Have you left the UK to live long-term in France, but left assets behind? That might not be in your best interest.
The UK tax landscape is shifting rapidly, with rising taxes, frozen allowances and shrinking exemptions. Any asset you continue to hold in Britain – whether savings, investments, property, or pensions – remains exposed to changes. And this isn’t a short-term trend. Many of these measures will roll out over the next few years, with more reforms likely on the horizon. If you want to protect your wealth and secure your legacy, now is the time to act.
We explore four key areas that British expatriates in France need to review urgently: inheritance tax, pensions, property and capital investments.
Inheritance tax
Any asset you keep in the UK is always liable to UK inheritance tax (IHT), wherever you live. British expatriates in France are subject to French succession tax rather than UK inheritance tax on worldwide assets, but UK assets are assessed for both taxes (with credit given in France for tax paid in the UK).
The UK’s nil-rate band has been frozen at £325,000 since 2009. It would be around £500,000 today if it had increased with inflation as it is meant to – and there are another five years of freeze ahead! The more your UK assets rise in value, the more they are exposed to 40% inheritance tax. And when pension funds are added in a year’s time, IHT bills will rise dramatically.
If you can take the UK out of the equation, only French succession tax will apply. Your children will each benefit from a €100,000 exemption, and their tax rates start at just 5% and only hit 40% when the amount they receive exceeds €902,838. Be careful though; when leaving assets to other relatives or non-relatives, French succession tax can rise much higher without careful advance planning.
Pensions
While many British expatriates may consider selling UK property, stocks and shares, they are less likely to consider pension funds. Yet pensions are often one of our biggest assets, if not the biggest, and the longer you leave them in the UK after leaving, the longer they remain a target for detrimental tax reforms.
There’s now much more incentive to consider moving pension savings out of the UK: they become fully liable to UK inheritance tax from April 2027. As a UK-situated asset, this impacts you even if you spend the rest of your days in France. Remember, if you die over age 75 and your residual pension funds pass to UK resident beneficiaries, they will pay income tax up to 45% – which could mean a combined tax of up to 67%!
The QROPS option – moving UK pension funds into a Qualifying Recognised Overseas Pensions Scheme (QROPS) – has become a much harder decision than before, as it now incurs the UK’s 25% Overseas Transfer Charge. The option remains available though, and while it sounds prohibitive, it can still be the right decision for some when they weigh this tax against the UK taxes applied on death.
One alternative could be to withdraw your whole pension fund and reinvest the capital into tax-efficient arrangements in France. Although pension lump sums are taxed as income in France, if you take your entire pension as one lump sum, in certain circumstances you may be eligible for a beneficial fixed 7.5% income tax rate.
Explore all your pension options to determine which is most effective and suitable for your circumstances and objectives. Specialist professional advice is essential to protect your savings.
Property
Many expatriates keep hold of UK property, even when they plan to spend their retirement years in France. It may be a fallback, or a place to stay when visiting, or purely an investment asset.
However, rising taxes, tightening regulations and falling net yields mean the landscape for UK property investment has changed dramatically. Many landlords, especially those living in France, are finding that the risk–reward balance of property investment has shifted unfavourably. Diversifying away from UK property may now offer better long-term value, less hassle and improved financial outcomes for French tax residents.
Landlords and investment property have been in the firing line for UK taxation over the last decade, starting with non-residents becoming subject to UK capital gains tax on property from 2015. Since then, the mortgage interest deduction was replaced by a limited tax credit, the furnished holiday lettings tax regime was abolished, residential property is now fully within the scope of inheritance tax, and stamp duty has increased. Then tax rates on rental income will increase by two percentage points from 2027, and a ‘mansion tax’ will hit properties over £2 million from 2028.
You also must consider French taxation if you live in France. French wealth tax impacts households with combined worldwide assets amounting to over €1,300,000 (but only the first €800,000 is tax free). In contrast, capital investments (shares, bonds, assurance-vie etc.) are not subject to wealth tax.
Any rental income from a UK property is taxable in the UK. Although you must declare it in France too, you receive a tax credit in France. Non-UK residents still benefit from the UK personal allowance, but it was frozen in 2021 at £12,570 until 2031 – it would be around £17,490 in 2031 if it increased with inflation each year.
If you sell UK property as a French resident, you don’t pay tax twice but do pay the higher amount. For UK tax, only gains made since 2015 are taxable, but the longer you leave it, the larger the tax bill. In France, tax and social charges start to reduce from the sixth year of ownership, so take advice to calculate the best time to sell.
UK capital investments
The more assets you retain in Britain, the greater your potential UK inheritance tax liability. This becomes even more significant if transferring your pension abroad is not an option. One practical step is to dispose of UK-based investments – such as ISAs, shares, bonds and funds – and reinvest the capital in a way that is tax-efficient for France.
France offers highly advantageous investment vehicles for residents. For example, an assurance-vie can deliver substantial benefits beyond tax savings, particularly in estate planning, provided you select the right policy.
A tax review of your investments is also an opportunity to consider currency exposure. Since your everyday expenses are in euros, holding funds in the appropriate currency can help reduce risk. Additionally, if you currently own multiple investments directly, consolidating them into a single, tax-efficient arrangement can significantly simplify administration and reporting requirements in France.
Live in UK and commute to France?
Do you have a home in both the UK and France and enjoy dividing your time between the two? If you opt to keep your main residence – and tax residence – in the UK while commuting to France, you continue to be stung by all the tax reforms announced over recent years. If you changed your tax residence to France and commuted back to the UK instead, you could be a lot better off. It’s certainly worth taking personalised advice to explore this option and calculate the tax comparisons, especially if you’d be happy to spend more time in France.
Managing assets across two tax jurisdictions is complex, and the rules are constantly evolving. Decisions about pensions, property and investments can have long-term implications for both your wealth and your heirs. Blevins Franks specialises in cross-border tax and wealth planning. Our strategic financial planning encompasses tax mitigation, estate planning, pensions and investment, and is specifically designed for your circumstances and goals. We aim to improve your tax liabilities, ensure compliance, make life easier for your heirs, and provide you with lasting peace of mind.
Get in touch today.
