Whether you’re planning a return to the UK soon or simply weighing your options, the UK’s new tax regime offers compelling reasons to start planning now.
For many British expatriates in France, the idea of returning to the UK may seem distant or highly unlikely. But the time may come when the UK calls you back, and if so, early and strategic financial planning reaps rewards.
UK taxation is going through a period of change, with many reforms having a negative impact on wealth. It is not all bad news, however, with changes from April 2025 offering surprising new tax advantages to long-term expatriates moving back to Britain.
Take advantage of the new long-term residence rules
From April 2025, the UK replaced its long-standing domicile-based tax system with residence-based rules. The new regime provides estate planning clarity and advantages to long-term British expatriates. While UK nationals living in France are subject to the French succession tax rules on worldwide assets, UK assets are always liable to UK inheritance tax. This will include pension funds from 2027.
These long-term residence rules also offer significant tax mitigation opportunities to returning Britons, particularly in the areas of inheritance tax (IHT) and foreign income and gains (FIG). If you’ve been living in France for 10 years or more, you could benefit from up to a decade of UK inheritance tax relief and four years of tax-free foreign income and gains – but only if you plan well ahead and structure your assets accordingly.
Liability to UK inheritance tax is now determined by whether or not you meet the long-term residence criteria, with 10 years being the magic number. Long-term residents are liable to UK inheritance tax on worldwide assets, while everyone else is only assessed on UK-situated assets. Where you own assets is therefore key for estate planning and protecting your wealth for your heirs. With careful planning, returning expatriates could make the UK an IHT-free zone for up to 10 years.
The new Foreign Income and Gains (FIG) regime is another key benefit for returning expatriates. It offers four years of UK tax exemption on foreign income and gains, even if you remit them to the UK, and a valuable opportunity to reorganise your wealth and investments before becoming fully liable to UK tax.
Timing is everything
When it comes to tax, timing your return strategically can make a significant difference. Since the UK and French tax years don’t align, you can plan your move and when you sell assets to optimise opportunities in both countries.
If you spend time in the UK before moving back, such as looking for and decorating a new home, watch the number of days you spend there. Follow the UK Statutory Residence Test to ensure you don’t trigger UK tax residency too early.
Capital gains taxes
Selling or buying property can have different tax implications depending on your country of residence at the time.
In France, the sale of your main home is exempt from capital gains tax, but only if the property is your actual main home when you put it on the market. Also, the window for benefitting from the exemption is limited and the gain may be taxed under the rules for second homes if you wait for too long.
If you sell UK property to release funds to buy a new home for your return, it will not benefit from Private Residence Relief as your main home was in France. You will be liable for UK capital gains tax even if you sell it as a non-resident, though only on gains made since April 2015 for residential property and 2019 for commercial property.
The UK charges 5% stamp duty on second homes and investment properties, which would affect you if you bought a UK home while still owning your French residence.
France’s exit tax
Be aware that France applies an ‘exit tax’, which is essentially a 30% capital gains tax on your potential gains, even though you’re not selling the asset. It is levied when an individual who has been resident in France for six of the last ten years leaves the country, and their total shareholdings are valued at over €800,000, or they own more than 50% share of a company.
This tax is deferred (until the shares are sold, reimbursed etc.) if you move to an EU/EEA member state, or third country with a tax information agreement if moving for professional reasons. Certain investment arrangements are exempt from exit tax, or it may be cancelled in some situations. Take advice well before leaving France to ensure you don’t get caught out by this unnecessary tax.
Releasing capital and reviewing your investments
If you plan to release capital from investments or pensions to buy your UK home, take advice first. Withdrawing from investments or pensions could impact your long-term retirement income and savings, and you need to plan carefully.
Establish how your investments will be taxed in the UK and how to restructure them for greater tax efficiency. It’s also a good opportunity to review how they can be passed to your beneficiaries. Decide if and when to convert savings and investments from Euros into Sterling. Some arrangements offer currency flexibility to help manage exchange rate risk.
UK pensions
Returning to the UK may affect how your pension funds are taxed and managed. If you have a Qualifying Recognised Overseas Pension Schemes (QROPS), seek specialist advice on the best path forward now.
UK pension funds become liable to UK inheritance tax from April 2027. Pension savings transferred out of the UK while living abroad may remain exempt for up to 10 years, provided you leave the funds overseas.
Estate planning
Returning to the UK means your inheritance planning needs a full review, especially if it was structured around French succession law and tax.
Review your wills, how you own assets and your overall estate plan to ensure your legacy will be distributed efficiently and according to your wishes. Consider how your wealth will be passed down the generations and take steps to make the transfer and probate process as easy as possible for your family.
Cross-border advance planning
Returning to the UK after years in France is a major life decision, and one that carries significant financial implications. But with the UK’s new residence-based tax regime, it also presents a rare opportunity to reset your tax position, protect your estate, and enjoy a more favourable financial future.
The key is early, strategic planning. Whether your return is months or years away, review your arrangements now to take advantage of beneficial wealth management opportunities.
Contact our cross-border wealth management specialists today for personalised advice and solutions.
