There are many people either moving to, or living in France, who have Individual Savings Accounts (ISAs) in the UK and ask us what they should be doing with them. Some people have been saving in them since their inception 10 years ago and have a substantial amount of money saved. As you may well know, as a non resident of the UK, you can no longer add to an ISA, but merely hold it.
As far as the UK is concerned it is tax free, however, the French fiscal authorities do not see it that way and will tax it for what it is, thus if it is a deposit based ISA, it will be taxed as interest in the same way as any other bank account.
The overall effect is that the common deposit ISA is not generally tax efficient for residents of France. This is especially the case when we consider that there are tax efficient ways of investing in France. The question is, how significant is the difference?
The only way to illustrate this clearly is to look at the position of a typical couple:
A married couple with pension income from the UK; one with a pension of €16,000 and the other a pension of €14,000.
The income tax bill for this couple amounts to just over €1,150 for the year, at 2008 rates. However, if we assume income from their UK bank is paying interest of €10,000 per year, the tax situation changes. The interest results in an income tax bill more than double, to just over €2,550 for the year, leaving them an extra €1,400 to pay.
This demonstrates that investment income can make a significant difference to your income tax bill.
However, if we look at what the liability would be had the money been invested in a compliant “assurance vie”, for example, the difference is significant:
The same couple drawing €10,000 from a tax efficient investment in France would have an average tax bill over 10 years of €104.94, somewhat less than the €1,400 extra tax caused by bank interest. Even if we add in the social charges (which, of course, you would pay on the interest from your UK ISA or bank account), bringing the 10 year average total to €252.11, the bill is still dramatically less.
Thus as residents of France we have a choice; we can ensure that our investment income results in as little tax as possible, or continue maintaining UK ISAs and bank accounts, paying tax in France at our highest marginal rate, paying, as in this case, over 13 times more tax than is necessary!
Some people have been saving in them since their inception 10 years ago and have a substantial amount of money saved. As you may well know, as a non resident of the UK, you can no longer add to an ISA, but merely hold it.
As far as the UK is concerned it is tax free, however, the French fiscal authorities do not see it that way and will tax it for what it is, thus if it is a deposit based ISA, it will be taxed as interest in the same way as any other bank account.
The overall effect is that the common deposit ISA is not generally tax efficient for residents of France. This is especially the case when we consider that there are tax efficient ways of investing in France. The question is, how significant is the difference?
The only way to illustrate this clearly is to look at the position of a typical couple:
A married couple with pension income from the UK; one with a pension of €16,000 and the other a pension of €14,000.
The income tax bill for this couple amounts to just over €1,150 for the year, at 2008 rates. However, if we assume income from their UK bank is paying interest of €10,000 per year, the tax situation changes. The interest results in an income tax bill more than double, to just over €2,550 for the year, leaving them an extra €1,400 to pay.
This demonstrates that investment income can make a significant difference to your income tax bill.
However, if we look at what the liability would be had the money been invested in a compliant “assurance vie”, for example, the difference is significant:
The same couple drawing €10,000 from a tax efficient investment in France would have an average tax bill over 10 years of €104.94, somewhat less than the €1,400 extra tax caused by bank interest. Even if we add in the social charges (which, of course, you would pay on the interest from your UK ISA or bank account), bringing the 10 year average total to €252.11, the bill is still dramatically less.
Thus as residents of France we have a choice; we can ensure that our investment income results in as little tax as possible, or continue maintaining UK ISAs and bank accounts, paying tax in France at our highest marginal rate, paying, as in this case, over 13 times more tax than is necessary!
Robert Kent< ><-->
