Over the years, but particularly since Brexit, we have met a number of people who are prepared to bend all sorts of rules in order to avoid becoming French resident. Even though, in reality, they would prefer to spend most of their time in France, or at least to have the flexibility to spend more than three months at a time when balancing time spent in the UK and in France.
Fear of the unknown is undoubtedly a factor, augmented by fear of what one thinks one knows. Let us just say there are numerous clichés about France, some of which are true. Many, however, are not, and others, whilst partially true, are vastly blown out of proportion, in the eyes of some.
So, for those sitting on the fence, particularly those perhaps holding priors (aka, preconceived conceptions) let us explore why you may wish to become a French resident.
Increased Flexibility of Movement Between the UK and France
We will start with one purely practical reason for changing tax residency. You are no doubt aware that, as a UK resident, stays in France (without a visa) are limited to a mere 3 months. This rule has made matters much more problematic for second home owners in France, who before Brexit could come and go as they so pleased.
But did you know that, as a French resident, a UK citizen can spend up to six months in the UK; continuously, should they so wish. This is because the rolling three-month rule is a rule of the EU Schengen area, whereas the UK allows non-residents to remain for up to 6 months. This increased flexibility could make life much simpler for those with properties in both countries.
Potential Tax Benefits
Coming back to those preconceived ideas I mentioned earlier; perhaps the biggest one is that France is a high tax country. Overall, I would suggest this comes into the category of being partially true, but very often over-exaggerated.
In short, work carries a heavy tax burden for companies and the self-employed in France; however, for individuals, tax on capital can be moderate to low. This means the tax burden will very much depend on your personal circumstances.
Most married couples pay less income tax in France than in the UK. This is not an opinion, but a statement of fact! This is because income is spread evenly between the household, meaning both spouses can fully benefit from tax allowances. If there are children still living at home, there are additional allowances for the household.
A French tax that has historically attracted a lot of negative press is wealth tax. Well, did you know that wealth tax no longer exists in France – In 2018 it was replaced by a property wealth tax, for those with property assets over €1.300.000. This greatly reduces the number of people liable, particularly as one’s main home benefits from a 30% allowance.
There remain two other taxes we have not covered, but should you be concerned? I would suggest not, and this is why.
- Capital gains tax: Excluding property, when selling assets there are perfectly legal ways to pay no capital gains tax at all. Where CGT must be paid, the maximum rate is currently 30%.
- Inheritance Tax: This can be more complicated and must always be considered on a case-by-case basis, as matters very much depend on personal circumstances, including the makeup of the family unit. Nevertheless, there are perfectly legal ways to get around strict inheritance laws in France. Furthermore, inheritance tax can potentially be reduced from 60% to 20%, after generous tax-free allowances.
Thus, having considered tax concerns, we can conclude that, depending on your specific situation, there is every chance you may actually be taxed less in France than in the UK! To find out, before moving to France, exactly what your tax position would look like as a French resident, a tax and investment consultant should be able to provide you with a comprehensive breakdown, giving you the information you need in order to make an informed decision regarding your future residence.
One thing to watch is that as a French resident, you will almost certainly pay more tax if you leave savings and investments in the UK. It is important to be aware of all the tax efficient savings vehicles in France, ideally before you leave the UK, as these can help to generate significant tax savings.
As far as pensions are concerned, in certain cases, but by no means all, it can be beneficial to cash in UK pensions in full. However, it is important to note that QROPS are not recognised as qualifying pensions in France.
Access to a Leading Health Care System
Finally, when considering residency, one can be reassured by the fact that France has one of the best health systems in the world. By right, it is open to all residents. Retirees holding an S1 will have their cover paid for by the UK. Early retirees generally pay much less than expected.
Should you become a French resident then?
The process for becoming French resident has become slightly more bureaucratic since Brexit, as one now needs to apply for a long-term visa before leaving the UK, but otherwise very little has changed for the British living in France.
Any move to a foreign country will require a certain amount of preparation, ensuring peace of mind, so there is no time like the present to start setting the wheels in motion.
With both one’s health and one’s finances in a good place, France allows for an all-encompassing, unrivalled, quality of life!
This article was first published in the Connexion September 2022