How could Brexit affect you and your finances?

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By Thomas Marron

Brexit negotiations are underway, though there is still a long way to go. There are still questions about how the relationship between the UK and EU will evolve and affect British expatriates in France. Reassuringly, both sides have confirmed that securing reciprocal rights for citizens is a priority.

Britain’s initial proposal for citizens’ rights included offering a “settled status” to EU nationals who have lived in the UK for five years. This would allow them the same access as UK citizens to healthcare, education, pensions and other benefits – provided the same was offered to Britons within the EU. The UK government said it would protect existing pension and healthcare provision for UK nationals in EU countries.

Taxation

Taxation is a local matter. Double taxation treaties are negotiated between two counties, independently of the EU, so there should be no change to how British expatriates resident in France are taxed.

However, if the UK leaves the European Economic Area (EEA) and no equivalent arrangements are set up, some UK assets may be taxed differently. In France, once UK life assurance policies become non-EU assets they will no longer qualify for beneficial tax treatment given to EU assurance-vie and capital redemption bonds. That means no fixed rates and no tax credit. Seek advice if this may affect you.

Pensions

The UK pledged to continue annual increases to expatriates’ state pensions. Brexit should not affect accessing or transferring private pension funds either. However, the UK’s new ‘overseas transfer charge’ may indicate things to come. Since 9th March 2017, certain transfers to Qualifying Recognised Overseas Pension Schemes (QROPS) attract 25% taxation.

Currently, this does not affect transfers to approved QROPS based within the EEA. However, Brexit offers the Treasury more scope to introduce more ‘exit taxes’ on overseas transfers or to make it harder to cash-in ‘defined benefit’ pensions. Consider acting now under today’s rules, but take personalised, regulated advice to ensure a suitable approach for you.

Investments

Brexit could potentially bring periods of uncertainty for the UK economy. Review your portfolio to check if you are overexposed to UK assets or any other one area. An adviser can help you improve diversification over countries, asset classes, companies, sectors and currencies to reduce risk in a way that suits your circumstances.

You should also consider the currency you hold your investments in. Keeping everything in Sterling brings extra risk as you are so dependent on exchange rates. With the fortunes of the pound and the euro so tied up with Brexit developments, it is a good idea to reconsider the best currency mix for you, and look for flexibility where possible.

Keep your finances in shape

Regardless of Brexit, your circumstances and objectives can change over time, so you should regularly review your financial planning. Now has never been a better time to talk to a locally-based financial adviser and establish the best way to structure your finances and help prepare for Brexit.

Potential French tax reforms under Macron

President Emmanuel Macron promised various tax reforms during his electoral campaign earlier this year. If they all go ahead, there will be substantial changes to how investment income is taxed.

He said his key aim was to encourage people to save more by simplifying taxation on financial income.

Flat tax on investment income

Under the flat tax proposal, investment income would become liable to one fixed rate of 30%, regardless of the amount earned. This 30% would include both the income tax and the social charges.

From information released back in April, it is possible that this new flat rate will apply to people investing over €150,000. Savers in low-income brackets will keep the option for progressive income tax rates.

Wealth tax 

Currently, you are liable to wealth tax if you are resident in France on 1st January and your household taxable wealth amounts to over €1,300,000. It is based on worldwide assets. The first €800,000 is exempt from this tax.

M. Macron’s plan is to reform this tax, so that it will only apply to real estate assets, so savings and investments would be exempt.

No confirmation as yet

This is based on the promises made by M. Macron during his electoral campaign, so the end result may be different. Even if he wants to go ahead as planned, it needs to be approved by parliament first, and he may have to adjust the proposals in the process.

Any reduction on tax on investment assets will be very welcome. However, although the current system has high headline rates of tax, with specialist advice and careful planning you can often significantly reduce taxation on investment assets. And with or without these reforms, strategic tax planning in France remains as important as ever.

Both Brexit and Macron’s tax reforms are key subjects at the Blevins Franks seminars.

Details below.

The Blevins Franks Autumn Seminar

Brexit, Macron, Healthcare, Pensions, Inheritance Planning, Tax, Markets, Timing…
What to consider in moving to, staying in or leaving France.

PLAISANCE-DU-TOUCH (Toulouse) Monday 2 October
CANET-EN-ROUSSILLON (Perpignan) Tuesday 3 October
BÉZIERS Wednesday 4 October
CASTELNAU-LE-LEZ (Montpellier) Thursday, 5th October
VERS-PONT-DU-GARD Friday, 6th October

Book your seminar place here.

Statements concerning taxation are based upon our understanding of current taxation laws and practices; tax rates, scope and reliefs may be subject to change. Any taxation information has been summarised and put forward for consideration purposes only and should not be construed as personalised tax advice; an individual should always request personalised advice in relation to their specific circumstances. Blevins Franks accepts no liability for any loss resulting from any action or inaction or omission as a result of reading this information, which is general in nature and not specific to your circumstances.

06 14 24 61 29
thomas.marron@blevinsfranks.com

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