Taxation

[Carina]

We are moving to France next Sept and we are retiring early (56 & 55) our pensions I presume will be paid in the UK - can anyone tell us where we will pay tax - UK or France. Also what would happen if Pensions were paid in France?

Thanks

[Sunday Driver]

Where your pension is physically paid is your own choice.  Your pension provider(s) can arrange for your pensions to be paid to your bank account in France.

If your pensions are government ones (eg, civil service, police), then you will continue to pay tax in the UK.  If they are private (ie, company pensions) then they will be taxable in France.  You will need to notify HMRC before you leave so that if you have private pensions, your tax status can be amended and your future pensions paid tax free.  You can also claim a refund of any UK tax paid since the date of your arrival in France.

In both cases, because you are going to be permanently resident in France, you will have to make a French tax declaration of your worldwide income.  The French tax year runs from January to December and is paid in arrears.  So, if you arrive on 1 September 2007, then you complete your first tax declaration in Spring 2008 and declare your income for the period 1 September 2007 to 31 December 2007.  You will then receive your 2007 tax bill in September 2008.  You then declare your income for the year 2008 in Spring 2009 and so on. 

If your type of pension means you have to pay tax in the UK, then you still declare it in France and you are assessed for French tax.  However, you will receive a credit against the UK tax you've already paid, so you don't pay twice.  Generally speaking, the income tax regime in France is kinder than that in the UK.

Your French tax code also determines the cost of your state heathcare as well as entitlement to other benefits. If your NI has been up to date, then before you move to France you can apply to the DWP for a form E106 which means that your French state healthcare contributions will be paid for by the UK for up to two years.  After that, you have to pay your own contributions, currently based on 8% of your taxable income after allowances (ie,your French tax code) over a 7,000 euros threshold.  Your contributions will only cover you for approximately 70% of the cost of treatment, so you will also need to budget for purchasing a top-up medical insurance.

Additionally, if you have private pensions, once your E106 expires, you will have to pay social charges which are currently 0.5% of the gross pension amount.  Social charges of arround 16% will apply to any investment/bank interest from day one.

 

 

[Carina]

Hi Sunday Driver

What a comprehensive reply - thanks ever so much for that. Just a couple of questions your reply raises:  My pension (private) will be approx 9600 Euro's PA and my wifes (private) will be approx 17,200 Euro's PA  1) How do I work out the taxes - ie what percentage would we pay.  2) Is the healthcare based on Household income or is it based on individual income.  Our ages are 56 (me) and 55 so both under state pension age, however I may qualify for Incapacity benefit in the UK so preume I will also get that in France.

Thanks for your help

Carina

[Benjamin]

 Just to add another couple of points to what Sunday Driver has already said. If you are receiving interest from a UK bank or building society you should change it to a gross interest paying account before you move. HMRC cannot instruct a bank or building society to repay tax to you that they have previously deducted nor to change your account to gross interest payments.

I believe (although I am not 100% certain) that an E106 expires at the end of December of the second year it was issued

If, for example, you ask for it to run from September 2007 it will expire at the end of December 2008. If you were to delay asking for it to be issued from January 2008 (and there by be taking a calculated risk) it would then expire at the end of December 2009

[quote user="Sunday Driver"]

You will need to notify HMRC before you leave so that if you have private pensions, your tax status can be amended and your future pensions paid tax free.  You can also claim a refund of any UK tax paid since the date of your arrival in France.

 

[/quote]

S D Is it true that you can make these arrangements before you leave for France? How would you then prevent a situation of asking the HMRC to authorise gross payments and then just not tell the French tax authorities that you are resident in France. I thought the completion of an FD5 which then is passed to HMRC via the French tax authorities was introduced to prevent just that situation.

Benjamin

[smiley]

Hello Sunday Driver,

We found your reply to Carina most informative.

My wife and I are planning to move to France in the summer of 2007 initially as a trial and if it works out we hope to purchase a property the following year.  We are both over 60.

Is it correct that the health contributions are charged on taxable income even after one has attained retirement age (60).  Is the same true of Social Contributions?  If so, 16% charge on unearned investment income plus French Income Tax is going to be a big tax hit.  This would seem to offset the otherwise favourable French income tax rates.

We would be most grateful for any guidance about this which you can provide.  Could you point us towards any helpful up to date guide to French taxation?

Smiley

 

 

[Sunday Driver]

Benjamin

You notify HMCR before you go by filling in a P85 "leaving the UK" form, and they pass your file to the Centre for Non Residents who then issue you with the FD5 tax reclaim form.  You hand this form in to your French tax office when you file your first tax declaration and they'll stamp it and return it to the CNR.  CNR won't amend your tax code or process your tax refund until they receive confirmation from the French tax office that you're on the French system. 

You can actually download an FD5 once you're over here, but doing it the approved way means you can get the UK preparations sorted before you leave for France - one less thing to forget about when you're basking in the pleasure of living in France..... [;-)]

 

 

[Sunday Driver]

Smiley

If your wife has reached the magic age of 60 and is in receipt of her old age pension, then she will qualify for a form E121 which exonerates you both from having to pay state healthcare contributions (if you yourself aren't yet 65, then you piggyback on her form).  The E121 also exonerates you both from the 0.5% social charge on your pensions.  You will, however, remain liable to the 16% social charge on your investment income. 

If your income is below a certain level you may qualify for exemption from heathcare contributions as well as reductions in your property taxes.

Full details of the French tax system can be found on the [url=http://www.impots.gouv.fr]www.impots.gouv.fr [/url]website. 

 

[LesLauriers]

SD

You keep saying 16% social charges when I am sure that you mean to say 11%, or am I missing something?

[Sunday Driver]

Sorry, you are right - it's 11%.  That's what comes of typing by moonlight....[:(]

 

 

[Kate]

Hi folks,

Been reading this thread with keen interest (thanks to Cooperlola for referring me from a previous posting, or I'd have missed it) and have squirrelled away the info for future reference.

Does anyone know what a "low income" might be? I'll have a small private pension plus my state pension in 2 years' time, amounting to perhaps £11K before any tax, but will also have something coming in from money I inherited about 3 years ago - curently about 4K (which is taxed) and which is helping to support me now after my (not very lucrative) divorce!I'm hoping all this will enable me to live in France, so any info on what constitutes a low income would be very helpful. Ideally I'd like to move to France next year, before the pensions kick in, but would then have to live off savings, and interest from the invested money. My tax/social fund liabilities would affect how much  I could afford to pay for a house in France - it might be better to spend! And there's a lump sum, but I've noted the comments on that.

[Benjamin]

£11k plus £4k..............sorry but that's far from being considered a low income in France.

The thresholds for claiming benefits in France are way below anything you could ever imagine in the UK.

[Kate]

[quote user="Benjamin"]£11k plus £4k..............sorry but that's far from being considered a low income in France.

The thresholds for claiming benefits in France are way below anything you could ever imagine in the UK.


[/quote]

 

Thanks, Benjamin,. Well, it wouldn't be a low income in the UK, either - wish I had it now! But it will be taxed if I continue to reside in the UK after the age of 60, and that's what I was wondering about France - how to compare. Does one get an allowance before one's pension is taxed? (In the UK the pension is taxed, but the personal allowance goes up a little when the pension kicks in. I know there's no personal allowance as such in France, but don't know if that's still true of over 60s receiving a pension). I wasn't considering claiming benefits, just wanted to know how I could work out my possible tax burden before I move.

[cooperlola]

Certainly there is a threshold amount before which you begin to be taxed.  The site SD referred to explains this if you read French!  It is perfectly possible to get a pretty good idea how much you will pay, the calculations are not that difficult.