Are you thinking of packing up and moving to France permanently? If so, you have an exciting time ahead of you! However, amidst all of the property hunting, there are a few financial matters to consider.
In their recent webinar, the team at Your Overseas Home asked the experts some pertinent questions about tax, pensions and so on to take note of ahead of your move to France.
Your financial advisor
It’s worth speaking to a financial advisor before, during and after your move to France to ensure that your money is in order. Before you make the move to France, you can use a financial advisor from the UK.
However, once you move, you must use a financial advisor who’s registered in the country you are residing in. The result of Brexit is that UK financial advisors cannot give advice to EU domiciled clients.
An overseas pension is likely to be more favourable than keeping your UK pension – there are generic ‘European’ pension options. However, if you move to France, your state pension will continue to grow as if it’s still in the UK. This was agreed as part of the Withdrawal Agreement.
If you have a SIPP (Self-Invested Personal Pensions) in the UK, you will not be able to contribute to this once you become non-resident in the UK.
Working for a UK employer in France
Currently, if you work for a British employer in France, you need to either: be travelling back to the UK to carry out work, set yourself up on the French payroll system or work as self-employed and bill the company for your hours.
If you are working from home in France, you could be seen to have set up an ‘establishment’. So, if you’re generating profits from that establishment, they could arguably be taxed in France. This is a tricky area to navigate in terms of tax, so it’s wise to ensure that you do everything by the book.
There is a double taxation agreement between the UK and France. This means that, in most cases, you will receive tax credits, so you don’t pay double. This is still applicable after Brexit. Under this agreement, there are certain incomes that remain taxable only in the UK.
Will you pay capital gains tax on your UK property if you’ve bought a property in France? If you put your main property of residence up for sale in the UK prior to moving, and it then sells within a year or 18 months after your move to France, then you will not pay capital gains tax on it in France.
However, if that period extends longer than a year or 18 months, or if you rented that property out in the UK and it wasn’t your main residence, the property won’t be exempt from capital gains tax.
If you live in France and rent out a property in the UK, your income is covered by the double tax treaty. Providing that you have no other French taxable income, you won’t pay any tax on your rental income in France, just the ordinary UK tax.
If you have some other income that is taxed in France, your rental income will be included in the computation of your taxable income.
Keeping your UK bank account
You can keep your UK bank account, but you will have to declare it to the tax authorities in France as an offshore account. Regarding investments, you could keep your saving accounts in the UK, however they will no longer be tax efficient. For example, UK ISAs will no longer be tax efficient when you go to France.
It is, therefore, wise to seek advice from a local financial advisor (in France) to discuss what investments you have and the tax implications going forward. France have an ISA equivalent, so your advisor can help you set this up.
Spouses or civil partners don’t pay inheritance tax, so it is possible to leave your inheritance to them. However, in France, children are priority heirs (not spouses) - this is different to the UK so it’s important to be aware of this.
In France, the more distant the family relation, the higher the tax rate. If you choose to leave the property to someone outside of your family or a distant relation, it’s likely that you will be hit by a 60% inheritance tax.
If a family member passes away in the UK whilst you are in France and you are due to receive an inheritance from them, all inheritance tax is paid in the UK.
How to make a safe international payment
If you’re looking to buy a home in France and/or expecting to receive regular payments from abroad, such as your pension, it’s important to remember that transferring large sums of money overseas comes with an element of risk. The currency markets can be unpredictable at best, so protecting your property buying budget from currency fluctuations is crucial.
The economic aftershock of the coronavirus crisis will continue for quite some time. If you’re looking to buy this year, or over the coming few years, you need to plan how you’re going to send your money safely. Learn more about how to buy safely in this volatile time in the Property Buyer’s Guide to Currency.
For more information from the experts on financial matters when moving to France, sign up to watch Your Overseas Home’s ‘Your move, your money’ webinar.