How Are UK Pensions Taxed In France?

This article is intended for UK expats in France with UK pensions, and runs through the tax treatment of different types of UK pensions under French law.

If you are a UK expat already living in France or planning your retirement there, it is important to consider the financial aspects of your move, particularly how your UK pension income will be taxed.

Our guide will provide everything you need to know to navigate these complexities, ensuring you can enjoy your golden years in France with peace of mind. With the right knowledge, you can choose the most optimal and tax-efficient pension solution.

UK Pensions In France | The Key Points

In France, pensions are taxed similarly to salaries and are subject to marginal income tax rates. However, UK pension income may qualify for a 10% deduction, capped at €4,321 per household. Unlike the UK, the French tax system operates on a household basis rather than taxing individuals separately, meaning tax is calculated on the total collective household income.

In addition to French income tax, you will also be subject to social charges, which apply at a rate of 9.1% for pension income. However, if you hold an S1 form and do not use the French social security system, you are exempt from paying these social charges.

The UK has a double taxation treaty with France, meaning you won’t have to pay tax twice and should only be taxed in one country. However, the specifics of how and where you are taxed will depend on the type of pension you have.

Most pensions, including State pensions, workplace pensions (defined benefit or defined contribution), and personal pensions, including Self-Invested Personal Pensions (SIPPs), are taxable in France.

Your pension income from these sources will be added to your total income and taxed in line with French income tax rates. To avoid double taxation, it is crucial to notify your UK pension company once you become a resident in France. You will need to provide proof of residency and tax obligations in France, which can be done by completing the France Individual DT form from HMRC.

How Are UK Government Service Pensions Taxed In France?

If you receive a UK Government pension, including those from public service employment, military service, or civil service, your pension will be taxed solely in the UK, even if you become a French tax resident.

However, you are still required to declare your UK Government pension income on your French tax returns. While these pension payments will not be taxed in France, they may impact your overall tax situation by increasing your effective tax rate (taux effectif), and potentially pushing you into a higher tax bracket.

Tax On Lump Sum Pension Payments In France

Lump sum withdrawals from personal pensions can be complex when it comes to tax treatment. In the UK, pension schemes typically allow up to 25% of the pension to be withdrawn tax-free. However, in France, this is generally not the case, and lump sum withdrawals may be taxed at the marginal income tax rate.

For this reason, it is important to consider whether you want to take your 25% tax-free lump sum in the UK before moving to France, as you may lose out on this tax-free benefit once you become a French tax resident.

However, France does offer a scheme called ‘prélèvement forfaitaire', a special fixed-rate tax regime for lump sum withdrawals of an entire pension. If you meet certain criteria, you may qualify for a preferential tax rate of 7.5%, though social charges will still apply.

If eligible, this may be a tax-efficient opportunity to invest the entire amount in a locally compliant, tax-efficient solution in France and reduce your overall tax burden. Seeking professional advice is essential to determine whether this option is suitable for your individual circumstances.

The Assurance Vie | Pension Transfers For UK Expats in France

The French Assurance Vie is a popular savings solution in France, particularly among expats, due to its tax efficiency. This investment account combines the benefits of life insurance and investment within a tax-efficient ‘wrapper,’ offering significant tax advantages and an excellent opportunity to grow your retirement savings over time.

It is an ideal option for expats planning to stay in France long-term, providing protection from high income tax and social charges. Additionally, it serves as an effective estate planning tool, offering significant advantages when it comes to inheritance tax. Find out more here.

Financial Planning In France

At The Wealth Genesis, we understand the unique needs of expats in France, with advisers based locally to provide expert guidance. As a fully independent firm, we offer advice based on the entire market, without ties to any specific financial products or providers.

This allows us to find the perfect solution tailored to your unique circumstances and financial goals. If you’re seeking advice on your pension or want to explore tax-efficient solutions such as the Assurance Vie, book a free discovery call with one of our advisers today using the diary below.