After French Prime Minister François Bayrou managed to force through the state's 2025 budget, using the controversial article 49.3 constitutional tool (and surviving two no-confidence votes) the French senate finally adopted the new legislation on Thursday.
It still needs to get final approval from the Conseil Constitutionel, but the budget will allow state spending plans for 2025, some of which had been frozen due to the ongoing uncertainty, to be unlocked.
The Budget is based on that proposed by deposed premier Michel Barnier, which sought to decrease France's spiralling deficit, but there are some important differences from the draft.
Taxes
High-earning households - The new 2025 budget held onto measures from the previous draft, including temporary (one year) increases on income taxes for the wealthiest households.
This is called the contribution différentielle sur les hauts revenus (CDHR), and it will apply to people with a reference tax income (revenu fiscal de référence) higher than €250,000 for an individual, and €500,000 for a couple. They will be taxed at a rate of at least 20 percent on all parts of their income, French news outlet LCP Assemblée Nationale reported.
According to Les Echos, about 25,000 households are expected to be affected by this in France, and it is estimated that it will bring in €2 billion in tax revenue.
Tax brackets - The budget also updates the income tax scale, increasing values by 1.8 percent to reflect inflation.
The initial budget draft from former PM Barnier proposed an increase of two percent, but this was not implemented due to the vote of no-confidence in December.
Here are the new tax brackets;
- 0 to €11,497 - 0 percent
- €11,497 to €29,315 - 11 percent
- €29,315 to €83,823 - 30 percent
- €83,823 to €180,294 - 41 percent
- €180,294 and over - 45 percent
You can see the 2024 tax brackets on the ministry of economy website.
VAT for self-employed people - the below measure has been paused after a public outcry, the finance ministry now says that it wants to consult more widely.
The intitial proposal was that from March 1st, the VAT exemption threshold reserved for micro-entrepreneurs (small businesses, freelancers, and self-employed people) would decrease. Previously, the VAT exemption on turnover depended on your specific type of work (eg. owning a gîte v offering services such as translation), but from March it will be decreased to €25,000 across the board for all micro-entrepreneurs, Capital reported.
READ MORE: How much can you earn as a French micro-entrepreneur
Big businesses - Large companies will be asked to make 'an exceptional contribution' (contribution exceptionnelle) from their profits, for a limited period only. Companies with turnover greater than or equal to €1 billion are affected by this.
Housing
Notaire fees - The new budget allows for local authorities to increase notaire fees (les droits de mutation à titre onéreux, DMTO) from 4.5 percent to 5 percent. However, the measure is only set to apply for three years (from March 2025 to February 2028), and first-time home-buyers should be exempt.
In France, a property sale in France cannot be legally completed without the involvement of a notaire - as only they have the power to register the change of ownership on the land registry.
First-time buyers - The means-tested interest free loan (prêt à taux zéro), intended to help first-time home buyers purchase a house, will be extended until 2027 to detached new-builds. This will come into effect in two months, in order to give banks time to get organised, according to Le Figaro.
Environmental efforts
'Eco' tax and flights - Similar to previous discussions in the former draft budget, the new budget will bring in an increased tax on airline tickets. For economy class tickets within France or Europe, this would mean more than doubling the existing amount from €2.63 to €7.40.
Previously, budget airlines, like Ryanair, threatened to axe flights over this tax increase.
Vehicle registration prices - For people purchasing high polluting combustion-powered cars, the budget allows for a higher tax at the time of registration (either for purchase or long-term lease).
This already existed (known as the taxe malus sur les véhicules polluants), but the new budget makes it apply to cars emitting more than 113g of CO2 per kilometer (rather than 118g previously). The tax is €50 per additional gram of CO2 above the limit, and it will apply from March 1st.
Gas boilers - The VAT rate for installing gas boilers will be increased to 20 percent.
Other changes
The budget for state medical aid (aide médicale d’Etat, AME), which provides care for undocumented people, will be reduced. In comparison to the Barnier draft, the funding is decreased by €111 million, keeping it at the 2024 level, Liberation reported.
Bayrou's budget also plans to cut €50 million from the education budget, but unlike previous expectations, it will restore 4,000 teaching posts.
Defence
One of the few areas of government spending to see a big increase in this otherwise cost-cutting budget is defence. The French defence budget stands at €50.5 billion in 2025, €3.3 billion more than in 2024.
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