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new life, new tax status


mint

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i have been diligently looking at many of the tax and financial queries on the forum and now i have one of my own that needs addressing so, PLEASE, give it all to me in idiots' guide version

we are expecting to move over completely in the next few weeks so what i want to know is whether we should take out an ISA each while we still have our UK address and tax status.  I do know that whatever you need to do to protect your funds (as best you can legally and legitimately) has to be done BEFORE the big move.

i know an ISA is only small beer but 2 years' worth for 2 of us will take care of £28k and, in the context of our total pot, that is not to be sneezed at.

also, if we were to invest money in equity-based vehicles, is it better to go for capital growth rather than income-producing programmes (on which we will be paying unearned income french taxes)?

please put on your thinking hats and give me all the advice/ personal experience that you have.  i shall be so grateful as this is one aspect of the move that worries me more than all the others put together!

thank you all......the drink's on me, ok? 

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Well, what I do know, is that you will be a tax resident in France from the moment you move here (assuming that it is a permanent move) so any income from your ISA will be subject to taxation over here and treated as unearned - therefore subject to full income tax and social charges, from the date of your move. A good French accountant (there are English-speaking ones) may well be worth consulting but no doubt Mr Driver and others will give you fuller info' too.
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Cash ISA

For

5.5% Interest (variable)

Tax free if you return to UK

Capital safe

 

Against

Limited to 4K maximum investment per adult / year.

Interest subject to income tax and 11% social charges

Subject to inheritance tax rules

Subject to exchange rate changes

 

 

French Euro Assurance Vie

 For

Invest as much as you wish per person including children

Interest (growth) accumulates tax and social charge free

Inheritance tax free for the first 152000€ per beneficiary

Not subject to exchange rate changes

Tax and social charges only apply to the interest part of

any withdrawal

Capital safe

Tax and social charge free withdrawal of 4600€ per person

after 8 years

 

Against

4.5% interest (variable)

Taxable if you return to UK

 

 

UK Maxi ISA (equity growth)

 

For

Tax free if you return to UK

Withdrawals under 20k€ tax and social charge free

You may feel happier investing in UK

 

Against

Limited to 7k maximum investment per adult / year.

Dividend income taken subject to tax and 11% social charges

Withdrawals over 20k€ subject to tax and social charge

Subject to inheritance tax

Subject to exchange rate changes

 

Equity based Assurance Vie

 

For

Invest as much as you wish per person including children

Interest (growth) accumulates tax and social charge free

Inheritance tax free for the first 152000€ per beneficiary

Not subject to exchange rate changes

Tax and social charges only apply to the growth part of any

withdrawal

Tax and social charge free withdrawal of 4600€ per person

after 8 years

Transfer from equity to capital safe, or vice versa, within

wrapper

 

Against

Taxable if you return to UK

Loose the ability to cash in 20k€ tax free each year

 

 

 

Growth or income depends upon your age, how long you will

live, how quickly you will need the cash. If you do not need the interest to

live off then go for growth and let it grow tax free. You pays your money and

takes your choices!

 

What happens to the breadwinners pension when they die?

What will the surviving partner live on?

Do you need to invest for growth to provide for this

eventuality?

 

Do you need to plan for inheritance tax?

How many years can you leave the investment for?

What will your income and expenditure be in 5, 10 or 20 years

time?

 

Go see a financial advisor – they will ask you all these

questions.

 

 

 

 

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Leslauriers excellent post.

But can you run the 20,000 euros bit, relating to the UK Maxi ISA past me again please. Are you saying that in France, if you withdraw 20,000 euros from your Maxi ISA capital, that it is free from income tax and social charges? Sorry to seem a bit thick here, but I have not come across this anywhere else where I have been researching.

Whilst I am here, also regarding the dividends from any equity based ISAs, are there any allowances granted against the dividends, or is the whole amount liable to income tax and social charges?

Many thanks for any light you may be able to shed.

 

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leslauriers

thank you so very much.  i was hoping you'd come on board as i knew you'd have sound advice.  thanks to everyone else as well.  i am waiting to talk to some financial advisors.

i also need to hear your advice to grecian.

incidentally, i have contacted exclusive health as per your advice on another thread and occasion and i am likely to sign up with them when i have the cpam stuff sorted

your advice has been invaluable and will give me and the OH food for thought

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You can sell €20k of shares without tax, they do not have to be held in an ISA, but if you sell more than this the whole amount is taxable.

Dividends are subject to allowances, see

http://www.boursorama.com/patrimoine/guides/Fiscalite/FIS18.html

Do not get confused about ISAs, interest paid on cash is taxable, increase in share price is only taxable when the profit is realised and the transaction is over €20k.

Don't hesitate to pick up on anything I miss guys.

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you do mean 20k euros PER transaction, don't you?  well, then, how many transactions are you allowed in, say, a year?  is there a limit to the frequency, number of transactions of 20k ,before the tax people are interested?

will look at the site you mention after this post; couldn't get it to come on by clicking

thanks for your patience

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I have spent a few unpleasant days having taken advice from a Notaire on the question of inheritance and now find and have read the excellent posting by Leslauriers.  A really good concise and logical piece of work.

Briefly I have no children and do understand that if I 'remain' after my wife then and subject to a small band the estate could then pass to my brothers and down that line and probably be caught up in a 60% charge.

That I do not want to happen but I have no choice? I would wish my wife's children to benefit as they will do from our discretionary trust in the UK

Leslaurier please could you comment not upon inhertiance regimes per se but upon the following.

Say and only for simple arithmetic not reality that we were to buy a house in France at 500000 euros (we already own a house in France and no mortgage) and would not need a mortgage on the new purchase. Thus pay cash.  What if that were to change and that I withdrew 250000 euros from the deal and funded a mortgage for 250000 could I place the 250000 in an Assurance Vie and could this be written in our names or in the names of my wife's children and say a special grandchild and who is is need both of support monetary wise and from other directions?

As to the UK ISA's and the like I know the risk factors and the opportunities for cash ISA's but here how does one limit the risk?

Once more a really stunning piece of work Leslaurier.

If the estate in France is going to be caught up in a 60% charge I would rather liquidate and then return the cash to the UK and then rent here for the rest of my life.  That is an emotionally charged statement but........

kind regards

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Llwyncelyn,

 

Simply placing the €250k into Assurance Vies will allow you to leave €152k to each named

beneficiary without incurring inheritance tax. In the case of the children from

your wifes former marriage this avoids the 60% tax charge.

Parents can invest in an Assurance Vie in their childrens

names, however some companies will require that they are French resident and

part of the foyer fiscal.

In effect you are gifting the money in advance of your own

death and the gift tax allowance of €50k per child, per 6 years, comes into

play. I don’t believe that this is what you are trying to achieve.

 

As you say your property is the real area of concern and

your scenario of renting or some form of equity release would appear to be

possible solutions. Alternatively gifting the house to your wifes children

every 6 years preferably with you and your wife retaining usufruit may be a

solution but I do not have the knowledge to say if this is possible.

As you say a Notaire is best placed to advise.

 

In terms of risk an AV is similar to an ISA in that you can

invest in cash, which is capital safe or you can invest in equities, the value

of which can fall as well as rise…………..as they say.

 You can insure your equity capital but it’s

expensive. Within the AV you can move funds to and from cash or equities at

will and change the equities held, normally free for the first few changes each

year. The inheritance benefits are clear as is the opportunity to withdraw €9.2k tax and social charge free each year.

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thank you, leslauriers.  i am now much clearer about, though not entirely on top of , this subject!  i shall be seeing a financial advisor later this month and, at the very least, i shall be able to discuss things with him from a more informed base.

you have also reassured me somewhat, generally speaking, and i can see that all may not be as unappealing as i had feared.  i have spent an anxious night thinking through the implications of some of the things you posted yesterday.  but, i do hope to be able to use your comments as a springboard to some useful debate with the FA and my OH

thanks again for your help; it has been much appreciated by me and others 

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