Where Are You Better Off Being Tax Resident – The UK Or France?

In our article UK and French Tax Residence Issues we touched on the UK and Fre

In our article UK and French Tax Residence Issues we touched on the UK and French tax residency rules, which leads to the question: where are you better off being resident – in the UK or France? France does have a reputation for being a high tax country, but in our experience, when you understand all the intricacies of the tax rules and do the complicated sums, for many people it makes more economic sense to be tax resident in France rather than in the UK.

The tax savings can sometimes be considerable, even before you employ tax mitigation arrangements.

Wealth tax is often cited as a key reason people do not want to be resident in France. However, when we calculate the potential liability, many clients are surprised to discover that it is lower than expected, and the situation has improved with the new wealth tax rates. In any case, for your first five years of residence you are only liable to wealth tax on your French situated assets, so investment assets set up outside of France escape wealth tax for these five years.

The income tax bands are lower than the UK?s and the parts familiales system – where income tax can be applied on the income of your whole household – often results in a lower tax bill. This can be very effective if one spouse earns much more than the other.

Unfortunately France does also impose social charges. If you are retired however your pension income is exempt from social charges if you hold Form S1 (available if you are over UK state retirement age or, if you retired early, on leaving the UK to cover you for up to 2.5 years).

In some situations your heirs would pay less inheritance taxes if you are resident in France rather than the UK, but this depends on many factors including the number of beneficiaries.

All the above is based on the basic French tax rates and rules. You can usually reduce the tax liability further on your savings, investments, UK pensions and estate by using well established and approved tax planning arrangements in France. In most cases they have the potential to significantly reduce the individual?s tax liability and are worthy of careful consideration.

Just how much tax you would save as a French resident depends on your assets and income, but it is certainly worth investigating. We would be happy to give you personalised advice and guide you through the most effective solutions. It would be a shame if the only reason you did not move to France or spend more time here was because you want to avoid becoming tax resident, or if you think you could not qualify to be resident in France when you would only need to make a few adjustments.

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 must take personalised advice.