Thinking about making the move to France? While the promise of sunshine, relaxed living, and delicious food is tempting, it’s essential to understand how the tax systems differ from what you’re used to in the UK. Whether you’re retiring, working, or setting up a business, here’s a breakdown of the key taxes you’ll encounter in France compared to the UK.
1. Income Tax (Impôt sur le Revenu)
France:
Income tax in France is based on a progressive system with multiple tax bands. However, one notable difference is that France applies its tax rates to households, not individuals. Your household income is divided by the number of family members (using a “parts” system), which can lower your overall tax liability if you have children or dependents.
UK:
In the UK, income tax is applied to individual earnings with tax-free personal allowances available. The UK system has fewer tax bands compared to France, making it simpler to calculate.
✅ Key Difference: Families often benefit from lower taxation in France due to the “parts” system, while singles or couples without children may pay more.
2. Social Charges (Prélèvements Sociaux)
France:
In addition to income tax, France applies social charges (up to around 17.2%) on investment income, pensions, and rental income. These contributions help fund the country’s extensive healthcare and welfare system.
UK:
In the UK, the equivalent would be National Insurance Contributions (NICs), but these are generally only paid on earned income, not on pensions or investments.
✅ Key Difference: If you have investment income or a private pension, expect to pay higher social charges in France than in the UK.
3. Property Tax (Taxe Foncière & Taxe d’Habitation)
France:
Homeowners in France pay Taxe Foncière, an annual property tax, and until recently, Taxe d’Habitation applied to all residents, though it has been phased out for most primary residences. Taxe Foncière varies depending on the size, location, and condition of the property.
UK:
In the UK, homeowners pay Council Tax, which is calculated based on property value bands from 1991. Unlike France, the UK doesn’t charge a separate property ownership tax.
✅ Key Difference: France’s system can be more expensive, especially for second-home owners, while UK council tax is generally simpler.
4. Capital Gains Tax (Impôt sur la Plus-Value)
France:
If you sell a property or other assets in France, capital gains tax applies at a rate of 19%, plus social charges. However, generous allowances and exemptions apply the longer you own the property. After 22 years, your liability for the capital gains tax disappears, and after 30 years you’re free from social charges.
UK:
In the UK, capital gains tax on property is charged at 18% or 28% for residential properties, with a lower rate on other assets. However, primary residences are exempt.
✅ Key Difference: France’s system is favourable for long-term property owners, while UK rules offer exemptions for your main home.
5. Inheritance Tax (Droits de Succession)
France:
Inheritance tax in France can be complex, with rates depending on your relationship to the deceased. Children and spouses generally pay less, while distant relatives and non-family members face higher rates. France also enforces forced heirship laws, which dictate how an estate is divided.
UK:
In the UK, inheritance tax is 40% on estates above a certain threshold, but spouses and charities are typically exempt. Unlike France, the UK gives more freedom on how estates are distributed.
✅ Key Difference: Estate planning is crucial in France due to the forced heirship laws and varying tax rates.
6. VAT (TVA)
France:
France applies a 20% Value Added Tax (TVA) on most goods and services, with reduced rates of 5.5% or 10%on essentials like food and public transport.
UK:
In the UK, VAT is currently 20%, with reduced rates on certain products and services. However, Brexit has resulted in some changes when trading between the UK and EU.
✅ Key Difference: Both countries have similar VAT rates, but cross-border shopping may involve additional customs charges post-Brexit.
7. Wealth Tax (Impôt sur la Fortune Immobilière - IFI)
France:
France has a wealth tax on real estate called the IFI, applied to properties worth over €1.3 million. It’s a tax that targets wealthier homeowners.
UK:
The UK does not have a wealth tax, although discussions on its introduction have been raised from time to time.
✅ Key Difference: Wealthier individuals may face additional taxation on property in France.
Final Thoughts
Moving to France comes with its financial considerations, but the country offers a high standard of living, excellent healthcare, and a relaxed pace of life. While some taxes may be higher, particularly social charges and property taxes, there are often more deductions and allowances available than in the UK.
Before making the move, it’s worth consulting with a financial advisor to navigate the differences in the tax systems and ensure you’re making the most of any benefits. Whether you’re retiring to a cottage in the Dordogne or setting up a new business in Brittany, knowing what to expect will help you settle in smoothly.
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