Can you afford to retire in France? It’s a good question. Things have changed since Brexit, and things have changed a lot for those from the UK who want to retire to France. We asked consultant Robert Kent at Kentingtons, a French financial and tax professional, to explain how to give yourself the best chance of making retirement as an expat in France successful.
I have been giving financial advice to English-speaking clients who have lived outside their home country for over three decades (which explains my diminishing hairline!). For 20 years, I lived in France, specialising in French tax and financial planning. The people I have served are from all walks of life. Some have settled into their new country and lifestyle very well, others have not, and a few have returned to their home country.
One primary reason some expats do better than others is financial planning. The more time you spend understanding how to make your savings work best for you, the more you will enjoy retirement and the good life in France. Most people I meet are those who retire in another country and rely on their pensions and investments to pay the bills and provide an income.
Retiring to another country is generally a decision to pursue a better life, so it is initially an emotional decision. However, actions taken before any move must also be carried out with logic and solid planning.
Look before you leap – Plan before you move
When moving to France, getting counsel from a French-qualified and regulated professional is vital to avoid unnecessary stress and complications. So, how do you ensure your bills are paid, you have sufficient income, and your investments are cared for as tax-efficiently as possible when you have retired in France?
Know what works best for you as French Residents
If you live in or plan to move to France, you must know that it has an entirely different tax system and inheritance rules. It would be best to talk to an international financial adviser who understands France and the UK’s rules and regulations to get the right advice.
Some people are happy to keep their investments in UK deposit accounts, which earn little or no interest. However, high inflation levels mean low interest rates stifle growth or reduce value.
Many UK nationals prefer to keep their investments in UK Individual Savings Accounts (ISAs).
ISAs are entirely tax-free. However, this is a UK tax allowance, which does not apply in France. The French tax system will completely ignore the tax wrapper and merely assess to tax whatever is inside it, such as stock, cash, etc. Moreover, non-UK residents may not add any further money to their investments.
Maximising Investment Return / Minimising French tax
Low interest rates mean you may need to take a measured risk within your investments to make a noteworthy return. Diversifying your investment portfolio to include French tax-efficient investments can spread out your tax liabilities and possibly offer more favourable tax treatment on some of your investments.
At the same time, you should seek to remain as tax-efficient as possible. For example, carefully plan the timing of your ISA withdrawals, ideally before you move to France.
Manage your pension and investment savings to maximise potential income and minimise tax. The UK Pension Freedom Act (2015) gives you a wide range of choices regarding managing your pension and retirement income financially. It is possible, for example, to draw down an entire pension as cash and pay a tax weight of just 6.75% (7.5% after a 10% allowance). If you are a high-rate taxpayer, paying 40% or more, this option can be overwhelmingly attractive, as you can save significant tax while gaining total control of your money.
You may have noticed by now that this article started with a question and that I have yet to answer it. Evidently, I do not know your personal position, so I cannot respond to that question directly; however, I can tell you how the tax systems differ and which leaves most UK retirees better off.
France as a Tax Haven
Many people consider a tax haven a place where people do not pay taxes. This is not the correct definition. The Cambridge dictionary explains it thus: a place where people live or invest money so as to pay less tax than they would in their own country.
Therefore, for UK nationals to be able to describe France as a tax haven, they merely have to pay less tax in France than their home country, the UK.
Most UK nationals who retire to France are better off paying their taxes in France!
I’ll give you a minute to let that sink in! This is a complete and total shock to many, who often approach me to ask in a resigned fashion, “Okay, what’s it going to cost me?” assuming that bad news is coming.
We find that most retirees in France who come from the UK pay 15-30% less tax than those in the UK. Better yet, with good planning, savings can be significantly higher. There are many reasons, such as the parts system and specific allowances; however, those are the facts.
I do not suggest for a second that everybody will be better off. This is where planning is essential; it is not moving with hope but with absolute certainty about your position.
Can you afford to retire to France? A better question might be … can you afford not to?
Seek Professional Advice: Tax laws can be complex and vary based on individual circumstances. It’s advisable to consult with financial advisors with expertise in UK and French tax systems. They can provide tailored advice and strategies for your specific situation.
Find out more and book a consultation with Kentingtons at: kentingtons.com
