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If you’re moving to France, make sure you understand how French income tax, wealth tax, inheritance tax and succession law works, and how you could take advantage of opportunities available for you and your heirs.

Have you been dreaming of living in France? We often come across people who talk wistfully about moving across the Channel, but something is stopping them. Many have to wait till they retire, but for others it may be the fear of French taxation, or just weighing up the pros and cons of making such a big change in their life. And, of course, we have had Brexit uncertainty over recent years.

Political uncertainty in the UK

Interestingly, the political uncertainty in the UK, triggered by the ongoing Brexit discussions, is encouraging some wealthy individuals and families to leave the UK and become tax resident elsewhere. There is speculation that high net worth individuals could be hit by higher taxes if there is a General Election and change of government. 

The Sunday Times and The Economist revealed that UK wealth advisers believe their richer clients are more concerned about the possibility of a Labour Party government than Brexit and many are thinking about leaving the country. The key taxation concerns are that income over £80,000 will be taxed at higher rates; that the inheritance tax regime could be tightened, and the possibility of a wealth tax on assets.  

The outgoing Liberal Democrat leader, Vince Cable, also said at their conference last September that they would tax capital gains from assets at the same rate as employment income and rebalance pensions tax relief away from higher earners.  

Much of this is speculation for now, but long-term residents of France will be only too aware of how their tax burden can rise and fall with different governments. 

Planning to leave the UK

Whatever your reason for wanting to move to France, it may be time to start doing some serious research and putting an action plan in place. 

You need to look at all the various taxes your assets will be exposed to, both on leaving the UK and once you are tax resident in France. This includes income taxes, capital gains tax, investment taxes, personal allowances, inheritance taxes and wealth tax

Then you need to establish where your assets stand in consideration of those taxes, whether you will be comfortable with your tax position in France and, importantly, whether there is anything you can do in advance to improve it.  

You also need to think about timings. What steps should you take before leaving UK (there are some key ones to take in advance) and which should wait until you are resident in France?  

Estate planning for France

With France you need to give estate planning almost as much importance as tax planning. Even if you do not expect to live in France forever, life is unpredictable. If you are resident in France when you die, your heirs will be impacted by French succession law and tax.

French succession law imposes ‘forced heirship’. This means your children are ‘protected heirs’ so you cannot leave your entire estate to your spouse. The European ‘Brussels IV’ succession regulations do allow you to opt for the law of your country of nationality to apply instead of French law (provided you organise this in advance through your will) but take specialist advice first to understand all the pros and cons; it may not be the best option for you.  

If you have not yet bought property, familiarise yourself with French succession law first. 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 and objectives.  

See more about French succession law

Taxation in France

So what key taxes would you face as a French resident? Encouragingly, President Macron has reduced some taxes on wealthier residents. 

French income taxes

Income tax rates currently range from 14% for income over €9,964 to 45% for income over €156,244. An additional 3% or 4% tax is levied on income over €250,000 and €500,000 respectively, with higher thresholds for families.  

Social charges are additionally payable on income, at 9.7% for employment income; 9.1% for pension income 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. 

Since 2018, investment income benefits from a special fixed rate of 30%, which includes both income tax and social charges.   

French wealth tax

This used to apply to the entire wealth of a household but is now only levied on real estate assets. This annual tax affects households with real estate wealth exceeding €1.3 million. The first €800,000 is tax free, then rates range from 0.5% to 1.5%.

French succession tax

French inheritance tax is charged on each beneficiary, with rates and allowances varying considerably according to who the beneficiary is. Inheritances between spouses/PACS partners are tax-free (but not gifts) and children have lower rates and higher allowances than more distant relations.

You need to be particularly careful where stepchildren are involved as their tax-free allowance is very low and the tax rate is generally 60%.  

Download our guide to taxes in France

Overall planning for France

While you probably use tax-efficient vehicles to hold investments and wealth in the UK, these may not be tax-efficient in France. You should review your tax planning and the way you hold your assets. There are arrangements available in France that can prove very advantageous tax-wise, both for yourself and for your heirs. They can also provide succession planning benefits. 

While preparing for French taxation is a major part of relocating here, to create a successful wealth management strategy look at the whole picture, including your estate planning, the options for UK pensions, your savings and investments etc. The way you hold your investments, for example, can make a big difference to how they are taxed and how easily they can be passed to your heirs. 

Planning a tax-efficient move to France involves both French and UK taxation, so talk to a specialist cross-border adviser who is familiar with the interaction between both regimes and regularly advises on effective planning strategies.

Contact us to discuss your plans

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.