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MONEY

Brits in France: What you need to know about your pension

Retiring to France is a popular option for Brits, offering a relaxed and sunny climate with good wine that's still within an easy journey of family back in the UK. But ensuring that you make the most of your pension is vital for your new life.

A couple sitting on chairs beneath a tree, silhouetted by the setting sun
Photo: Harli Marten / Unsplash

For Brits already living in France, the good news is Brexit didn’t change everything. Pension rights, including uprating of the state pension and account being taken of any period in which pension holders paid into another country’s system, were retained in the Withdrawal Agreement.

UK state pensions and civil service pensions can still be able to be paid into EU bank accounts, while private pension providers should have arrangements in place to ensure they can also continue to do so. 

Be aware, however, that any private pension lump sum payable on retirement is taxable in France. 

But some benefits have been lost to anyone who moved to France after January 1st, 2021, the end of the Brexit transition period.

READ ALSO How Brits can retire to France after Brexit

Tom Goold, founder of international financial advisers Valiant Wealth, said: “It pays to be pro-active if you’re planning to move to France or any other country. If you have a private UK pension and are over the age of 55 then you have full flexible access to the pot.

“The first 25 percent – known as the pension commencement lump sum (PCLS) – is tax free but only if you are UK tax resident. Once you have established tax residency elsewhere you will pay tax according to local rules, providing that country has a double tax agreement with the UK – which France does.

“This means that even the PCLS will be taxed, so it can pay off to take the maximum amount out of your pension before you leave.

“If this means taking a large amount and you are worried about it being in cash then you can simply invest it via a vehicle suitable for residents of France rather than leaving it in cash and losing value against the current high level of inflation.

“There are flexible pension vehicles available for EU residents such as UK-based SIPPs (self-invested personal pensions) that offer multiple currency accounts and will pay out gross of UK tax to a foreign bank account. Most UK SIPP providers aren’t interested in non-residents as the extra compliance makes it commercially unviable as well as extra post-Brexit complications involved with giving advice.”

Brits living in France can claim their UK state pension, by completing an international claim form – here – as long as they have paid enough UK National Insurance to qualify. Claims must be made no more than four months before retirement age.

Most UK pensioners pay tax in the UK. But you should still declare them on your annual tax return in France – under a double taxation agreement between the two countries, you will not be charged twice, and the French taxman will assess your tax liability accordingly.

The UK government’s gov.uk website has more information on pensions for Britons living overseas.

Tax matters

Many people think that if all your income comes from the UK then there is no need to do a French tax declaration. That is in fact not the case, almost all residents of France are required to fill in the annual declaration. Double taxation agreements between the UK and France mean that you won’t be taxed on your UK income, but you still have to complete the French paperwork.

Tax declarations begin in April.

READ ALSO How to fill out the French tax declaration

You should inform tax authorities back in the UK that you’re moving to France. 

Pensioners are treated favourably in France, with a 10 percent reduction factored in on income up to €36,600. You also pay tax as a household so you probably end up paying less tax than you might elsewhere.

Currency matters

Be aware that currency fluctuations between sterling and the euro will mean that the amount that finally makes it into your bank account will change from month to month.

Scams

Brits living in France are unfortunately frequently targeted for cold-calls and scams surrounding pensions – find out more on how to protect yourself.

In all cases, it is best to obtain independent advice that’s appropriate to your personal situation, from a financial expert.

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TAX DECLARATION

Late fees, fines and charges: What you risk by missing French tax deadlines

The deadlines for the annual French tax declaration are upon us, but what are the penalties if you either miss the deadline or fail to file your return at all? We take a look at the sanctions.

Late fees, fines and charges: What you risk by missing French tax deadlines

The annual Déclaration des revenues – income tax declaration – involves virtually everyone in France filling out a form giving detailed information on their income to French tax authorities.

If you live in France, it’s almost certain that you will have to complete this – even if you’re a salaried employee and your tax has already been deducted at source, or if all your income comes from outside France (eg a pension received from the UK or USA).

There are only a very few exemptions to the requirement to fill out the tax declaration and they are listed here

Declarations for the 2021 tax year opened in April 2022 and the deadline is either late May or early June, depending on where you live – find the full calendar here

But what happens if you miss the deadline?

For most people there is a staggered system of late charges.

If you are less than 30 days late your overall tax bill can be increased by up to a maximum of 10 percent.

Once you receive a notice of late payment, the overall bill can increase by up to 20 percent, or 40 percent if you have still not filed within 30 days of receiving the later payment notice.

You will also be charged interest on late payments.

What if I don’t pay income tax in France?

If you have no taxable income in France – for example your only income is a pension from another country – then you still have to fill in the declaration.

If you file late the increases cannot be applied, since your tax bill is €0, but you can instead be liable for a late fee of €150.

What if I have exceptional circumstances?

If you know that you will not be able to file in time, you can ask the tax office for a remise gracieuse (remission) in order to avoid late fees and penalties.

You will need to outline your reasons for not being able to file in time and while there isn’t a list of accepted excuses, the reason must be exceptional circumstances such as serious illness or the death or a loved one.

If you have previously missed deadlines, the tax office will be less likely to accept your request.

The request should be made by June 29th either in person at the tax office or through the messaging system in your online tax page.

What if you don’t declare everything?

If you have not declared income which is subsequently discovered by authorities, the increase in your overall tax bill can be up to 80 percent – the maximum penalty is usually reserved for people who have deliberately tried to hide parts of their income.

We have a full guide to what you need to declare HERE, but the basic rule of thumb is that you need to declare everything, even if it is not taxable in France, eg income from a rental property in another country.

France has dual taxation agreements with countries including the UK and USA so if you have already paid tax on income in another country you won’t need to pay more tax in France – but you still need to declare it.

What about foreign bank accounts?

Another item that frequently catches out foreigners in France is overseas bank accounts.

If you have any non-French bank accounts, you need to list them on your tax declaration, even if they are dormant or only have a very small amount of money in them.

This also applies to any foreign investment schemes you have, such as life insurance policies. 

The penalty for not listing accounts is between €1,500 and €10,000 and that applies for each account you fail to declare. 

What if I made a mistake on my declaration?

In 2018 France formally enshrined the ‘right to make mistakes’, giving people the right to go back and correct their declarations without attracting a penalty.

So if you realise you have missed something off or added the wrong info you can either go back into your online declaration and correct it or, if you file on paper, visit your local tax office.

However the ‘right to make a mistake’ does not extend to late filing.

What if I didn’t make a declaration?

The French tax system is often confusing for foreigners, with many people wrongly assuming that if they are not liable for tax in France then they don’t need to fill in the declaration.

For people who persist in not making the declaration, even after the arrival of the notice of default, tax authorities can make an estimate, based on earnings and lifestyle, and present the bill.

However for new arrivals in France it’s likely that they will not be registered with the tax office and will therefore never receive a notice. 

In this instance it’s always better to come clean – if you have made a genuine mistake and you approach the tax office  (rather than waiting for them to watch up with you) you will usually be dealt with quite leniently. 

How can I get help?

If you’re struggling with the system, there are ways to get help.

The tax office has an English language information page here, and a dedicated helpline for internationals on + 33 1 72 95 20 42.

You can also visit your local tax office, every town has one and you can simply turn up without appointment and ask for help (although if the office is small and your query is complicated you may need to make an appointment for the full discussion). Surprising as it may sound, employees at the tax office are generally pretty friendly and helpful and can guide you through the forms you need to fill in.

If your tax affairs are complicated and/or your French is at beginner level, it may be better to hire an accountant to ensure that everything is in order. You can find some tips on getting professional help HERE.

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