Are you planning your move to France? Or have you recently settled into your new life there? No matter where you are in your journey, it’s essential to prepare for the French tax system and align your wealth management strategy accordingly.
To safeguard your assets from unnecessary taxation, take time to understand the taxes you may face in France and how they apply to your personal situation. While the French regime can be complex, it also offers valuable tax planning opportunities – especially when it comes to optimising your investment income and pension arrangements.
Tax residence in France
You are deemed to be tax resident in France if you meet any of these criteria:
- France is your main residence or home (your foyer). This where your close family (i.e. spouse and minor children) habitually live and can apply even if you yourself spend most of your time abroad.
- France is your principal place of abode, which usually means you spend more than 183 days there per calendar year.
- Your principal activity is in France.
- France is your centre of economic interests.
You become tax resident the day after you arrive in France to live there indefinitely. From that day onwards you are liable to French tax on your worldwide income, gains and real estate wealth.
French taxes
The main taxes plan for in France are income tax at scale rates, social charges, a fixed rate on investment income, wealth tax and succession tax.
Income taxes
Income tax is calculated on the household, not the individual, which can prove beneficial in some cases. It is paid in arrears , with tax rates published at the end of year. The rates for 2024 income (paid in 2025) start at 11% for income over €11,497, rising over five bands to 45% for income surpassing €180,294. An additional 3% or 4% tax on ‘high income’ may apply to income over €250,000.
Social charges are additionally payable on income, generally 9.7% for employment income; 9.1% for pension income (7.4% for those on low incomes) and 17.2% for investment income. Retirees with Form S1 escape social charges on pensions and pay a lower 7.5% rate on investment income.
Fixed tax rate on investment income. The 30% Prélèvement Forfaitaire Unique (PFU) includes both income tax and social charges. It reduces to 20.3% if you have Form S1. Lower earners can opt for the scale rates of tax.
Wealth tax on real estate
France’s wealth tax, Impot sur la fortune immobilière (IFI) is an annual tax applied to the combined real estate assets of a household. It only affects those with property assets exceeding €1,300,000. The first €800,000 is tax free, then rates range from 0.5% to 1.5%.
Succession tax
French inheritance tax is charged on each beneficiary, with rates and allowances varying considerably per beneficiary. Inheritances between spouses/PACS partners are tax free (but not gifts) and children benefit from much lower rates and much higher allowances than more distant relations. Be particularly careful where stepchildren and non-married partners are involved, as their tax-free allowance is minimal and the tax rate 60%.
Estate planning
Life is unpredictable, so don’t risk leaving your estate planning too late. There are usually steps you can take to improve your tax position in France, particularly for investment capital and inheritances, sometimes considerably so.
You also need to be aware of and plan around French succession law. Children are ‘protected heirs’ in France; cannot simply leave your entire estate to your spouse. The European succession regulations allow you to opt in advance for the law of your country of nationality to apply instead of French law, though protected heirs can still make a claim for assets located in France. Regardless, take cross-border advice to understand all the pros and cons as other options may be more suitable for you.
If you have not yet bought property, familiarise yourself with succession law. There are various ways of owning property in France, which can have succession tax and law implications. Establish which option would best suit your family situation.
Pensions
British retirees should also review their pension funds and the options available to them as an expatriate. This is even more important now that UK pensions will become subject to UK inheritance tax.
Moving your pension out of the UK into a Qualifying Recognised Overseas Pension Scheme Qualifying Recognised Overseas Pensions Schemes (QROPS) can provide currency, investment and estate planning flexibility – but now comes with a UK imposed 25% overseas transfer charge. Nonetheless, it is worth weighing this against the inheritance and income taxes your UK beneficiaries could pay.
In some cases where you meet the conditions, it is possible to take your UK pension fund as a lump sum and pay just 7.5% tax in France (plus 9.1% social charges unless you have an S1). You could then re-invest the capital into tax-efficient arrangements.
With something as important as your pension, it is vital to take regulated professional advice tailored for your situation before taking any action.
Before you move to France
If you have not left the UK, do your research before you sell UK assets and before you become tax resident in France.
Understanding the differences between the two tax regimes can help you make informed decisions and potentially reduce your tax liability. With the right timing and strategy, you can structure your move to France in a way that protects your wealth and maximises tax efficiency.
Tax and financial planning for France
Effective wealth management goes beyond tax – it includes estate planning, pensions, savings and investments. How you hold your assets can significantly impact both taxation and inheritance. France offers tax-efficient solutions that can benefit both you and your heirs, with added advantages for succession planning.
Since relocating involves both UK and French tax systems, consult a cross-border specialist who understands how the two interact and can help you build a tailored, tax-efficient strategy.
Contact our cross-border tax and wealth management specialist for personalised advice
