preside over budget debates and he is encouraging parliamentary debate.
How budget could affect you
Mr Lecornu and his allies are hoping that a left-to-right agreement of parties from the Socialists to Les Républicains and including centrist parties, can mould the budget into a format that will be passed.
As the budget will be opened up to greater debate, several measures are likely to be removed or significantly changed depending on support within the chamber.
However, the main points as the draft versions stand are now available.
They are based on the cost-cutting measures presented by former Prime Minister François Bayrou but several of the most controversial measures, including the abolition of two public holidays, have been removed.
“It is urgent to continue spending less,” said Mr Lecornu. “Further savings will be made by more rigorously combating fraud, both social and tax,” he added, with an anti-fraud bill to be debated alongside the budget over the coming weeks.
The aim of the budget is to limit French debt to 4.7% of GDP. This is less than the aim of former Prime Minister François Bayrou, but will still require the government to reduce its budget deficit in 2025 by €30 billion compared to the previous year.
It is proposed that this should be done by raising €14 million more in taxes and by reducing spending by €17 million.
Below, we outline the main points of the budget as it stands and how they may affect you:
Freeze on state payouts to remain…
The freeze on government spending envisioned by former Prime Minister François Bayrou largely remains in place.
Several benefits such as for housing and disability will not be re-evaluated in light of inflation in 2025 and will remain at this year’s levels.
Inflation in 2025 is set to reach around 1%, however payments will not scale up to reflect this, effectively reducing disposable income for eligible households.
… affecting pensions and income tax bands
This freeze applies to several other payouts and calculations linked to inflation.
Notably, this includes French pension payouts, which would remain at 2025 levels.
Overall, these changes will save around €8 billion.
From 2027 onwards, pensions will be under-indexed to inflation rises by 0.4 percentage points, envisioning long-term savings.
Income tax bands will be frozen at current levels, and not re-evaluated in light of inflation as they usually are.
It means between an extra 200,000 and 400,000 households are likey to move into paying income tax as their income reaches above the minimum threshold, and 18 million households will pay more tax than in 2025 as their income moves into a higher band.
However, systems to limit the effect on the lowest-income households (made up of two people), are included.
End to 10% tax allowance for pensioners
As discussed several times in recent years, the draft budget axes the 10% income tax allowance for pensioners.
The deduction, currently automatically applied to pension incomes declared, will be converted into a flat €2,000 deduction for all pensioners.
Currently, the 10% retirees' allowance has a maximum cap of €4,399 in deductions, meaning a potential loss of over €2,000 in the allowance for some households.
The €2,000 limit will benefit those on the most-modest incomes, who will see a higher reduction from the changes (€2,000 being more than 10% of their annual income). However, it will see better-off pensioners required to pay more tax.
Several social security measures
The 2026 Social Security budget (technically a separate bill) looks to cut debt in the sector from €17.2 billion to €12.5 billion, and limit the annual healthcare spending increase to 1.6% (down from 3.6% in 2025).
Overall, this amounts to just over €7 billion in savings.
Part of these savings come from reductions to pension payouts mentioned above.
However, other measures envisioned include:
Reducing state reimbursements for several dental appointments and procedures and medical devices (dispositifs médicaux) such as bandages and prosthetics. This should save up to €2.3 billion.
Reducing the amount the government pays producers for medication
Limiting the maximum days a first sick-leave note provides (15 days for someone on sick leave at home, 30 days for someone in hospital) before they must obtain a new certificate from a doctor. Currently there is no limit.
Fighting social security fraud
Doubling the daily maximums and annual thresholds for franchises médicales and participation forfaitaire payments, to an overall €100 annual maximum for both
Taxes on wealthiest households and companies continue
The exceptional taxes on the wealthiest French households introduced in the 2025 budget, will be extended for an additional year.
Households with an income of €250,000 (or €500,000 for a couple) will face a minimum tax rate of 20%.
It brought in an estimated €1.2 to €1.4 billion in 2025, and is expected to do the same in 2026.
“This tax justice measure represents a targeted effort for high-income households, which, particularly through sustained use of tax exemptions, are seeing their effective tax rate decrease,” says the budget.
At the same time, a tax surcharge on the 400 biggest and most profitable companies in France – those with a turnover of at least €1 billion – will continue, although the additional tax rate will be halved.
Set to raise €8 billion in 2025, it will add around €4 billion to the 2026 budget.
This is an area expected to be fiercely contested.
Left-wing parties are likely to call for higher wealth taxes, potentially including the ‘Zucman’ tax or a more stringent wealth tax, to increase government income in lieu of cost-cutting measures.
Parties on the right and centre are against the additional wealth taxes proposed by the left.
Tax on company assets, tax loopholes attacked
As part of wider plans to reduce ‘tax optimisation’, companies used to hold assets are to be taxed.
The tax, known as une taxe sur le patrimoine financier des holdings patrimoniales is inspired by similar laws in the US and Republic of Ireland.
Around 30,000 companies, owned by around 4,000 individuals, are being targeted in particular.
“For the sake of fairness, the tax will also be payable by French residents who own holding companies located abroad,” the budget states.
It will bring in around €1 billion to €1.5 billion.
In a similar vein, the state will close 23 so-called niches fiscales (tax breaks of various kinds) deemed to be “obsolete or ineffective".
Examples include tax credits for training business leaders and for employee buyouts, income tax exemptions for recipients of the Légion d'honneur, the Military Medal, and the Long Service Medal as well as for amounts received as part of the Nobel Prize award, and deductions for expenses incurred by professional athletes when changing careers.
Motorists affected by fuel tax tweaks
An end to tax breaks for producers of E85 (economical 'bioethanol' fuel, used by certain adapted vehicles) could see prices of this increase by up to 50c per litre in the coming years.
Produced mainly by beets grown in France, the increase in costs could also impact farmers.
An end to special preferential tax rates on B100 fuel, a rapeseed-based biofuel mainly used by trucks, is also planned.
End to tax reductions for parents of older children
A flat €61 tax reduction for parents of children in collège (ages 11-15) and lycée (16 -18) will be removed, saving up to €240 million. However, It will remain in place for parents of children in primary school at the current €61 rate. You can read more about this here.
Groups that back the reduction say the funds should be redirected into scholarships for children of modest-income backgrounds, although it is unclear whether this will happen in the context of the 2026 budget.
Changes to long-term illness system
Patients suffering from a long-term illness (affection longue durée or ALD) see most of their health costs fully reimbursable by Assurance Maladie.
In the event of taking paid sick-leave, ALD patients currently do not pay income tax on the aid they receive. The 2026 budget looks to suspend this, saving up to €700 million.
Charity donations encouraged
Currently, individuals who donate to certain charities such as Secours Populaire or Restos du Cœur, helping people in need, can benefit from a 75% income tax reduction on donations up to €1,000.
This limit will be doubled to €2,000 to encourage more donations.
Small parcel tax
A flat €2 tax before VAT on receiving small parcels from outside the EU is included in the budget.
Tabled as a temporary solution to a Europe-wide problem of an influx of smaller packages, particularly from e-commerce websites based in Asia, the tax will only be in place until EU regulations on the matter have been made.
Although the tax will raise some funds, it is being put in place also because the trend “disrupts the economic balance of traditional distribution, weakens certain local businesses and the dynamism of many regions, and puts increasing pressure on traditional logistics networks, particularly La Poste,” the budget states.
You can read the full 136-page overview of the budget provided by the government here.
