So, you’re dissatisfied with the Great British climate/immigration policy/government/economy/cost of living/way of life (delete as applicable…) are you? And you’ve decided that you want to live in France where the weather is better, the lifestyle is more attractive, the cost of living is incredibly affordable and where, if you learn to speak French, you will be made to feel at home.
Fine. You have clearly covered at least the basics when considering both leaving the UK and where you want to move to – but what about the financial aspects of living in France? For example, tax matters when living in France because it is actually one of the highest taxed countries in the EU. So, if you thought the UK was bad, take another look at France before you commit to a relocation!
Even since Sarkozy came to power and brought with him a significant swathe of tax reforms, tax is tough on British expatriates living and working in France. The top rate of tax is 49.8% for example, and there are seven tax bands to work through to determine how much you owe the French authorities. In the UK the top rate is 40% and with fewer tax bands this can make determining that which you owe each year a bit simpler.
Another thing to think about when moving to France is that once you’re resident you’re liable to pay French tax on your worldwide income and gains. This is not even the case for non-domiciled individuals who come to the UK to reside – they can get away with retaining a certain level of tax free income if they keep assets, income and gains outside of the UK. So, once you’ve been in France over the 183 day threshold and you become liable for French tax, you have to declare everything – even if you’ve retired to France and are receiving a pension into your UK bank account.
There is a double taxation agreement in place between the UK and France though – so if you’ve already paid tax on any income or gains in the UK, you can offset this payment against any French liability. This stops you having to pay tax twice.
French inheritance tax is something else you have to think about. If you were born in the UK to parents of British origin you will be domiciled in the UK. The nation in which you are domiciled has significant bearing on the inheritance tax due from your estate upon death and to whom it will be paid. You tend to ‘inherit’ your domicile from your father and ultimately your domicile relates to where your father was born and raised. So, even if you have been living in France for decades, if you are considered to be of British domicile you will be liable for British inheritance tax. Whilst it is simply a case of moving nations and of spending a certain number of days in a given country to become resident there, it is nigh on impossible to change your country of domicile.
So, assuming you’re living, working or have retired to France from the UK, upon your death your estate will become liable for UK inheritance tax. However, you still need to be very aware of the French system for inheritance as the laws of succession in France differ significantly from those in the UK. You have to speak to a lawyer in France and one in the UK and make sure your affairs are in order and wills are in place that are legally binding in each nation and which ensure your personal wishes are adhered to upon your death.
There are some benefits of signing up to the French tax system though – if you’re resident in France full time and you work and contribute to the French tax system with income tax, it’s highly likely that you will benefit from the new 20% tax relief on mortgage payments. If the mortgage is being paid on a home that is your primary residence you may be eligible for this 20% tax saving up to a threshold of EUR 7,500 annually. Furthermore, if you’re working or you’re officially retired and over the official French retirement age, you can benefit from the French health system as a result of the taxes you’re now paying or have paid during your working life.
So, even if you are wholly dissatisfied with life in the UK, the grass isn’t always completely greener elsewhere. That doesn’t mean you shouldn’t expatriate to go and live abroad – it just means you should look at the bigger picture and examine all aspects of a given nation before you move there so that there are no nasty surprises in store for you, and so that you have a realistic idea of what your life will be like abroad.
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