One topic that causes concern and confusion for British expatriates in France is inheritance tax, particularly when you have family in the UK.
We are receiving more enquiries about this than ever before with the UK tax reforms and inheritance bills on a sharp upwards path.
The UK inheritance tax nil rate bands are frozen until 2030. The main nil rate band has been £325,000 since 2009 – it would be around £500,000 if it had risen in line with inflation.
Read more: What are the rules on gifting a share of French property to a child?
The Office for Budget Responsibility forecasts that HM Revenue & Customs will earn £14billion annually from this tax by 2030, double that collected in 2022/23.
Once pensions form part of taxable estates from 2027, many families will pay more tax.
But does this affect you as a UK national living in France, especially since France imposes its own succession tax? Are you liable for UK inheritance tax, French succession tax, or both?
Since France and the UK have a double tax treaty for inheritances, the simple answer is that, as a habitual resident of France, your estate is taxable in France – but nothing is ever simple with taxation.
There are different circumstances you should be aware of, and UK inheritance tax may continue to affect you more than you realise.
UK domicile regime replaced by long-term residence
Domicile was a particularly complex concept, and a hard tie to break, which determined liability to UK inheritance tax (IHT) for British expatriates in most countries until 5 April 2025. In Spain, for example, they are subject to both IHT and Spanish succession tax.
It is different in France, thanks to a specific double tax treaty with the UK. UK nationals who are long-term residents of France are only subject to French succession tax (and not UK IHT) on worldwide assets – except those in the UK.
Assets located in the UK are always subject to UK IHT and in this case French residents are assessed for tax in both countries.
The domicile regime was replaced by one based on long-term residence (generally 10 years of being resident or non-resident in the UK) from April 6, 2026, but the terms of this France/UK double tax treaty still apply. Here we look at various scenarios –
French residents leaving or gifting worldwide assets
If you live in France permanently, assets you gift during your lifetime or pass on at death are subject to French succession tax, subject to any tax treaty.
British expatriates are not liable for UK inheritance tax on assets outside the UK (lifetime gifts may still have IHT implications).
French residents leaving UK assets
Tax is due in both countries, but credit is given in France for any tax paid in the UK. You do not pay tax twice, but pay the higher amount.
From April 2027, UK liability will include UK pension funds. The 40% IHT rate will be in addition to the standard income tax your beneficiaries face on the residual funds if you die after age 75.
French residents receiving an inheritance or gift (general rule)
If you have lived in France for at least six out of the last 10 years, you generally pay French succession tax on inheritances or gifts you receive (subject to tax treaty terms). This applies even if the donor and assets are outside France. There are penalties for failing to declare such inheritances/gifts.
French residents receiving an inheritance from the UK
Thanks to the UK/France tax treaty, the general rule above does not apply. You do not pay French succession tax, provided the deceased was a long-term UK resident and there are no French assets. The estate will have been subject to UK tax.
French residents receiving a gift from the UK
The France/UK treaty only applies to inheritances. If you receive a gift from a UK domicile, you owe tax in France if you have been resident here for six years.
UK residents owning assets in France
As a long-term UK resident, assets you own in France are liable to French succession tax as well as forming part of your estate for UK inheritance tax purposes. Your heirs are entitled to credit for tax paid in France.
Key differences between UK and France inheritance taxes
In the UK, tax is calculated on your estate as a whole and paid by the estate. Spouses are generally exempt, but otherwise the 40% tax rate and £325,000 threshold apply to everyone.
The additional £175,000 residence nil rate band benefits families, but has limitations. It only applies to residential property you have lived in (which can be in France) received directly by descendants. The relief tapers away for estates over £2million.
In France, spouses/PACS partners also receive inheritances tax free, but not gifts. Tax is calculated on each beneficiary who has to personally pay the tax due. Rates and allowances vary according to beneficiary, with immediate family being much better off than distant or non-relatives.
For example, each child pays tax at progressive rates starting from 5% to 45% with a €100,000 allowance. Non-relatives pay a fixed 60%, with only €1,594 being tax free.
‘Non-relatives’ includes unmarried partners (unless you have entered into a PACS) and stepchildren. You may not think of your adult children from a previous relationship as your spouse’s stepchildren, but if you leave assets to your spouse, to pass onto your children when he/she dies, they are taxed as non-relatives. Your children will pay tax at 60% and lose the €100,000 allowance. Research all your options to establish how to protect both your spouse and children.
Read more: Can French forced heirship rules be bypassed?
For British expatriates, estate planning may be the most complicated part of living in France. There are many possibilities to get it wrong, resulting in unwelcome surprises for your family. But there are also planning opportunities to achieve your wishes. A little time and effort, with specialist, professional advice, will prove extremely beneficial and provide peace of mind.
Tax rates, scope and reliefs may change. Any statements concerning taxation are based upon our understanding of current taxation laws and practices which are subject to change. Tax information has been summarised; an individual is advised to seek personalised advice.
