5 June 2018
By Thomas Marron
06 14 24 61 29
However well we have settled into our new way of life in France, most UK nationals living here continue with some British lifestyle habits. Whether it is a Sunday roast with all the trimmings, watching UK tv channels and sport etc, there are some ties we do not like to lose and comfort in familiarity.
The same applies for UK investments. You may, for example, have accumulated Premium Bonds, Individual Savings Accounts (ISAs) etc over the years, or bought shares in UK companies, and prefer to hang on to them because they are familiar and feel like a safe option. But are these suitable investments for your new life in France?
In particular, once you take up residence in France, the tax incentives provided by Premium Bonds and ISAs in the UK fall away and all income and gains are subject to tax in France.
Premium bonds, ISAs and other UK investments
Premium bonds were launched 60 years ago and today around 21 million people own some. They do not provide any automatic interest earnings or capital growth – which means their value will be eroded over time by inflation – but the possibility of winning a large prize can make them quite appealing.
But what are the chances of winning big? According to MoneySavingExpert’s Martin Lewis, you have a one in 45 million chance of winning the jackpot with one National Lottery ticket, but your chance of becoming a millionaire through one single Premium Bond is one in almost 36 billion. If you’re happy to win £25,000 the chances are still one in 2 billion.
One key attraction is that they have always been tax free in the UK – they are not tax free if you live in France though.
Although betting and gambling winnings are tax-free in France, this does not apply to Premium Bonds since the initial investment is never actually at stake.
ISAs too are fully taxable in France in the hands of French residents. This applies to income and gains from cash and share ISAs.
You also need to look at your other UK investments, such as shares, unit trusts, OEICs and investment bonds, and consider whether they the most tax-efficient way of holding your capital.
Since January 2018 most investment income is now subject to a flat rate of tax of 30% (inclusive of social charges). This includes income and gains from ISAs and Premium Bond winnings, as well as bank interest, dividends, capital gains made on the disposal of movable assets etc. Low income households can choose to pay tax at normal scale rates of tax instead.
Note that if you receive interest or dividends from the UK you must declare the income within 15 days of the end of the month and pay 30% of the amount received by that date. This is then offset against the tax due on your tax return. This advance payment can be avoided where your household’s revenu fiscal de réference is below €25,000 for an individual or €50,000 for a couple.
In the UK long-term residents benefit from a 5% tax-deferred allowance when making withdrawals from UK investment bonds. This does not extend to French residents. The French rules on such income are different so seek advice if you have these bonds.
Some expatriates mistakenly think that since ISAs and Premium Bonds are UK investments they do not need to be declared in France. In fact they do, and with global automatic exchange of information now taking place under the Common Reporting Standard, the French tax authorities will be informed about your UK investments.
UK rental income
If you are resident in France and rent out property in the UK, under the UK-France double tax treaty, the income will be directly taxed in the UK, since that is where it arises. It is not directly taxed in France, but note that you have to include as part of your taxable income for the year. You then receive a credit equal to the French tax and social charges.
It’s not all about tax
There are very tax-efficient investment vehicles available to residents of France. With specialist professional advice, you could enjoy extremely favourable tax treatment on your capital investments, both for yourself today and your heirs in future. Speak to an adviser who can guide you on both UK and French taxation, the interaction between them and tax planning opportunities.
Taxation is not the only reason to review your savings and investments, however. You need to ensure they are suitable for your life in France (for example, what currency should they be in?) and your future expectations; your objectives (are you looking for income or growth?); your time horizon and, importantly, your risk tolerance. Too many people have portfolios which were built up over the years and are no longer suitable for them today. You need personalised advice from a locally based adviser like Blevins Franks which provides holistic advice covering investments, tax efficiency and estate planning.