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British pound falls again and heads for parity against euro

The value of the pound has tumbled against the euro post-Brexit referendum, with some experts predicting the two currencies could end up at parity. The falling currency can have a huge impact on the lives of expats in the EU.

British pound falls again and heads for parity against euro
Photo: AFP
At the time of writing, the British pound is worth €1.17, down from around €1.40 before the June 23rd referendum that saw the majority of British voters opt to leave the EU.
 
This comes as a knock-on effect from the pound falling against the US dollar overnight, seeing lows that haven't been reached since 1985. 
 
“The pound sterling recorded a bad performance after poor economic figures from the UK, including a stronger slowdown in services,” Eric Viloria of Wells Fargo told the AFP news agency. 
 
This drop has seen the value of the euro drop slightly against the dollar too, with one euro currently worth 1.1050 dollars.

Some analysts have suggested that the pound and the euro will eventually reach parity.
 
David Meier, an economist at Julius Baer, said he would “not be surprised” to see parity within the next 12 months. 
 
“We believe that weakness will extend gradually beyond the first shock reaction, as the fundamental data will continuously turn pound-negative,” he wrote in a research note soon after the referendum.
 
The past week of Euro per 1 GBP. Photo: XE.com
 
Impacts of a weaker pound for France
 
As the value of the pound continues to tumble, many Brits will see their summer holiday budgets rise considerably.
 
Brits make some 12 million visits to France every year, most of which are made in the summer. While companies like Brittany Ferries say they haven't noticed hordes of British travellers looking to cancel, it fears the fall in currency may impact future bookings unless the value of the pound picks up.
 
Many expats in France earn a living from the tourist industry, and its no secret that the British (and their wallets) play a large part in contributing to this industry. 
 
Those working in operating tours or renting out property – popular jobs among Brits in France – are likely to see continued strains on their business if the pound keeps dropping. 
 
The falling pound also spells bad news for any retirees living in France who depend on their UK pensions or investments for income.

And any Brits in the UK who have been planning to escape to France and buy a dream home in the country may have to rethink their plans, as finance experts told The Local soon after the Leave vote came through. 
 
George White, who was planning to sell up in the UK and buy a house in France says he has been left in limbo.
 
“We were planning to move to an “equal valued” house [in France] which would in theory have been a nice big place will land and a swimming pool.. Now we are in limbo. We do not feel good about this,” White told The Local.
 
“We are devastated. We will lose financially.”
 
Estate agents in France fear that a falling pound will badly hit the foreign housing market, to which British buyers contribute massively in certain parts of the country like Dordogne.
 
Of course, the currency uncertainty brings good news as well, with those in France keen to visit the UK  never having a better excuse to cross the channel and enjoy a cheap holiday. 
 
And of course for those selling their house in France to return to the UK , there may be no better time.
 
David Thompson is one of those selling up and heading back to the UK.
 
“It makes sense to move back and sell the French property. Unfortunately we bought it at the peak of property prices and they have slumped since, so we aren't even getting back the amount we spent to buy it, so the more pounds sterling we can get from the sale the better,” he told The Local.
 
However looking on the positive side, it was only a few years ago that the pound and the euro were almost level and life went on pretty much as normal.
 
And after all, the Brexit isn't all bad news for Brits in France. In fact, we've come up with a whole host of things that show there is a bright side to the Brexit vote. 
 
 
If you have been affected by the fall of the pound, either positively or negatively, please get in touch and tell us your story. Email [email protected]
 
 
 

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READER QUESTIONS

Why some Brits in France are facing bigger tax bills since Brexit

Over the summer people living in France have received their tax bills, and some Brits who are residents here will have noticed that their bill is larger than usual - here's why.

Why some Brits in France are facing bigger tax bills since Brexit

Brits who live in France and make a tax declaration here, but have income from the UK, may have noticed that their tax bill has increased this year – here’s why and whether you can challenge the increase. 

Brexit

Yes, this is Brexit related and it refers to social charges on non-French income. The standard rate for these charges are 7.5 percent for income from an EU country and 17.2 percent for income from a non-EU country.

The tax bills received over the summer relate to the annual French tax declaration filed in April 2022, covering the 2021 tax year. In other words, the first year after the end of the Brexit transition period.

Social charges

Social charges are levies with a social purpose introduced in France in the 1990s to finance the country’s complex social security system.

If you have a French payslip you will already be familiar with them, and they actually make up the bulk of deductions from salaries, significantly more than income tax.

READ ALSO How to understand your French payslip

One of the big questions is whether France’s social charges are actually a ‘tax’ – the government repeatedly insists they’re not, for all that they look like a tax and are paid like a tax. 

The position on French social charges has changed several times in recent years, sometimes in response to court action all centred on whether this money that government deducts from your income can be called a ‘tax’ or not.

Katey Murray, at The Spectrum IFA Group, explained: “Article 29 of the amended Finance law of 2012 extended social charges to rental income from French properties and capital gains on properties for people who are not French tax resident.

“In 2015, a Dutch national challenged the fact that he was paying social charges in France and social security contributions in the Netherlands. The case went before the ECJ, which ruled these levies were similar to social security contributions and therefore contrary to European law.”

France’s highest administrative court, the Conseil d’Etat, confirmed the ECJ’s ruling. “French tax offices then, if a claim was made to them, reimbursed undue social charges,” Murray said.

“However, the French Government stated that these claims could only be made by someone covered for their healthcare by the system of another European country (EU, EEA or Switzerland) and not someone covered by a non-European health system. 

“This was confirmed by the ECJ for a French national living in China in a case in January 2018.”

Foreigners in France

And it’s this ‘healthcare system’ distinction that has become the key detail for Brits in France, clarified by a court ruling from March 2022 on the details of the Brexit Withdrawal Agreement. 

Social charges are currently set at 7.5 percent for income from an EU country, or 17.2 percent for income from a non-EU country. So income from the UK jumped to the higher rate at the end of the Brexit transition period.

However the ECJ ruling on healthcare cover is the key bit – essentially if you are already contributing to another European country’s social security system, you benefit from the lower rate.

This mainly affects two groups – Brits living in the UK (and therefore covered by the NHS) who have income in France, and Brits who are living in France and who have an S1, which states that their healthcare costs are covered by the NHS.

S1 holders are mainly British pensioners living in France, but the scheme can also apply to other groups including students and posted workers. 

Brits who are living in France and are covered by the French health system pay the higher rate on income from the UK. 

Technically the 7.5 percent rate is a ‘social levy’ rather than the prélèvements sociaux.

The ‘social levy’ is not charged on pensions, so if you are an S1 holder who receives a British pension, you will not have to pay any social charges at all, while certain types of property income may also be exempt from social charges.

Tax

As we stated above, social charges are not a tax (although they are deducted from your income by the tax office).

Taxes on income from the UK is covered by the bilateral dual-taxation treaty between France and the UK, which states that you don’t have to pay tax in France on income that you have already paid tax on in the UK. 

So the first thing to check on your tax bill is whether deductions relate to impôt (tax) or prélèvements sociaux (social charges).

Challenge your tax bill

So what to do if you think you have been incorrectly charged on income from the UK?

If you are an S1 holder, it’s a case of telling the tax office that you benefit from the lower 7.5 percent social levy, rather than the 17.2 percent social charge.

Murray said: “You can state that you are not subject to social charges by ticking boxes 8SH/8SI on your tax form (2042 form) or, if you have been charged at the higher rate, you can claim them back on your personal page on the impots.gouv.fr website.”

If the over-charge relates to a different issue – for example you have been charged both tax and the social charge or charged on exempt income – your first step is talking to the tax office, either in person or over the phone.

READ ALSO How to challenge your French tax bill

This article is a general overview of the tax rules and is not intended as a substitute for financial advice, if your financial affairs are complicated you are always better off getting professional help from an accountant who specialises in international taxation.

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