Now that France has finalised its 2026 national budget, it is a good time to review what has — and has not — changed for French taxation this year.
After significant delays caused by political deadlock, the Assemblée Nationale adopted the 2026 budget on 2 February. The government ultimately used its constitutional powers to push the finance bill through parliament. Prime Minister Sébastien Lecornu subsequently survived the no-confidence motions that followed, and the Constitutional Court approved the budget on 19 February, allowing President Emmanuel Macron to sign it into law.
While annual budgets in France sometimes introduce significant tax reforms, recent years have been relatively stable from a taxation perspective — and 2026 is no exception.
Most changes are modest, including slight increases to income tax bands to account for inflation and a rise in the Contribution Sociale Généralisée (CSG) element of social charges for certain types of investment income.
For British expatriates living in France, understanding how these changes affect your finances remains important.
French Income Tax Rates for 2026
While income tax rates themselves remain unchanged, the income bands have increased slightly in line with inflation.
The scale rates of French income tax for income earned in 2025 and declared in 2026 are as follows:
| Net Income | Tax Rate |
| Up to €11,600 | 0% |
| €11,601 – €29,579 | 11% |
| €29,580 – €84,577 | 30% |
| €84,578 – €181,917 | 41% |
| Over €181,917 | 45% |
In addition to these rates, an extra tax applies to higher income households.
For single taxpayers:
- 3% on income above €250,000
- 4% on income above €500,000
For couples:
- 3% on income above €500,000
- 4% on income above €1,000,000
A measure introduced in the previous budget requiring certain households to pay a minimum tax liability of 20% has now been made permanent. This rule will remain in place until France’s budget deficit falls to 3% of GDP, which may take several years given that the deficit stood at 5.6% in 2025.
French Social Charges in 2026
In France, social charges are applied in addition to income tax, and these can significantly increase the overall tax burden depending on the type of income.
For 2026, there are no changes to social charges on employment or pension income.
However, the CSG component has increased from 9.2% to 10.6% for certain investment income.
Social charges consist of several components, and the total rate varies depending on the type of income and whether the individual holds an S1 certificate.
British expatriates who are covered by the healthcare system of another EU or EEA country — including those with a UK-issued S1 certificate — benefit from reduced social charges.
For these individuals:
- Foreign pension income is exempt from French social charges
- Investment income is subject only to the 7.5% Prélèvement de Solidarité
This can significantly reduce the overall tax burden on investments.
Social Charges Overview
| Income Type | Without S1 | With S1 |
| Employment income | 9.7% | 9.7% |
| Pension income | 9.10% | Exempt |
| Assurance-vie gains | 17.20% | 7.50% |
| Income from PEL, PEP & CEL | 17.20% | 7.50% |
| Real estate capital gains | 17.20% | 7.50% |
| Rental income | 17.20% | 7.50% |
| Bank interest | 18.60% | 7.50% |
| Dividends | 18.60% | 7.50% |
| Share capital gains | 18.60% | 7.50% |
Taxation of Investment Income
The fixed rate of income tax for investment income remains 12.8% in 2026.
This rate applies to:
- Interest
- Dividends
- Capital gains from shares and securities
It does not apply to rental income, which is taxed under different rules.
When social charges are added, the total effective tax rate on investment income becomes:
- 31.4% for individuals without an S1
- 20.3% for individuals with an S1
Lower-income households may opt to be taxed under the standard progressive income tax scale instead, though this choice must apply to all investment income.
Real Estate Wealth Tax
France’s Impôt sur la Fortune Immobilière (IFI) — the real estate wealth tax — remains unchanged for 2026.
The tax applies to net real estate assets above €1.3 million, and the scale rates remain the same.
Importantly, IFI only applies to property assets, not financial investments. This means that investment portfolios and financial assets are often more tax efficient than large property holdings.
French Succession Tax
There have been no major reforms to French inheritance tax rules in recent years, and 2026 brings only a small adjustment.
The main change affects the tax advantages for business transfers during lifetime or on death.
To benefit from the 75% tax exemption, beneficiaries must now retain the transferred assets or company shares for six years instead of four.
In addition, assets such as cars and residential property not exclusively used for business purposes are now excluded from the exemption.
More broadly, while inheritance tax rates have remained stable, tax allowances have not increased with inflation. This means the real value of allowances has gradually declined over time.
For many families, this makes regular estate planning reviews increasingly important.
New Holding Company Tax
The 2026 budget introduces a 20% tax on certain holding company structures.
This measure will apply from 31 December 2026 to holdings subject to corporate tax where at least one shareholder is a French resident.
The tax targets non-operational assets exceeding €5 million, including items such as:
- Racehorses
- Jewellery
- Real estate used for the benefit of shareholders
While financial assets such as shares are considered when determining eligibility for the tax, they are not themselves taxed under this measure.
At the same time, the temporary increase in corporate tax rates for large enterprises continues into 2026.
Tax Planning for UK Nationals Living in France
For British expatriates, effective tax planning requires understanding both the French and UK tax systems.
The two countries often take different approaches to taxation, particularly in areas such as:
- pensions
- investment income
- estate and inheritance planning
This means that relocating to France often requires restructuring financial arrangements to ensure assets are held in the most tax-efficient way possible.
Although French taxation has remained relatively stable in recent years, the UK tax landscape is undergoing significant change, with reforms affecting inheritance tax, pensions and residency rules.
Many expatriates who have relocated from the UK to France — or who are already living there — may benefit from reviewing their financial and tax arrangements, depending on individual circumstances
Strategic Advice for Expats
Understanding how tax rules apply across multiple jurisdictions can help individuals make informed decisions and consider potential strategies for their financial affairs.With the appropriate strategic planning, it may be possible to:
- consider ways to reduce exposure to unnecessary taxation
- review how assets are structured
- asses options for retirement income
- evalaute estate planning arrangements
Taking specialist cross-border advice can support understanding of how your financial arrangements interact with both French and UK regulations.
Disclaimer
This article is for general information purposes only and does not constitute tax, legal, or financial advice. Tax rules and regulations depend on individual circumstances and may change in the future. Professional advice should always be obtained before making decisions based on your personal situation.
This communication is for informational purposes only and is not intended to constitute, and should not be construed as, investment advice, investment recommendations or investment research. You should seek advice from a professional adviser before embarking on any financial planning activity. Whilst every effort has been made to ensure the information contained in this communication is correct, we are not responsible for any errors or omissions.
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