With early and careful planning, you can make the most of tax-efficient opportunities when moving to France or buying a French property.

Thinking of moving to France or buying a property across the Channel? Or perhaps you have recently arrived are still in the process of settling in? While foreign bureaucracy and tax legislation may seem off-putting, with early and careful planning you can prevent headaches and make the most of tax-efficient opportunities. Here are seven key considerations.

1. Where you will pay tax

You need to establish exactly when you become liable for French tax on your worldwide income, gains, wealth and estate.  

Generally, once you arrive in France intending to live there permanently, you become French tax resident the following day. But it is not always so straightforward. You could be considered resident even if you do not live in France but your spouse does, or if your main home is in France.

You also need to be wary of UK tax residence rules – you could, for example, unintentionally trigger UK tax residency by spending just 16 days back home.

If you plan carefully and have some flexibility, you may be able to time your residency switch to minimise taxes. 

2. How you will be taxed

French taxation can be complicated… and high. Besides income tax rates up to 45%, you also face social charges on most income with rates generally between 9.1% and 17.2%, depending on the type of income. If you hold Form S1, these charges reduce to 7.5% on investment income and pension income escapes them completely. 

France also imposes an annual wealth tax on real estate assets if your property portfolio exceeds €1.3 million, but there is a €800,000 allowance. 

With expert planning, it is possible to structure savings, investments and assets to be tax-efficient – and maybe even pay less tax in France than you did in the UK, depending on your circumstances. 

Download our guide to French taxes

3. Ways to structure your wealth 

Do not assume that what is tax-efficient at home will be the same in France. ISAs, for example, are fully taxable in France. 

Your circumstances and goals will change when you relocate too, so you need to take a fresh look at your financial planning to establish if affairs are set up in the most suitable way for your new life in France.

Take professional advice to make sure your investment portfolio is specifically designed around your circumstances today, future goals, income needs and risk profile. An adviser experienced with French taxation can recommend compliant investment arrangements that provide considerable tax advantages in France.

4. Which currency works for you

Many British expatriates tend to favour sterling for savings and investments, but this makes income vulnerable to exchange rate fluctuations. Ideally you should hold some assets in euros to avoid this risk. 

However, you may also want to spend money in the UK, return someday or leave an inheritance to UK residents. Ask your adviser about investment structures that let you diversify currencies or consider transferring UK pensions to arrangements offering currency flexibility. 

5. Your property options 

Research and understand the tax implications before buying and selling property. Are you better off selling UK property while still resident there or waiting until you are living in France? 

Note that there are various ways of owning property in France, with different tax and succession implications, so if you have not bought your French home yet do your research first. 

The most suitable option will depend on your family situation, what you want to happen to the property on death and how you will use it – will you live there full-time, treat it as a holiday home or rent it out? 

6. What to do with UK pensions

Many British expatriates find it beneficial to transfer UK pension funds into a Qualifying Recognised Overseas Pension Scheme (QROPS) to enjoy tax efficiency, flexibility and estate planning advantages over UK pensions. 

Alternatively, you could potentially take out your UK pension fund as a lump sum and pay just 7.5% tax in France under certain circumstances. You could then re-invest the capital into tax-efficient arrangements. 

There is no ‘one size fits all’ solution. With something as important as your pension, it is vital to take regulated professional advice tailored for you and your situation.

See more about your pension options

7. How your legacy will be passed on  

French succession law and inheritance tax work very differently from the UK and can be particularly complicated, especially if you have children from previous relationships or want to leave assets to distant or non-relatives. Succession tax rates can be as high as 60%. 

The ‘forced heirship’ rules in French succession law can automatically pass on up to 75% of your estate to your children, regardless of your intentions. You can nominate the law of your nationality to apply instead, but take care to understand all the pros and cons first.

Ultimately, you need professional advice to make the most of tax planning, pension and wealth management opportunities in France, and ensure you use compliant arrangements that suit your specific circumstances.  

An adviser based in France, who is up-to-date with the intricacies of French taxation and frequent tax reforms, is best placed to assist you, ideally one who has specific cross-border experience with British expatriate. 

Take personalised advice sooner rather than later so you can have peace of mind that your financial affairs are in order and you can relax and enjoy your new life in France.  

Contact us to discuss your plans

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.