Blevins Franks Financial News - France 2023 Budget and Tax Update

By Rob Kay, Senior Partner, Blevins Franks

The French government published its 2023 projet de loi de finances on 26 September.  This  now has to pass through the usual parliamentary process before being finalised and approved at the end of the year.

Unsurprisingly, the budget’s main purpose is to help protect households and businesses from inflation. During the press conference, Finance Minister Bruno Le Maire said that “no new spending” will be approved unless it has “been budgeted to the nearest euro”.  He added that the economy was “holding up”, but the state’s absolute priority was to bring down inflationary pressures.

The finance bill therefore includes a €45 billion package to help households and companies with energy prices increases, including capping gas and electricity bills at 15% in early 2023.

2023 taxation

Considering the current local and international economic context, this budget does not carry any significant reform. Income tax bands will increase – thereby reducing tax liabilities – and there are no tax rises.

Income tax

The income tax bands will increase by 5.4%, to match inflation. 

The income tax rate bands and scale rates for 2022 income are:

Up to €10,777 – nil

€10,778 to €27,748 – 11%

€27,749 to €78,570 – 30%

€78,570 to €168,994 – 41%

Over €168,994 – 45%

This means that employees who received a pay rise because of inflation are much less likely to be hit by a higher tax rate.  Those whose income has not changed will now benefit by paying less tax on it.

Note that these new tax brackets apply to your 2022 income (as declared in the tax return you submit in spring 2023).

The budget also facilitates the lowering of income tax withholding at source if the taxpayer’s income decreases, as well as simplifying the collection of taxes for foreign employers who have employees who are French tax residents and regularly work from home.

Taxe d’habitation and TV licence reform

The taxe d’habitation reform which began a few years ago reaches its conclusion in 2023, with the complete suppression for the remaining 20% of households who were still paying it.  

This budget also confirms the removal of the TV licence (contribution a l’audiovisuel public) implemented in the August 2022 revised budget.

Succession taxes reform

During his presidential campaign, Emmanuel Macron promised to reform and diminish succession taxes by increasing the tax-free deduction for inheritances between parents and children from €100,000 to €150,000, and by lowering the taxes for other relatives such as stepchildren.

However, given the current economic context, the government does not support this reform at the present time. It could still be voted on by Parliament further to a MP amendment, but this is uncertain.

Social charges

The budget maintains social charges at the same rates as 2022:

Employment income – 9.7%

Pension income – 9.1%

Investment income – 17.2%

The special lower rates also remain in place:

Pensions – Social charges on pensions are reduced to 7.4% for those whose taxable income is less than approximately €2,000 a month (€3,000 for a couple). If you have Form S1, and/or are not subject to the French health care system, you do not need to pay any social charges your pension income, regardless of the amount you receive.

Investment income – If you are covered under the health care system of another EU/EEA country, or if you have Form S1, social charges are reduced from 17.2% to 7.5% for investment and property income. Earlier this year the French government confirmed this continues to apply to UK residents and to UK nationals living in France.

Real estate wealth tax (IFI)

The current threshold of €1,300,000 will stay in place for 2023 and no changes are proposed to the scale rates of wealth tax.

Assurance-vie

The budget does not include any changes to the taxation of Assurance-vie policies.

The savings and investment ‘wrappers’ remain very attractive from both a tax and succession planning point of view.

The finance bill is now being debated by parliament and will be approved by the end of the year.  There may be changes as it goes through the process.

Please do not hesitate to get it in touch with our advisers if you need any clarification or feel it is time to review your tax planning to ensure it is up to date and as effective as it could be.

Tax rates, scope and reliefs may change. Any statements concerning taxation are based upon our understanding of current taxation laws and practices which are subject to change. Tax information has been summarised; individuals should seek personalised advice.

Blevins Franks Group is represented in France by the following companies:  Blevins Franks Wealth Management Limited (BFWML) and Blevins Franks France SASU (BFF). BFWML is authorised and regulated by the Malta Financial Services Authority, registered number C 92917. Authorised to conduct investment services under the Investment Services Act and authorised to carry out insurance intermediary activities under the Insurance Distribution Act. Where advice is provided outside of Malta via the Insurance Distribution Directive or the Markets in Financial Instruments Directive II, the applicable regulatory system differs in some respects from that of Malta. BFWML also provides taxation advice; its tax advisers are fully qualified tax specialists.  Blevins Franks France SASU (BFF), is registered with ORIAS, registered number 07 027 475, and authorised as ‘Conseil en Investissements Financiers’ and ‘Courtiers d’Assurance’ Category B (register can be consulted on www.orias.fr). Member of ANACOFI-CIF. BFF’s registered office: 1 rue Pablo Neruda, 33140 Villenave d’Ornon – RCS BX 498 800 465 APE 6622Z.  Garantie Financière et Assurance de Responsabilité Civile Professionnelle conformes aux articles L 541-3 du Code Monétaire et Financier and L512-6 and 512-7 du Code des Assurances (assureur MMA). Blevins Franks Trustees Limited is authorised and regulated by the Malta Financial Services Authority for the administration of retirement schemes. This promotion has been approved and issued by BFWML. 

You can find other financial advisory articles by visiting our website here

Blevins Franks Financial Tips - The Multi-Manager Investment Approach – Specialists vs Generalists

Multi-manager investment enables your portfolio to be managed by several different fund managers, each selected for their expertise in specific market sectors. This ‘open architecture’ approach reduces your reliance on any one investment manager making the right decisions in all conditions, and provides the opportunity to have some of the world’s best mangers looking after your money.

By Rob Kay, Senior Partner, Blevins Franks
Did you see the athletics at the Commonwealth Games in Birmingham this summer? Or at the World or European Championships? And of course we had the Tokyo Olympics last year. It was great to see British success emerging with the likes of Jake Wightman, Keely Hodgkinson, Laura Muir and Eilish McColgan, but interestingly, there are some aspects of what you may have seen that are directly relevant to investing.

Specialists vs generalists – a sporting analogy

A useful way to explain the benefits of a multi-manager investment approach is to compare the difference in performance between a decathlon champion and the individual champion in each event. 

You may have watched the athletics at the Commonwealth Games or European Championships and marvelled at the decathletes’ abilities. They have to be skilled at 10 different disciplines, quite a Herculean task – speed for sprinting, stamina for distance, strength for the field events and technique for events like the pole vault. 

But while the decathlon champion is obviously an all-round athlete performing at an extremely high standard across ten different disciplines, they are frequently beaten by specialists in each of the individual events.

Let’s compare the performance of the decathlon gold medallist at the 2020 Tokyo Olympics (held in 2021) against the individual gold medallists in some of the individual disciplines.

The decathlon champion Damian Warner ran the 100m in 10.12 seconds.  Lamont Marcell Jacobs took just 9.80 seconds in the individual event. The results of the other nine disciplines tell the same story.  For example, Warner threw the javelin 63.44m, while the individual event gold medallist achieved 87.58m.  Warner reached a height of 4.90m in the pole vault compared to the individual champion’s 6.02m.  The specialist performed better than the generalist every time. 

You would not expect a sprinter like Lamont Marcell Jacobs or Usain Bolt to also specialise in pole vault or javelin; specialists tend to be just that – specialists.  There are many situations in life where a specialist performs more efficiently and delivers better results than a generalist, and this is particularly true in investments.

Just because an investment manager is skilled at managing UK equities, for example, does not mean he will be as successful at managing US or Japanese equities.  Managers also tend to specialise in a certain style of investing, and these styles move in and out of favour according to economic and other factors.  They will therefore produce impressive results in certain conditions, but below average ones in others.

Some investors rely on just one or two fund managers to look after their investment capital. But wouldn’t you prefer to have individual specialists managing the various areas of the market your capital is invested in?

Multi-manager investing

Today most investors agree that holding different asset classes and different regions and sectors in their portfolio spreads risk.  Multi-manager funds add a third, and increasingly important, level of diversification to your portfolio. 

You will benefit from a team of specialist managers, as well as diversification across multiple investment styles within each fund, with different managers looking after one style. So one fund could have five or more specialist managers, covering a variety of styles (growth, value, quality, risk management, market oriented etc).

This complementary blending of managers and styles can reduce investment risk, regardless of what style is in favour, and help provide more consistent returns through different market environments.

Just like a strained muscle would hamper the decathlete in all his events, if prevailing market conditions are unfavourable to a single manager’s investment approach, performance may suffer.  Multi-manager spreads risk as it lowers the investor’s dependence on the success of a single manager’s approach.  

Going back to the sporting analogy, in the world of athletics individual champions can easily change from year to year.  The same can happen with investment managers, but the multi-manager firm’s research is designed to find the next champions.  They constantly monitor their funds, so that managers can be changed as and when necessary to improve performance for clients.

Multi-manager investing is not designed to attempt to win a gold medal in just one particular season.  Rather, it aims to produce consistent results, season by season, over a long-term period. 

This investment approach can prove suitable for various investors with different needs.  However, you should always discuss your requirements with a professional financial adviser, as your investment strategy should be targeted to meet your personal objectives.  At Blevins Franks, we combine investment advice with effective tax and estate planning strategies, to maximise wealth preservation opportunities.

These views are put forward for consideration purposes only as the suitability of any investment is dependent on the investment objectives, time horizon and attitude to risk of the investor. The value of investments can fall as well as rise, as can the income arising from them. Past performance should not be seen as an indication of future performance.

Blevins Franks Group is represented in France by the following companies:  Blevins Franks Wealth Management Limited (BFWML) and Blevins Franks France SASU (BFF). BFWML is authorised and regulated by the Malta Financial Services Authority, registered number C 92917. Authorised to conduct investment services under the Investment Services Act and authorised to carry out insurance intermediary activities under the Insurance Distribution Act. Where advice is provided outside of Malta via the Insurance Distribution Directive or the Markets in Financial Instruments Directive II, the applicable regulatory system differs in some respects from that of Malta. BFWML also provides taxation advice; its tax advisers are fully qualified tax specialists.  Blevins Franks France SASU (BFF), is registered with ORIAS, registered number 07 027 475, and authorised as ‘Conseil en Investissements Financiers’ and ‘Courtiers d’Assurance’ Category B (register can be consulted on www.orias.fr). Member of ANACOFI-CIF. BFF’s registered office: 1 rue Pablo Neruda, 33140 Villenave d’Ornon – RCS BX 498 800 465 APE 6622Z.  Garantie Financière et Assurance de Responsabilité Civile Professionnelle conformes aux articles L 541-3 du Code Monétaire et Financier and L512-6 and 512-7 du Code des Assurances (assureur MMA). Blevins Franks Trustees Limited is authorised and regulated by the Malta Financial Services Authority for the administration of retirement schemes. This promotion has been approved and issued by BFWML. 

 You can find other financial advisory articles by visiting our website here

Blevins Frank Financial Tips - Inflation Concerns Today and Planning for the Future

Inflation is causing concern in across the EU and in the UK. It has been climbing steadily since last summer, hitting over 8% in the Euro area in June and July and expected to climb to 13% in the UK. Even low levels impact your spending power over time, so take steps now to protect your savings and retirement income for your long-term future.

Inflation has been a major news story this year, but we don’t need to read news reports to know the cost of living is going up, we’re only too aware with our weekly shops and electricity bills.

This follows 10 years of benign, easy to ignore inflation, but in fact we were not immune from it then. It is always there, slowly eroding the spending power of the Euro in our pocket and we should always be vigilant about how it impacts our financial security through retirement.

Although this inflation surge is lasting considerably longer than first anticipated, and is likely to get worse before it gets better, it is not still not expected to be long-term. But hopefully people will view it as an eye opener and take this long-term threat more seriously now.  We cannot predict what inflation will be in ten or twenty-years’ time, but we do know that even low levels can seriously reduce your spending power over time if your money does not grow at the same rate.

The Eurozone

The Harmonised Index of Consumer Prices (HICP) was 2.2% in July 2021. This July it hit 8.9%, another record for the single currency.

French consumer prices, as measured by the local Consumer Price Index (CPI) reached 6.1% in July, up from June’s 5.8%.  The acceleration of service prices linked to the summer period has contributed to the increase, as have food prices. Energy prices, however, slowed.

The UK
In the UK, the Consumer Price Index reached 10.1% in July, up from 9.4% the previous month. The July figure was the highest annual CPI inflation rate in the National Statistic series, which began in January 1997. Rising food prices made the largest upward contribution.

Will inflation remain high?

When prices began rising last summer, that was largely caused by the ‘base effect’ (inflation the previous year had been unusually low in the pandemic) and supply difficulties as economies exited from lockdowns. However, the crisis in Ukraine then exacerbated the issues, particularly with energy prices escalating though uncertainty about supply chains has also pushed prices up.

In July, the European Commission revised its Eurozone 2022 inflation forecast upwards, from 6.1% for the year to 7.6% – peaking at 8.4% in the third quarter. It will then ease to 4% for 2023 as a whole, falling below 3% in the last three months of the year.

Its Summer Economic Forecast explains:

“Russia's invasion of Ukraine has put additional upward pressures on energy and food commodity prices. These are feeding global inflationary pressures, eroding the purchasing power of households and triggering a faster monetary policy response than previously assumed.”

In the UK, the Bank of England has issued bleaker forecasts. On 4 August it warned that it now predicts inflation to hit 13% in the last quarter of the year, and that it will “remain at very elevated levels throughout much of 2023, before falling to the 2% target two years ahead”.

In response to inflation, the Bank of England has raised its interest rate six consecutive times since December 2021. At its latest Monetary Policy Meeting on 3 August, the committee voted 8-1 to increase the bank rate by 0.5 percentage points, to 1.75%. This is the highest since December 2008 – but still a long way below inflation.  

Inflation and your savings and retirement income

No-one is immune from inflation.  We all need to plan to protect our savings and future income from the rising cost of living. Making sure your money lasts as long as we do should be an integral part of our financial planning for retirement.

If you’re retiring now at age 60, you need to plan for over 30 years of retirement. Unless your savings grow each year, they will buy you considerably less as the years go by.  

As a basic illustration, if you have €50,000 in a current account with no growth, and inflation is 3% every year, after 10 years its value will have fallen to around €37,000. After 20 years it’s around €27,500 and after 30 just €20,555.  That’s a 59% reduction in purchasing power.

 You therefore need to invest in assets that can be expected to produce enough growth to at least keep up with inflation.  As we know from the last decade, bank interest rates cannot be expected to do this – in fact, many savers have been earning negative real rates of return.

While you may become more averse to investment risk in retirement, remember that inflation is also a big risk to your savings. You can reduce investment risk to comfortable levels by obtaining an objective calculation of your attitude to risk, then building a suitable well-diversified portfolio around your risk tolerance, time horizon, circumstances and objectives.

Holding your investment portfolio within an arrangement that is tax efficient in your country of residence helps protect your capital from unnecessary taxation as well as inflation. Review your financial planning annually to have peace of mind about your future, then get back to enjoying your retirement years.

HICP/CPI inflation data is at 25 August 2022.
By Rob Kay, Senior Partner, Blevins Franks

Blevins Franks Group is represented in France by the following companies:  Blevins Franks Wealth Management Limited (BFWML) and Blevins Franks France SASU (BFF). BFWML is authorised and regulated by the Malta Financial Services Authority, registered number C 92917. Authorised to conduct investment services under the Investment Services Act and authorised to carry out insurance intermediary activities under the Insurance Distribution Act. Where advice is provided outside of Malta via the Insurance Distribution Directive or the Markets in Financial Instruments Directive II, the applicable regulatory system differs in some respects from that of Malta. BFWML also provides taxation advice; its tax advisers are fully qualified tax specialists.  Blevins Franks France SASU (BFF), is registered with ORIAS, registered number 07 027 475, and authorised as ‘Conseil en Investissements Financiers’ and ‘Courtiers d’Assurance’ Category B (register can be consulted on www.orias.fr). Member of ANACOFI-CIF. BFF’s registered office: 1 rue Pablo Neruda, 33140 Villenave d’Ornon – RCS BX 498 800 465 APE 6622Z.  Garantie Financière et Assurance de Responsabilité Civile Professionnelle conformes aux articles L 541-3 du Code Monétaire et Financier and L512-6 and 512-7 du Code des Assurances (assureur MMA). Blevins Franks Trustees Limited is authorised and regulated by the Malta Financial Services Authority for the administration of retirement schemes. This promotion has been approved and issued by BFWML. 

You can find other financial advisory articles by visiting our website here

Blevins Franks Financial Tips - French Social Charges – What You Need to Know in 2022

By Rob Kay, Senior Partner, Blevins Franks

France imposes social charges in addition to income tax. If you hold form S1, however, you don’t need to pay them on your UK pension income and now the French tax authorities have confirmed that the favourable 7.5% rate on investment income and capital gains continues to apply to UK nationals post Brexit.  

Newcomers to France soon learn that income is subject to two forms of tax here – income tax and social charges.  Non-residents may also have to pay this tax, for example if they rent out French property or make capital gains on the sale of local real estate.   

Like other French taxes, the rules and rates often change over the years, sometimes for the better, sometimes for the worse.   A significant change last year, however, came about because of Brexit, rather than through French reform.

Since 2019, social charges on some types of investment income, including income and gains from property, have been applied, under certain conditions, at 7.5% instead of 17.2%.  However, because this generally only applied to individuals covered by the healthcare system of EU/EEA countries, it was unclear whether UK nationals would continue to benefit from this reduced rate from January 2021.  The good news now, however, is that the French tax authorities have confirmed that this treatment continues to apply to UK nationals under the terms of the Brexit Withdrawal Agreement, even post Brexit.   You’ll find more information on this below.

What are social charges?

Social charges (also called ‘social contributions’) are levied on most forms of income in France, in addition to income tax.  They are called ‘social’ charges (prélèvement social) because the money is used to finance the French social security. They do not, however, provide health benefits and should not be confused with social security contributions (which are also payable on employment income).

Social charges are actually made up of four elements, with the rates varying according to the type of income.  The rates for 2022 are:

Are UK pensions liable to social charges?

Social charges on pension income are only payable if you are subject to the French health care system (you are either paying cotisations sociales or PUMA contributions).  If you are not, and/or you have Form S1, you escape social charges on pension income as well as on pension lump sums on the basis that you the UK pays for your healthcare in France. 

Otherwise, if your pension income is less than €2,000 per month (€3,000 for a couple), you will pay 7.4% instead of 9.7%.

Reduced 7.5% rate for property and investment income

Since 2019, individuals covered under the health care system of another EU or EEA country are no longer subject to the CSG or CRDS charges on their investment income or capital gains.   This means only just pay the Prélèvement de Solidarité at 7.5% - a tax saving of 9.7%.

Last year, the authorities took the view that  UK residents or individuals holding Form S1 no longer benefited from this reduction since, as a non-EU state, the UK is no longer subject to its social security laws. This year, however, they reanalysed the Brexit Withdrawal Agreement and the law on social charges and came to a more favourable interpretation – and officially confirmed that UK nationals continue to be exempt from CSG & CRDS social charges on investment income.  This is backdated to 1 January 2021, so those who paid the full rate last year can claim a refund.

You can therefore benefit from this 7.5% social charges rate on investment income if you meet these conditions:

·      You live in France and hold Form S1 and/or are covered by the health system of another EU or EEA country or affiliated to the UK social security system; or

·      You are a UK resident (or reside in an EU/EEA country outside France) and earn French source income or gains (eg, from a French property).

If you are eligible, this 7.5% social charges rate applies to:

·      Capital gains made on the sale of property

·      Rental income

·      Investment income – interest, dividends, capital gains made on the disposal of securities like shares, withdrawals from assurance-vie etc.

Note that the 30% flat tax charged on investment income since January 2018 – the Prélèvement Forfaitaire Unique (PFU) – already includes social charges at the standard rate of 17.2%. Therefore, if you qualify for the reduced rate, you will pay 20.3% in total.

How are social charges paid?

Social charges are paid in arrears and usually calculated on the income declared in your income tax return.  Each autumn you receive a notification of the amount you owe for the previous year’s income. 

For certain types of income/gain (assurance-vie under special rates, real estate capital gains, dividend/interest advance payment etc.), the charges are paid by the 15th of the following month.

Tax planning

When you add social charges to income tax, French taxation can be rather daunting. In any case, with French tax regime being so complex, and frequently changing, it is always a good idea to take personalised advice to ensure you are following the rules correctly.

A locally based tax and wealth management adviser can guide you through the local tax regime and advise you on the compliant tax planning opportunities that are available in France, particularly for your investment capital and pensions. 

The tax rates, scope and reliefs may change. Any statements concerning taxation are based upon our understanding of current taxation laws and practices which are subject to change. Tax information has been summarised; an individual is advised to seek personalised advice.

Blevins Franks Group is represented in France by the following companies:  Blevins Franks Wealth Management Limited (BFWML) and Blevins Franks France SASU (BFF). BFWML is authorised and regulated by the Malta Financial Services Authority, registered number C 92917. Authorised to conduct investment services under the Investment Services Act and authorised to carry out insurance intermediary activities under the Insurance Distribution Act. Where advice is provided outside of Malta via the Insurance Distribution Directive or the Markets in Financial Instruments Directive II, the applicable regulatory system differs in some respects from that of Malta. BFWML also provides taxation advice; its tax advisers are fully qualified tax specialists.  Blevins Franks France SASU (BFF), is registered with ORIAS, registered number 07 027 475, and authorised as ‘Conseil en Investissements Financiers’ and ‘Courtiers d’Assurance’ Category B (register can be consulted on www.orias.fr). Member of ANACOFI-CIF. BFF’s registered office: 1 rue Pablo Neruda, 33140 Villenave d’Ornon – RCS BX 498 800 465 APE 6622Z.  Garantie Financière et Assurance de Responsabilité Civile Professionnelle conformes aux articles L 541-3 du Code Monétaire et Financier and L512-6 and 512-7 du Code des Assurances (assureur MMA). Blevins Franks Trustees Limited is authorised and regulated by the Malta Financial Services Authority for the administration of retirement schemes. This promotion has been approved and issued by BFWML. 

 You can find other financial advisory articles by visiting our website here

Blevins Franks Financial Tips - The Cost of Living Longer

The Cost of Living Longer

By Rob Kay, Senior Partner, Blevins Franks

By making the lifestyle choice to retire in France, you will want to make the most of what the country has to offer, hopefully well into the future.

This may be longer than you expect. Thanks to medical advances over the years and a better quality of life, people are generally living longer than the previous generation. French statistics show that life expectancy for males currently aged 65 is 84, while for women it’s higher at 88. Of course, these are just averages, many of us will live longer, maybe much longer– it has become more common to hear of people reaching their 100th birthday.

Living to a ripe old age does sound rather appealing, provided we are healthy enough. Much more time to watch our grandchildren grow up and much more time to enjoy our well-earned retirement in France. There are, however, implications at both personal and government levels, with the key issue being: can we afford it?

The longer we live, the longer we need our savings to last in order to live as comfortably as we are used to. For peace of mind, assess whether your resources are on track to last throughout your lifetime.  Here are the key considerations.

Income and inflation

Starting with the big topic of the moment – inflation. We are getting used to headlines about rising inflation and the levels we have seen this year are certainly an eye-opener on how it can impact our monthly living costs.  But even though inflation will hopefully start to come down before too long, even low levels, compounded year after year, will reduce how far a fixed income will stretch in the future.

Say, for example, you spend €5,000 a month. Assuming an inflation rate of 3% a year, in 10 years’ time you could need €6,720 a month to maintain the same spending, and €9,030 in 20 years. So your capital and income would need to grow by the same amount to maintain the same standard of living.

Making your savings and investments last

Many retirees favour low-risk, ‘safer’ investments like bank deposits in their later years. But with potentially 30 years or more to fund in retirement, this can actually be a risky strategy.

British expatriates also need to factor in exchange rate risk. If you receive income in pounds while spending euros in your daily life, depending on currency movements you may find your money does not go as far as it once did, even without the inflation factor.

By following some key investment principles and taking specialist guidance, you can invest capital to give it the opportunity to keep pace with inflation, while keeping risk to a comfortable level.  Start by establishing your risk profile then carefully build a well-diversified investment portfolio to suit your circumstances, needs and objectives.   Look for investment arrangements which provide some currency flexibility to try and avoid the exchange rate risk.

You could get currency flexibility through some ‘assurance-vie’ policies, a specialised form of life assurance that allows French residents to hold a range of investments in a highly tax-efficient package. There are many different assurance-vie options based in various jurisdictions, not just France, and not all offer currency flexibility, so choose carefully. 

A taxing problem – not just for governments

Rising life expectancy is also expensive for governments. The higher the proportion of older people in a population, the greater the costs of services like state pensions and healthcare – and the lower the number of taxpayers that can fund it. The solution usually lies in pension or healthcare reforms and tax increases to finance these escalating expenses.  The issue has been exacerbated over recent years with the amount of money governments have had to spend as a result of covid.

Higher taxation can be a considerable threat to your financial security in retirement.  Just like inflation it erodes your income, and in France we have social charges on top of income tax, giving us quite a high tax burden.   This is where personalised tax planning is vital to make use of available opportunities – in France, the UK, or elsewhere – to ensure you do not pay more tax than necessary.

With many of these arrangements you can combine your tax and investment planning in one exercise, allowing you to tackle the twin threats of tax and inflation at the same time.

Getting the most from your pensions

Pensions are often the key to financial security in retirement, so take care to do what is right for you.   You need to consider all your options, carefully weighing the pros and cons. Look at your income needs, investment options and risk, currency risk, what happens to the balance when you die and the tax implications.

There may be ways for expatriates to make pension funds go further, but before making any decisions, take regulated advice to avoid pension scams and establish the best approach for your particular objectives and circumstances.  You may be best advised to leave your pension where it is.

Leaving wealth behind

If you want to leave a lasting legacy for your family, you have to make sure you do not spend it all in your own lifetime – without compromising your quality of life today.  A strategic financial planning approach – that considers estate planning alongside investing and tax planning – can prove invaluable here.

Estate planning in France is complex, with succession tax based on the beneficiary and succession law imposing forced heirship.  If your family includes children from previous marriages, be particularly careful to ensure everyone benefits as you wish them to.

Whatever your stage of life, good financial planning can help you afford the lifestyle you want, for as long as you need, so you can focus on enjoying your retirement in France.

This article should not be construed as providing any personalised investment or taxation advice. You should take advice for your circumstances.

Blevins Franks Group is represented in France by the following companies:  Blevins Franks Wealth Management Limited (BFWML) and Blevins Franks France SASU (BFF). BFWML is authorised and regulated by the Malta Financial Services Authority, registered number C 92917. Authorised to conduct investment services under the Investment Services Act and authorised to carry out insurance intermediary activities under the Insurance Distribution Act. Where advice is provided outside of Malta via the Insurance Distribution Directive or the Markets in Financial Instruments Directive II, the applicable regulatory system differs in some respects from that of Malta. BFWML also provides taxation advice; its tax advisers are fully qualified tax specialists.  Blevins Franks France SASU (BFF), is registered with ORIAS, registered number 07 027 475, and authorised as ‘Conseil en Investissements Financiers’ and ‘Courtiers d’Assurance’ Category B (register can be consulted on www.orias.fr). Member of ANACOFI-CIF. BFF’s registered office: 1 rue Pablo Neruda, 33140 Villenave d’Ornon – RCS BX 498 800 465 APE 6622Z.  Garantie Financière et Assurance de Responsabilité Civile Professionnelle conformes aux articles L 541-3 du Code Monétaire et Financier and L512-6 and 512-7 du Code des Assurances (assureur MMA). Blevins Franks Trustees Limited is authorised and regulated by the Malta Financial Services Authority for the administration of retirement schemes. This promotion has been approved and issued by BFWML. 

You can find other financial advisory articles by visiting our website here

Blevins Franks Financial Tips - Why Time in the Markets Matters

When you have worked hard to build up your savings, it is not always easy to decide how best to look after them, especially if you are nearing retirement or already enjoying your retirement years. You most likely have some or all of the following objectives: 

·      Protect your capital and maintain financial security  

·      Generate an income  

·      Grow the capital, but with an acceptable level of risk 

·      Leave a healthy inheritance to children and grandchildren

You know that you need to invest to earn enough capital growth but may also be wary about taking on too much investment risk.  And if you are invested geopolitical events and market volatility can make you nervous and wonder if you should sell and sit in cash for a while.

In truth, for most people, successful investing is hard; financial markets are complicated and can be unpredictable. But by getting a better understanding of investment principles you can avoid some common pitfalls. Following these principles and working with a financial adviser will help turn your goals into reality.

The risks of trying to time the market

Successful investors are marathon runners, not sprinters. So staying invested in the markets over the long term usually gives the best returns. When you see the markets fluctuate, it can be tempting to buy and sell investments, either to chase short-term gains or because you are afraid share prices will fall.  Unfortunately, this can often result in entering or exiting the market at precisely the wrong time and making emotional investment decisions will rarely help you meet your longer-term financial goals.

For individual investors, it is extremely difficult to anticipate and deal with the wide range and speed of events and issues which can impact economies and markets. At any time, external events, investor sentiment and even rumours can have a negative or positive impact, often unexpectedly and suddenly. Reacting to current conditions is usually too late, so to be successful, you would need to foresee both the best time to buy and to sell. Even experienced investors cannot get this right all the time. 

Then there is the risk of missing out. It is surprising what a difference certain days in a market cycle can make to returns. If, for example, you are not invested because you are waiting for share prices to stabilise after a period of volatility, you could miss benefiting from rebound days if the market suddenly rallies.  

To illustrate this, if you had invested £100,000 in the FTSE All-Share index for the full ten-year period up to 31 December 2021, and stayed invested the whole time, you would have enjoyed a profit (before fees and charges), of £110,700, so  your investment would notionally have more than doubled to £210,700, including the original investment. Investors who missed the five, ten and twenty best days saw profits, before fees and charges are applied, drop to £64,090, £40,540 and £6,820 respectively. Those who missed the best 30 days saw a loss of £15,800.

While it may feel uncomfortable to stay invested when markets fluctuate, this discipline usually produces better returns over the longer term than chasing short-term gains.

The importance of diversification

Before investing, you need to ensure that your strategy is well diversified and suitable for your situation, risk appetite and goals. Even the most patient investor is unlikely to benefit from an ill-fitting portfolio that does not meet their needs or is overly concentrated in one area. 

The best strategy for minimising risk is to diversify by spreading investments across multiple, unrelated areas. This should include a range of different asset classes (shares, bonds, cash and ‘real’ assets such as property) as well as geographical regions and market sectors. Diversification gives your portfolio the chance to produce positive returns over time without being vulnerable to any single area or stock under-performing. 

Choosing an adviser who uses a dynamic ‘multi-manager’ approach can help increase diversification. By combining several carefully selected fund managers, this reduces reliance on any one manager making the right decisions in all market conditions. 

Establishing a suitable investment approach

When investing, it is crucial to carefully assess your situation, income requirements, goals and timeline alongside your appetite for risk. This is best done objectively by an experienced professional who can then build a diversified portfolio with the right balance of risk/return for your peace of mind. Your arrangements should also be structured as tax-efficiently as possible for your country of residence. 

If you have capital to invest but today’s climate makes you nervous, you could consider spreading the timing of your investments over a period by investing in tranches. The ‘pound (or euro/dollar) cost averaging’ approach can help smooth out volatility and potentially improve average returns over longer time periods. 

British expatriates may also benefit from exploring investment structures that have a multi-currency facility to minimise exchange rate risk. This would allow you to invest, for example, in sterling now and then switch to euros as you wished, and choose the currency of withdrawals. 

Ultimately, a long-term, diversified investment approach is vital to help protect and grow your capital, whatever the economic climate. While a ‘keep calm and stay invested’ approach usually gives the best overall results over time, make sure you still review your planning once a year, or sooner if your circumstances change, to realign your investments with your risk profile and continue meeting your long-term financial goals. 

These views are put forward for consideration purposes only as the suitability of any investment is dependent on individual circumstances; take individual personalised advice. The value of investments can fall as well as rise as can the income arising from them. Past performance should not be seen as an indication of future performance.

Blevins Franks Group is represented in France by the following companies:  Blevins Franks Wealth Management Limited (BFWML) and Blevins Franks France SASU (BFF). BFWML is authorised and regulated by the Malta Financial Services Authority, registered number C 92917. Authorised to conduct investment services under the Investment Services Act and authorised to carry out insurance intermediary activities under the Insurance Distribution Act. Where advice is provided outside of Malta via the Insurance Distribution Directive or the Markets in Financial Instruments Directive II, the applicable regulatory system differs in some respects from that of Malta. BFWML also provides taxation advice; its tax advisers are fully qualified tax specialists.  Blevins Franks France SASU (BFF), is registered with ORIAS, registered number 07 027 475, and authorised as ‘Conseil en Investissements Financiers’ and ‘Courtiers d’Assurance’ Category B (register can be consulted on www.orias.fr). Member of ANACOFI-CIF. BFF’s registered office: 1 rue Pablo Neruda, 33140 Villenave d’Ornon – RCS BX 498 800 465 APE 6622Z.  Garantie Financière et Assurance de Responsabilité Civile Professionnelle conformes aux articles L 541-3 du Code Monétaire et Financier and L512-6 and 512-7 du Code des Assurances (assureur MMA). Blevins Franks Trustees Limited is authorised and regulated by the Malta Financial Services Authority for the administration of retirement schemes. This promotion has been approved and issued by BFWML. 

You can find other financial advisory articles by visiting our website here

Blevins Franks Financial Tips - How to Take Control of your Finances in an Uncertain World

The last few years have emphasised how uncertain life can be; how we never know what is around the corner.  Brexit and the pandemic have now been followed by the worrying and upsetting events in Ukraine.  Life feels more uncertain again. 

This perhaps makes it more important for us to take control where we can, as much as we can, particularly when it comes to our family’s long-term future and security.  So here we take a look at the key wealth management considerations we should review from time to time. 

Pension planning

For most of us, our pension funds are key to our long-term financial security, so great care must be taken to do what is right for you and your family.  The UK pension freedoms may no longer be ‘new’, but they can still cause uncertainty when deciding what to do with yours, and each option has pros and cons. 

If you are planning to spend your retirement years in France, you also need to establish the local tax implications and what works best for you as a France resident.

Many expatriates have chosen to transfer UK pensions to a Qualifying Recognised Overseas Pension Scheme (QROPS) for the advantages they can offer, such as income and currency flexibility. But they do not suit everyone – you may find it more beneficial, for example, to reinvest UK pension funds into French-compliant investment arrangements, or even leave your UK pension where it is.  Also, the UK has recently made changes which make transferring to QROPS more difficult. 

In any case, you should always take personalised, regulated pensions advice to ensure you take the best course of action for your particular circumstances.

Your savings and investments 

It is impossible to control what may or may not happen in the markets in future, what geopolitical events may cause volatility or prices to rise; we can’t know what interest rates will be five, ten, or twenty years from now. 

But we can take steps to build an investment portfolio that:

·      is based around our risk profile, circumstances, time horizon and objectives; and 

·      includes suitable asset allocation and diversification to control risk; and 

·      is designed to provide capital growth over the longer term to beat inflation so you can maintain your spending power through retirement. 

Geopolitical events, like those we’re seeing at the moment, can cause significant market turbulence which can be unsettling for investors, but that does not mean it’s the time for knee-jerk reactions or short-term changes.  

History has shown that ‘timing’ markets is incredibly difficult, especially where out-sized market movements are involved. And in timing, an investor needs to get it right twice – when to encash some of your investments and when to get in the market. Getting one right is rarely achieved, as the news has already arrived by the time you can look to act (so markets will already have reacted). The same also applies when markets move sharply upward as we saw after the initial covid news in 2020.  

Investing is a marathon not a sprint, so being patient and sticking with the plan can pay off. 

Estate planning

While we cannot avoid death, with good estate planning we can control who receives our assets and when. Is your legacy on track to go to your chosen heirs according to your wishes and with minimal taxation? Take care to understand the succession laws and inheritance tax in France and anywhere else you have assets and heirs, as well as the pros and cons of using the EU succession regulation ‘Brussels IV’ to override local ‘forced heirship’ rules.

You need a strategy that achieves your wishes while making the process straightforward and tax-efficient for your heirs. And don’t forget your own needs; consider the tax implications to find the optimum solution for your wealth during your lifetime too.  

Tax planning

The way you structure your assets and wealth can make a significant difference to your tax bill. You need to make sure your arrangements are structured appropriately for your life in France as well as your particular aims, circumstance, goals and risk appetite.

Are you taking advantage of tax-efficient structures available in France? Besides tax savings, these may offer additional benefits such as currency and income flexibility and estate planning advantages. 

Ultimately, cross-border tax and financial planning is complex. While you can do some groundwork yourself, you will benefit from talking to a specialist adviser with in-depth knowledge of the French tax regime and its interaction with UK rules. They can help you take advantage of available tax, investment, pensions, and estate planning opportunities to ensure you do what works best for you and your family, today, tomorrow and the future. 

By Rob Kay, Senior Partner, Blevins Franks 
Link to Rob Kay profile / contact page

You can find other financial advisory articles by visiting our website here

Tax rates, scope and reliefs may change. Any statements concerning taxation are based upon our understanding of current taxation laws and practices which are subject to change. Tax information has been summarised; individuals should seek personalised advice.

Blevins Franks Group is represented in France by the following companies:  Blevins Franks Wealth Management Limited (BFWML) and Blevins Franks France SASU (BFF). BFWML is authorised and regulated by the Malta Financial Services Authority, registered number C 92917. Authorised to conduct investment services under the Investment Services Act and authorised to carry out insurance intermediary activities under the Insurance Distribution Act. Where advice is provided outside of Malta via the Insurance Distribution Directive or the Markets in Financial Instruments Directive II, the applicable regulatory system differs in some respects from that of Malta. BFWML also provides taxation advice; its tax advisers are fully qualified tax specialists.  Blevins Franks France SASU (BFF), is registered with ORIAS, registered number 07 027 475, and authorised as ‘Conseil en Investissements Financiers’ and ‘Courtiers d’Assurance’ Category B (register can be consulted on www.orias.fr). Member of ANACOFI-CIF. BFF’s registered office: 1 rue Pablo Neruda, 33140 Villenave d’Ornon – RCS BX 498 800 465 APE 6622Z.  Garantie Financière et Assurance de Responsabilité Civile Professionnelle conformes aux articles L 541-3 du Code Monétaire et Financier and L512-6 and 512-7 du Code des Assurances (assureur MMA). Blevins Franks Trustees Limited is authorised and regulated by the Malta Financial Services Authority for the administration of retirement schemes. This promotion has been approved and issued by BFWML. 

Blevins Franks Financial Tips - Resolve to Review Your Financial Planning for 2022

Take time to check your tax planning, investments, pensions and estate planning are all on track to protect your family’s long-term wealth. 

The New Year is a time when most of us take stock of our situation and set goals to improve our health, happiness, lifestyle and wealth. This year, make it one of your resolutions to check your financial planning is on track to meet your needs and protect your family’s long-term financial security.

Why regular reviews are important 

Regular reviews help keep your financial affairs compliant and up to date. Tax rules or financial regulations can change at any time, which may affect the tax efficiency – or even legality – of your existing arrangements. There may also be new opportunities that you could find beneficial… but only if you know about them. And with Brexit still relatively new, and more potential changes on the way, it is important to keep ahead of any developments that may affect you, for better or worse. 

You also need to consider if any changes in your personal and family circumstances mean you should adjust your arrangements. Did you welcome any new family members or are there any upcoming major life events – such as retirement, relocation or divorce – that may warrant a rethink of your plans? 

For a truly effective review, and to ensure it is suitable for your life in France, consider how your tax planning, investments, pensions and estate planning work together. 

Tax planning

You should first make sure you know where you are resident for tax purposes, especially if you are new to France or spend time in both countries. You then want to structure your investments and wealth in the most suitable way to minimise taxation – in France, the UK and wherever you have financial interests – while still meeting your obligations. 

In today’s world of ‘automatic exchange of information’, it is more important than ever to get it right. Your local tax office receives financial information about your offshore assets without having to even ask for it. 

Cross-border tax planning is complex, so take specialist advice to achieve peace of mind and potentially secure significant tax savings.

Savings and investments

If you do not already have a financial plan in place for France, you need to take a fresh look at your savings and investments. Are they actually better suited to a UK resident? Do they meet your risk/reward appetite? Are you taking advantage of suitable tax-efficient opportunities in France?

Successful investing is about having a strategy specifically based around your personal circumstances, time horizon, needs, aims and risk tolerance. You should ensure you have adequate diversification to avoid over-exposure to any given country (including the UK), asset type, sector or company. Explore investment structures that allow multi-currency flexibility to help minimise exchange rate risk.  

Pensions

For most people, their pension is key to their financial security through retirement, so deciding what to do with yours could be one of the most important financial decisions you make.  

So take the time to explore all the available options, weighing the pros and cons and considering the tax implications and potential benefits in France. 

Make sure you take regulated advice to protect your retirement benefits from pension scams and do what is right for your personal circumstances and aims. 

Estate planning  

It is vital to review your estate planning when living in France.  Here in France both succession law and tax work very differently to the UK. 

Are you aware, for example, that France’s ‘forced heirship’ rules could automatically pass a significant proportion of your worldwide estate to your direct family, whatever your intentions? You can specify in your will for the EU regulation ‘Brussels IV’ to apply relevant British law to your estate instead, but take care to understand your options and any tax implications. 

Your estate plan should be set up to achieve your wishes in the most tax-efficient way possible. 

To bring all these complex elements together and ensure you have not missed out on any suitable opportunities, take expert, cross-border advice. Spending time on a financial health-check now can secure peace of mind that you and your family are in the best position to enjoy a prosperous 2022 and beyond.    

The tax rates, scope and reliefs may change. Any statements concerning taxation are based upon our understanding of current taxation laws and practices which are subject to change. Tax information has been summarised; individuals should seek personalised advice.

Blevins Franks Group is represented in France by the following companies:  Blevins Franks Wealth Management Limited (BFWML) and Blevins Franks France SASU (BFF). BFWML is authorised and regulated by the Malta Financial Services Authority, registered number C 92917. Authorised to conduct investment services under the Investment Services Act and authorised to carry out insurance intermediary activities under the Insurance Distribution Act. Where advice is provided outside of Malta via the Insurance Distribution Directive or the Markets in Financial Instruments Directive II, the applicable regulatory system differs in some respects from that of Malta. BFWML also provides taxation advice; its tax advisers are fully qualified tax specialists.  Blevins Franks France SASU (BFF), is registered with ORIAS, registered number 07 027 475, and authorised as ‘Conseil en Investissements Financiers’ and ‘Courtiers d’Assurance’ Category B (register can be consulted on www.orias.fr). Member of ANACOFI-CIF. BFF’s registered office: 1 rue Pablo Neruda, 33140 Villenave d’Ornon – RCS BX 498 800 465 APE 6622Z.  Garantie Financière et Assurance de Responsabilité Civile Professionnelle conformes aux articles L 541-3 du Code Monétaire et Financier and L512-6 and 512-7 du Code des Assurances (assureur MMA). Blevins Franks Trustees Limited is authorised and regulated by the Malta Financial Services Authority for the administration of retirement schemes. This promotion has been approved and issued by BFWML. 

You can find other financial advisory articles by visiting our website here

Blevins Franks Group Financial Advice - French Succession Law – New Forced Heirship Rules

In August, France approved changes to succession law  which will affect the forced heirship rules applied on French assets. It will allow children to contest a will, even if you opted for UK law to apply to your estate. This could affect the succession planning you set up over recent years.

France’s long-standing Napoleonic code was created to protect the bloodline. Children are protected heirs and must inherit 50-75% of an estate (depending on the number of children).  These rules apply to your worldwide estate if you die as a habitual resident of France, and a will, even a foreign one, will be ignored if it attempts to override these reserved heirship rights. 

Brussels IV
In 2015 there a welcome development for British expatriates who wish to avoid French succession laws.  The European succession regulations (‘Brussels IV’) allow foreign nationals to elect for the law of their country of nationality to apply to their assets on their death, rather than that of their country of residence. Provided this election is made in their will, nationals of many common law countries (such as the UK and US) can avoid forced heirship rules and potentially choose to leave children out of a will.    

France’s new succession rules for French assets 
On 13 August 2021, the French Constitutional Council approved new legislation which will affect the forced heirship rules applied on French assets.

Under the new legislation, if French assets pass according to the provisions of a country which does not impose forced heirship rules – as is the case in England and Wales – the protected heirs (biological and adopted children) can make a claim for the share they would be entitled to under the French rules. 

This means children could challenge the parent’s will and seek for compensation. This would even apply to estranged children who have had no contact with the parent for decades. The compensation mechanism, however, only applies to French assets. 

In summary, the new rules apply where:

·      the deceased individual was either habitually resident in an EU country or a national of an EU country; or

·      the children were habitually resident in an EU country or nationals of an EU country; and

·      the law applied in the will of the deceased individual does not include any forced heirship / protected share for his/her children.

 The new legislation is likely to come into force before the end of 2021 (three months after the publication of the law) and only succession after the relevant date will be affected. 

 At first glance, this new legislation seems contrary to the European succession regulations which override the domestic French legislation. Therefore, there is a strong chance it will be challenged in the European Courts. 

There are also outstanding questions on how the rules would apply. For example, when an election is made to apply the law of Scotland which has forced heirship rules but enables parents to disown children in some circumstances. 

Does this impact you?
Many British expatriates have used Brussel’s IV to avoid France’s forced heirship rules.  Now, under the new rules, if you die as a French resident and have elected, for example, to use English law, if you do not leave your biological children a share of your estate equal to what they would be entitled to under French rules, they can potentially make a claim for their protected share of your French assets.

If you wish to retain flexibility of disposition of assets at death, it is now more important to minimise the value of the assets held in France.  If the new rules are applied on a strict basis (ignoring the European regulations), it will be more difficult to pass your French assets according to your wishes.

This should be considered very carefully when drafting wills in France. French may now not be willing to include the election to use the law of a country with no forced heirship rules. 

The interaction with the Brussels IV rules is not yet clear, and it is likely to take some time to establish how the new rules are applied in practice.

Estate planning for France
Even before this development, we always recommend you should take specialist advice before using Brussels IV as electing for UK law may have consequences you are not aware of.  You also need to watch out for high succession tax rates (up to 60%) if you leave assets to distant or non-relatives.

In any case, there are steps you can take to avoid some of these problems created by France’s succession regime. If you have not yet bought French property, take personal advice before you do as matters may be sorted by simply reviewing how the property should be held. And even what some people think of as obvious answers, such as putting property in their children’s name to avoid taxes on death can have unexpected effects, including actually increasing the tax liability.

Estate planning in France is complex, with the succession law and tax regimes very different to the UK’s. But professional advice and advance planning will make things easier and give you peace of mind, and help ensure the right money goes to the right hands at the right time.

Tax rates, scope and reliefs may change. Any statements concerning taxation are based upon our understanding of current taxation laws and practices which are subject to change. Tax information has been summarised; individuals should seek personalised advice.

Blevins Franks Group is represented in France by the following companies:  Blevins Franks Wealth Management Limited (BFWML) and Blevins Franks France SASU (BFF). BFWML is authorised and regulated by the Malta Financial Services Authority, registered number C 92917. Authorised to conduct investment services under the Investment Services Act and authorised to carry out insurance intermediary activities under the Insurance Distribution Act. Where advice is provided outside of Malta via the Insurance Distribution Directive or the Markets in Financial Instruments Directive II, the applicable regulatory system differs in some respects from that of Malta. BFWML also provides taxation advice; its tax advisers are fully qualified tax specialists.  Blevins Franks France SASU (BFF), is registered with ORIAS, registered number 07 027 475, and authorised as ‘Conseil en Investissements Financiers’ and ‘Courtiers d’Assurance’ Category B (register can be consulted on www.orias.fr). Member of ANACOFI-CIF. BFF’s registered office: 1 rue Pablo Neruda, 33140 Villenave d’Ornon – RCS BX 498 800 465 APE 6622Z.  Garantie Financière et Assurance de Responsabilité Civile Professionnelle conformes aux articles L 541-3 du Code Monétaire et Financier and L512-6 and 512-7 du Code des Assurances (assureur MMA). Blevins Franks Trustees Limited is authorised and regulated by the Malta Financial Services Authority for the administration of retirement schemes. This promotion has been approved and issued by BFWML. 

You can find other financial advisory articles by visiting our website here

The Latest 2021 UK Budget - What Are The Implications For Expatriates?

While there was little in the way of immediate changes in the latest UK Budget, the freezing of some allowances is set to increase tax bills in the long run. 

This year’s UK Budget predictably focused on ongoing pandemic support, bringing very few changes to personal taxes. Chancellor Rishi Sunak did, however, introduce some longer-term measures to collect more tax by freezing the main allowances and exemptions for the next five years. 

According to the Office for Budget Responsibility (OBR), the overall impact of these measures will be that the UK’s tax burden will rise to its highest level since the 1960s! 

So what changes in April may affect UK nationals living in France, and what can you do to minimise any negative impact?

Income tax

UK taxpayers (including non-UK residents) see a slight increase to the personal income tax allowance thresholds at each end: £12,570 at the basic 20% tax band and £50,270 at the higher 40% rate. However, these will be frozen until at least April 2026. 

This is estimated to bring 1.3 million more people into income tax liability, with one million more paying the higher tax rate, altogether netting an extra £8 billion in the 2025/6 tax year. 

Savings and investments

The band of UK savings income that can be earned tax-free stays at £5,000 and the annual ISA subscription limit at £20,000 (£9,000 for a Junior ISA). 

The dividend allowance remains at £2,000.

Remember: investments like ISAs may become taxable in France once you are non-UK resident. Take time to explore alternative arrangements that may be more tax efficient and better suit your circumstances, goals and risk appetite.

Capital gains tax (CGT)

As with income tax, the annual allowance will be frozen for the next five years. Unlike income tax, the CGT allowance does not increase, staying at its current level of £12,300 for individuals (£6,150 for most trusts). 

Despite expectations that CGT rates would be aligned with income tax rates, there is no change here, so rates remain between 10% and 28%.

Don’t forget that, in recent years, non-UK residents became liable for capital gains tax on most UK property and land.

Pensions

Annual allowance: This remains at £40,000 – as it has been since 2016 – and starts reducing once ‘adjusted income’ reaches £240,000.

Lifetime allowance (LTA) – This will not increase with inflation as planned so remains at £1,073,100, where it sticks until at least 2026. 

If your combined UK pension benefits are near the LTA threshold, you need to consider the potential impact of future growth. If investment markets recover in line with the Chancellor’s forecast that the economy will return to pre-pandemic levels by mid-2022, this could bring many more pension funds within the scope of the LTA’s 25% or 55% penalties. The Treasury expects to collect an extra £250 million as a result.

QROPS – There were no changes to Qualifying Recognised Overseas Pension Schemes, with transfers to EU/EEA-based QROPS still tax-free for EU residents. The 25% ‘overseas transfer charge’ continues to only apply to transfers outside the EU/EEA. But now the UK has left the bloc, this could potentially be extended to capture EU transfers in future. 

Once in a QROPS, UK pension funds become immune to LTA penalties and future changes to UK pension rules while unlocking other benefits, so carefully consider your options here. 

Inheritance tax

Despite much anticipation that this year could see inheritance tax changes, again the only action was freezing the exemptions, allowances and reliefs for the next five years.

The tax-free ‘nil rate band’ allowance stays at £325,000 per person (unchanged since 2009!) The residential nil rate band (RNRB) – which provides extra tax relief when passing on a main home (including overseas) to direct descendants – remains at £175,000 per person.

The Treasury collected £5.2 billion in inheritance taxes in the 2019/20 tax year. With these latest freezes, they expect to generate an additional £15 million next year, increasing to £445 million by 2026.

What can you do to minimise the impact?

Although this new tax year brings relatively few changes, there are longer term implications. The Chancellor’s strategy of freezing allowances, exemptions and reliefs is clearly designed to raise more tax revenue as people’s income, capital gains, and asset values grow. Taxpayers may also feel the pinch as the cost of living increases over time. 

Wherever possible, you should make full use of the available allowances each year to help minimise your tax bill. However, no one action in isolation will make a substantial difference. You need to make sure your overall financial arrangements are structured as tax efficiently as possible for your life in France to help minimise exposure for you and your heirs. 

As always, subsequent Budgets can change the current trajectory by introducing new taxes with little notice, but this is especially likely as the economy picks up and the government looks to recoup its pandemic spending.  

This is a good prompt to think ahead and review your tax planning to check you are making the most of all the available tax-efficient opportunities, in the UK and your country of residence. For the best results, take personalised advice from a cross-border specialist with understanding of both the UK and French tax regimes.

Rob Kay, Senior Partner, Blevins Franks

Tax rates, scope and reliefs may change. Any statements concerning taxation are based upon our understanding of current taxation laws and practices which are subject to change. Tax information has been summarised; individuals should seek personalised advice.

Blevins Franks Group is represented in France by the following companies:  Blevins Franks Wealth Management Limited (BFWML) and Blevins Franks France SASU (BFF). BFWML is authorised and regulated by the Malta Financial Services Authority, registered number C 92917. Authorised to conduct investment services under the Investment Services Act and authorised to carry out insurance intermediary activities under the Insurance Distribution Act. Where advice is provided outside of Malta via the Insurance Distribution Directive or the Markets in Financial Instruments Directive II, the applicable regulatory system differs in some respects from that of Malta. BFWML also provides taxation advice; its tax advisers are fully qualified tax specialists.  Blevins Franks France SASU (BFF), is registered with ORIAS, registered number 07 027 475, and authorised as ‘Conseil en Investissements Financiers’ and ‘Courtiers d’Assurance’ Category B (register can be consulted on www.orias.fr). Member of ANACOFI-CIF. BFF’s registered office: 1 rue Pablo Neruda, 33140 Villenave d’Ornon – RCS BX 498 800 465 APE 6622Z.  Garantie Financière et Assurance de Responsabilité Civile Professionnelle conformes aux articles L 541-3 du Code Monétaire et Financier and L512-6 and 512-7 du Code des Assurances (assureur MMA). Blevins Franks Trustees Limited is authorised and regulated by the Malta Financial Services Authority for the administration of retirement schemes. This promotion has been approved and issued by BFWML.

You can find other financial advisory articles by visiting our website here