Do you want HUGE tax efficiency for your savings in France?
When I first meet a client it takes time for us to get to know each other, and every single person is different with different needs. However, at the root of those needs is usually the desire to find out how best to keep all those hard earned savings, investments and pensions as tax efficient as possible.
Once you have left the UK and become resident in France, the ISAs and other tax efficient savings you may hold in the UK are no longer tax-free and you need to give careful consideration about how you deal with this. With the new Common Reporting Standards that were introduced recently we can no longer bury our heads in the sand and think that the French taxman will not know about the assets you have left in the UK and will not look to tax you accordingly.
Fortunately, there is a perfectly good solution for this in France – Assurance Vie. Many of my clients have heard the name but do not necessarily know how it works. Similar in make-up to a UK Equity ISA an Assurance Vie allows you to save your money in a tax-efficient ‘wrapper’.
Assurance Vie, Working for You
What are the principles of an Assurance Vie and how can it help you with your tax planning?
- Your investment is allowed to grow tax free.
- Should you wish to withdraw funds only the part of the withdrawal that is subject to a ‘gain’ will be subject to tax and social charges, as the majority of your withdrawal is classed as return of capital.
- For higher rate taxpayers you can choose to be taxed at the lower rates attributed through the Assurance Vie regime (12.8% in years 1 – 8, plus 17.2% social charges. After year 8 if your net premiums are below €150,000 then you can benefit from a reduced rate of tax at 7.5%) or your nominal rate, so if you are a nil-rate taxpayer then you will have no tax to pay.
- After your 8th year there is a tax-free withdrawal allowance of €4,600 per annum (€9,200 for a joint policy), after which additional withdrawals are taxed as above.
- You can nominate anyone to be a beneficiary of your Assurance Vie and unlike other aspects of inheritance the recipient is entitled to receive the equivalent of €152,500 tax free, with anything over this taxed at a rate of 20%. This means that anyone who is not a blood relative or spouse (step-children, cohabiting partners or friends) will not be subject to the usual 60% Inheritance tax. (Different amounts apply if initial investment is made when you are over the age of 70.)
- Savings can be kept in sterling, or be made in Euros or US dollars and can be ported back to the UK should you return in the future.
- You can have a choice of investment options to suit your specific requirements and level of risk, which can be altered as your needs change.
- Assurance Vie policies are exempt from Wealth Tax.
However, this is only one aspect of your tax planning and it is extremely important to take full advice from the outset to ensure that your hard-earned cash, whether in savings, pensions or investments, keeps working hard for you.