Partner Article
Financial mistakes newcomers to France make – and how to avoid them
Many wrongly assume that the rules broadly mirror those of their home country
A frequent error is misunderstanding the point at which someone becomes a tax resident in France
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A move to France often marks an exciting new chapter, whether it is a long-planned retirement, a lifestyle change, or a professional relocation.
However, the financial and tax systems in this country differ in many important ways from those in the UK, US, and elsewhere, and new arrivals can make costly mistakes if they are not properly prepared.
Planning is everything
The key to transitioning financially into your new life in France is to prepare in advance.
Many people assume they can deal with financial planning once they have moved. In France, that approach can be brutally expensive.
The moment you become a French tax resident, the rules change, and some planning opportunities disappear completely. Certain restructurings, disposals, or adjustments can be done efficiently before arrival, but once you are resident, the same actions may trigger income tax, social charges, or both.
Contact a financial adviser at Kentingtons to learn more about about planning your finances in France.
Spot the difference
Another mistake new arrivals make is assuming that French rules broadly mirror those of their home country. In reality, France operates a very different system for taxation, investments, pensions, and estate planning.
For example, the French tax year follows the calendar year (January 1 to December 31), social charges apply to many forms of income, and tax-efficient wrappers such as UK ISAs are not recognised.
What was sensible planning in your home country can quickly become inefficient, or even problematic, once you become a French tax resident.
Tax residency rules
Another frequent error is misunderstanding the point at which someone becomes a tax resident in France. Residency is not determined solely by paperwork or intention, but by facts such as where you live, work, or have your main economic interests.
Becoming a tax resident without realising can create complex financial situations. Failing to plan for this transition can lead to unexpected tax bills or missed planning opportunities.
Inappropriate investments
Many people arrive in France with investment portfolios built around home country rules, which can be tax-inefficient or unsuitable once you are subject to French taxation.
UK ISAs, for instance, lose their tax-free status in France, and some collective investments may be taxed unfavourably, or require additional reporting.
Without restructuring, individuals can end up paying more tax than necessary or facing avoidable administrative complexity.
Social charges
French social charges (prélèvements sociaux) often come as a surprise. These can apply to investment income, rental income and capital gains, even for retirees.
Although exemptions and reductions may apply in some cases, particularly depending on healthcare cover and country of origin, these are not automatic.
Understanding how and when social charges apply is an essential part of settling financially in France.
French estate and gift rules
Inheritance and gifting rules in France are another area where assumptions can be costly. France has strict forced heirship provisions and gift tax rules that differ markedly from common law systems.
While everyday gifts and presents are not an issue, larger transfers of wealth should always be planned carefully.
New arrivals often delay estate planning, only to discover later that, had they acted sooner, they would have been able to significantly lower their inheritance tax liabilities.
Review pensions early
Pensions are frequently left ‘as they are’ during the relocation process. This might be the right solution for some; nevertheless, the timing of withdrawals can significantly affect the tax outcome.
Early review allows for smoother income planning and helps avoid unnecessary tax exposure.
Seek advice
The most common mistake of all is waiting too long before seeking professional advice.
Once decisions are made or deadlines missed, options can become limited. Early guidance helps new residents understand their obligations, take advantage of planning opportunities, and gain confidence in their financial arrangements.
However, be careful of taking advice from non-professional sources; I call it BDP syndrome (bloke down pub).
The point is, everybody’s circumstances are different, so what works for one person may not necessarily work for another.
Christopher Davenport is a financial adviser at Kentingtons.
