New Year resolution to review your financial planning

15.01.18

Please note that this article is over six months old. While Blevins Franks takes care to make sure that information is accurate on the date of publication, some content may change over time. You should not rely on the accuracy of legislation and tax information in this article; take professional advice for your circumstances.

January is a perfect time to review your tax and financial planning for France. Are they up to date?

January is a perfect time to review your tax and financial planning for France. Are they up to date? There are various elements to consider…

Tax planning

Consider any rate or regulation changes over the last year. Do you need to make adjustments to take full advantage of the new French tax cuts? There are two significant changes from January 2018:

1)  Wealth tax repealed and replaced by a new version. The rates and rules are similar but it now only applies to real estate (savings and investments are exempt).

2) Investment income now taxed at a fixed rate of 30%, including social charges (though smaller policies can still apply the scale rates of income tax).

If you are thinking of investing in property, first look at the tax implications and compare this with investing in securities like shares and bonds. Consider wealth tax, capital gains tax and tax on income (rental income does not benefit from the 30% fixed rate).

If you are new to France it is even more important to review your tax planning since the opportunities for tax mitigation are very different from the UK or elsewhere. You may need to make changes to secure an appropriate strategy that reduces your liabilities to the legal minimum.

Estate planning

There are no major changes since the EU succession regulation “Brussels IV” came into effect in 2015. Estate planning done over the last couple of years should still be effective, but if you have not established a thorough estate plan since moving to France, or in recent years, do so now, before it is suddenly too late.

Establish your goals. Who do you wish to benefit from your estate? Do you want them to have control over the money? What impact will French succession and UK inheritance taxes have? Can you avoid probate on any assets? Should you choose French succession law or UK succession law? Then take specialist advice to put structures in place to achieve your goals – cross border succession planning is complex, particularly for wealthier families and/or those with children from previous relationships. Make sure you get it right.

We have produced a “Guide to Estate Planning in France” that we can send upon request. Blevins Franks also provide an Estate Planning Review Service. For further details please contact us.

Savings and investments

As asset prices rise and fall your portfolio could become unbalanced and carry more risk than you previously intended. You may need to make adjustments to re-balance it.

Are your investments and the mix of them suitable for your life in France (your circumstances, needs, time horizon and risk tolerance)? This is such an important element of protecting and growing your wealth, yet many people do not have a strategic investment plan in place, or have neglected one set up years ago.

Establish your risk appetite and make sure that the mix of investment assets in your portfolio is in line with it. This will involve a careful blend of asset types, companies, countries, sectors etc, which should also be structured to suit your specific objectives – for example, is income or growth more important for you?

Even if you have a carefully structured portfolio, it is essential to review it every year.

Pensions

Today’s pension landscape is quite different from a few years ago, so spend a little time to establish the best course of action for your pension funds.

The UK’s “pension freedoms” provide you with many ways to access your funds. This creates some attractive opportunities, but great care must be taken to establish the best course of action for you – do not risk your long-term financial security.

If you have a final salary pension you may be able to take advantage of higher transfer values being offered by some providers. Carefully weigh this up against giving up a guaranteed pension for life and take regulated advice to avoid pension scams.

Remember that UK pension benefits (excluding the state pension) totalling over £1 million breach the lifetime allowance and anything over this triggers 55% UK taxation when taken as cash or 25% for income and transfers. Consider ‘protection’ options or transferring to minimise tax penalties.

Consider the French tax implications of all your options. The local tax regime can provide advantages, particularly if you can take all your pension as a cash lump sum at once. In this case you may be able to pay just 7.5% tax, plus 9.1% social charges (2018 rate). You escape social charges if you have not yet registered for healthcare or have Form S1.

Reviewing your wealth management arrangement once a year should prove profitable and provide peace of mind. You should look at all the above areas together, as changes in one could affect the other, and establish holistic solutions that work for your personal situation.

Our France advisers would be happy to review your current tax and wealth management and discuss strategies to improve and protect your wealth for yourself and your heirs. Contact us here.

The 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.

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; individuals should seek personalised advice.

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