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Do you want HUGE tax efficiency for your savings in France?

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.

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However, analysis by the Association of British Insurers (ABI) and the Financial Conduct Authority (FCA) reveal worrying trends.

In 2018, the FCA published research findings showing that during the 12-month survey period 91% of UK adults did not obtain regulated financial advice.*

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Reforms to pension tax relief may happen soon

TaxThe importance of putting money into a pension cannot be understated, and the British government has a regulation in place – the pension tax relief scheme – to encourage people to save. But many experts are predicting significant changes to the scheme. If you’re planning to retire overseas as an expat and take advantage of international pension transfers, you’ll need to stay updated with these changes.

How does pension tax relief work?

The pension tax relief scheme is an incentive to entice people to put money into their pension pot. To reward people for thinking ahead to their retirement, the government currently tops up their pension contributions based on the rate at which they pay income tax. So, basic rate taxpayers will receive 20 per cent tax relief (meaning they only need to pay £80 into their pot to get £100), while higher rate taxpayers are entitled to 40 per cent relief.

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