When it comes to your financial planning, delay can be costly. From missed tax breaks to unexpected penalties and lost inheritance opportunities, putting off planning, especially in complex systems like France’s, can quietly impact your financial wellbeing. This article explains why acting early is key to protecting your finances and how expert advice can help you stay ahead.
Procrastination is human nature and can affect us all. Putting off financial planning research and decisions is something many of us are guilty of at some point. While you may have other priorities, the longer you delay reviewing your finances, the more money it could cost you or your heirs.
Financial planning can feel overwhelming, with too many choices and rules and too much jargon and paperwork. Many people think they’ll deal with it when they have more time or money. Some avoid it out of fear of facing their finances or making a wrong move, and no-one wants to dwell on passing wealth to children or future care bills.
Others just don’t see the urgency, assuming tax deadlines, retirement, succession planning etc are years away. But in countries like France and the UK, where tax rules can change quickly from year to year, delaying can lock you into higher liabilities. It’s a mindset trap that ultimately costs real money.
Even if you have already adjusted your tax and estate planning, investments and pensions after moving to France, you cannot then forget all about them. Tax rules and pension regulations change often, as can your personal circumstances and objectives. Regular reviews are essential to keep your finances on track to meet your goals. If you’re using the services of a wealth manager, they should remind you each year and arrange a meeting to review your financial arrangements, situation and plans.
How procrastination can affect your tax bills in France
When you move to France, you have to make yourself known to the local tax authorities and fully declare your income, capital gains and wealth on time each year. Obtaining a residency card is not enough.
Delaying your integration into the French tax system and failing to meet filing deadlines can lead to significant penalties. Additionally, without timely planning of your fiscal residency, you could miss valuable opportunities for tax savings.
For example, French income tax offers deductions like home renovation credits and charitable giving offsets. But you have to know about them and claim them on time the following year. If you miss these opportunities, you end up paying the full rate of tax.
French tax residents must declare their worldwide income and gains. Not declaring your UK pension, rental or investment income on time can trigger penalties or double taxation.
Furthermore, if you don’t take the time now to understand the options for your pensions and how to optimise them for tax, you potentially miss out on the chance to do so. Procrastination here is not just lost savings; it is handing cash to the French fiscal authorities. Act early and you turn rules into opportunities, but delay and they potentially turn into traps.
Sometimes planning opportunities are not apparent unless you take professional advice. For example, we recently advised a client not to draw his French state pension. That might sound counterintuitive when he was entitled to this income, but drawing it would have nullified his Form S1 exemption to social charges, potentially costing him many thousands over the years. Since in this case the French pension was relatively small, the social charges saving far outweighed the lost income.
Then there is wealth tax. If your net, worldwide property assets exceed €1.3 million, planning ahead enables you to use exemptions like restructuring wealth into assets that do not attract wealth tax. Deferring your financial planning could result in a sizable and potentially unnecessary wealth tax bill.
Financial planning is not always about building wealth. It’s also about protecting what you already have. Delays can turn small oversights into real financial loss, especially when rules change fast.
Other missed tax saving opportunities
Another opportunity retirees can miss in France is tax relief timing. The assurance-vie, France’s tax-efficient savings policy, allows you to withdraw funds with an annual tax-free allowance after you have held it for eight years. If you open your policy at age 65, by 73 you’re enjoying a source of income that benefits from a tax-free exemption. But delay until you are 70, and you are without that tax break at age 75, which could amount to, say, an extra €5,000 of tax on a €50,000 withdrawal.
Your children could pay up to 45% French succession tax on any amount over their allowance, while rates for other beneficiaries reach as high as 60% with very little allowance. You can make tax-free gifts every 15 years – but you need to act. The earlier you make gifts, the more chance there is you can make a second one tax-free and ensure your heirs benefit from your wealth instead of the taxman.
If you had set up a trust in the UK, be aware that that French authorities have a rather suspicious approach towards trust structures. This is another good example of where delaying reviewing your wealth and estate planning can cause tax headaches and stress down the line. If you take the time to properly reorganise your affairs for the French system, you can significantly save both tax and scrutiny.
Procrastination can also have implications when it comes to property transactions. If you are selling a second home, with careful planning you may be able to avoid capital gains tax if you act within the tax-free window.
Taking charge
Try and see financial planning as form of control over your financial wellbeing, rather than a burden.
If you don’t enjoy thinking about finances, go back to basics. Make a list of your assets, current and future income, needs in retirement and wishes for your heirs – you will make progress simply by visualising it. Set aside the time and then reward yourself. Two heads are often better than one, so perhaps discuss your planning with someone close to you and try to outline your retirement goals.
Above all, taking professional advice will prove invaluable and make everything so much easier. It would save you hours of research, stress and having to navigate the French regimes. All the different elements and options will be explained along with the pros and cons, and you’ll benefit from their experience and expertise. And it will give you peace of mind that you haven’t overlooked anything important and your finances are correctly set up to meet your long-term objectives.
Blevins Franks is the leading tax and wealth management adviser to UK nationals moving to and living in Europe. We have decades of experience advising clients in France on how to optimise their financial planning. Our role is to save you time and stress, improve your tax position and take away the burden of financial planning. We do all the heavy lifting so that you don’t have to.
Get in touch today.
