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Second home owners in France: What are your rights after Brexit?

While British nationals who are permanent residents in France have been grappling for some time with what Brexit means for them, second home owners will also be affected by the changes after December 31st - here's a reminder of what Brexit means for them.

Published: 1 July 2020 14:54 CEST
Updated: 7 July 2020 16:50 CEST

Second home owners in France: What are your rights after Brexit?

British second home owners in France are facing some hard choices. Photo: AFP

For many people who own property in France, the country is more than just a holiday destination. Second home owners frequently spend long periods here, get to know their neighbours, learn the language and often have long-term plans to move to France permanently.

But whatever their plans for their second home in France, Brexit is likely to have an impact. Many people assume that owning property in France gives them extra rights, but this is not always the case.

Here's the current situation for second home owners on some of the most commonly-raised issues – length of stay, residency, healthcare and making the move to France permanently at a later date – after December 31st, 2020.

Length of stay

This is the biggest question for second home owners – how long can they stay in France after Brexit? While some people use their French property purely for short breaks others, especially retirees, often spend long periods at a time in France or divide their year completely, spending the summer in France and the winter in the UK or vice versa.

Under European freedom of movement there is no limit to how long you can stay and no need to plan in advance – if you're having a great time and haven't yet sampled all the wines of the Bordeaux area then just extend your stay by another couple of months, no problem.

However this will almost certainly change after December 31st, 2020, which is when the Brexit transition period ends.

Exactly what the rules will be for second home owners after this date we don't know, it's one of the (many) things that still need to be agreed between the UK, the EU and member states like France.

At this stage, however, it seems likely that British citizens will be subject to the 90 day rule that already governs the visits of non-European citizens such as Americans and Australians.

The 90 day rule states that people can spend 90 days out of every 180 in the EU without requiring a visa. So in total you can spend 180 days (six months) in France but crucially you cannot spend more than 90 days at a time – ruling out extended summers in the French countryside or five months skiing in the French Alps.

The 90 rule also covers your time anywhere in the Schengen zone, so if you plan to visit another country as well this will limit your time in France even further.

Read more on the 90 day rule and how it works here.

For longer stays, non-Europeans are required to get a visa, a process that is expensive and complicated and for people who are not working requires you to demonstrate that you have sufficient resources never to be a burden on the French state. Find out more about visa rules here.

Residency

For people who want to spend longer than 90 days at a time in France there is the option to move here full time and apply for residency.

You can benefit from the more generous provisions of the Withdrawal Agreement if you are legally resident in France before December 31st, 2020.

However to gain French residency you must establish the country as your main residence, which means registering with the health system and filing an annual tax return (even if all your income comes from the UK you still need to file a tax return in France if you are a resident here).

There are also conditions attached to being 'legally resident' and they are more onerous than simply owning property or being on French soil – find out what legal residency means here.

Healthcare

This is not something that British people in France have previously had to worry about, as the European Health Insurance Card (EHIC) has entitled British people to treatment in France should they fall ill or get injured while they are here.

However as a European scheme this will not be available to British people after Brexit.

An agreement on healthcare has been reached for people who are full time residents in France, but at this stage there has been no deal for visitors or non-resident second-home owners. This means that British visitors to France will need to make sure they have comprehensive travel or health insurance in order for their costs to be covered, in the same way as you would for trips to America or other non EU countries.

Moving to France at a later date

For many second home owners the ultimate dream is to make the move to France permanent, often after retiring. But while this has been a comparatively simple process, after the end of the Brexit transition period it is set to get a lot more complicated.

Exactly what the rules will be for Brits moving to France after December 31st we again don't know – it's on the long list of things yet to be negotiated (along with the little matter of a trade deal) – but they will not be as straightforward as under freedom of movement.

It is likely that the rules will be similar to those now in place for other third country nationals such as Americans, Australians or Canadians. Third country nationals can and do move to France of course, but the process is considerably more complicated, not to mention expensive, and requires visas and – for people not working such as pensioners – extensive proof of your financial situation.

People who have a European spouse or partner – or a British spouse or partner who is legally resident in France by December 31st – can claim spousal rights, which is slightly easier but not exactly hassle free. Find out more here.

There's also the issue of healthcare for pensioners – at present the UK government still pays healthcare costs for British pensioners living in France, but while that will continue for people already living here, early indications are that the UK is not seeking the same deal for people who move after December 31st.

In conclusion then, owning property in France and even paying the French taxes such as the taxe d'habitation that come with it does not entitle you to much in the way of extra rights after Brexit and for many second home owners, life after December 31st is going to be considerably curtailed.

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6 pension questions British people should ask before retiring to France

Retiring to France is a dream for many, but before turning that dream into reality there are some serious financial questions that you need to ask yourself to ensure that your retirement is a financially comfortable one.

For most retirees, their main or only income will be a UK pension, so it’s important that you understand how your pension will work once you make the move.

There are some specific rules and restrictions on taking pensions out of the UK, while there is also the question of how UK pensions interact with the French tax system.

Financial adviser, Maeve Hoffman, from Spectrum IFA Group, emphasised that people should not take these decisions lightly, telling The Local: “Figuring out what to do with your pension should be part of your wider financial plans for your life.

“This may be your most important asset, besides your home, and the best answer for what to do with your pension is highly individual. There are no sweeping generalisations when it comes to advice on private pensions. Everyone’s situation is different,” she said.

This article is intended as an overview of how the system works for UK pensioners and is not intended as a substitute for individual financial advice. The article is aimed at people who have worked most or all of their career in the UK and then intend to retire in France – the situation is slightly different for people who work in France and then retire here.

You can find an overview on French tax rules for pensions HERE.

Long-term or short-term

The first thing you need to carefully consider is whether or not your move to France will be for the long-term or short-term.

When it comes to your UK pension, there are some options that may be advantageous for French residents looking to stay here permanently, but they could make your life very complicated if you end up returning to the UK in the future.

Do not be afraid to ask yourself the tough questions – is there any chance you will have grandchildren in the future that you will want to be geographically close to? Have you ever spent a significant time in France, aside from short holidays? Do you have roots in France, such as friends, family or a home? If your health deteriorates, will you want to be cared for in France or the UK?

If are unsure about the answers to these questions, then take some time to really think about them. There are alternatives to permanently moving to France if you are unsure – for example, you could spend a few months a year here on a short-term visitor’s visa.

Understanding the different tax rules

British retirees should be aware that the UK and France have very different tax systems.

Once you become a tax resident in France, you have to file a yearly declaration, including your global income. The country that gets to tax that income is determined based on the tax treaty between the UK and France, which seeks to eliminate double-taxation.

As for your UK-based pension, the treaty states that if you have a UK government or civil service pension (eg a state school teachers’ pension), then this will remain taxable only in the UK. Some old NHS pensions were considered ‘government pensions’, but modern ones might not be. You can check if your pension is classified as ‘government’ here.

You still have to declare this income to the French tax authorities, but you will not be subject to tax in France on it. That being said, it will count towards your total household income, and could end up pushing you into a higher tax bracket which is something you should carefully consider, particularly if you want to take a large sum at once.

The same is not true of private pensions: these are taxed in France, not the UK, as soon as you become a tax resident here. Confusingly, the UK state pension is also considered a private pension, even though it is paid by the government.

You can find a complete guide to how UK pensions are taxed in France HERE.

As a result, you will want to think about whether your previous plans for your private pension were only advantageous to you as a UK resident. Once you become a French tax resident, they could have unforeseen implications.

You can find more information about tax rates in our tax guide.

Get reliable, expert financial advice before doing anything

If you have decided you want to be in France permanently, then you will need some expert tax and pension advice – but you need to be careful who you take advice from, this is a highly specialist area and it’s unlikely that high street financial advisers will have the knowledge that you need.

Brexit has also made getting financial advice more complicated, with fewer experts available.

Maeve told us: “Because of Brexit, you cannot use a UK-based financial adviser anymore – you have to use an EU-registered one. This has made things more complicated. When picking an adviser, seek out someone who has expertise on the local taxation rules in France. They should also be regulated with the financial regulator where you live and where they work.”

It can be especially complicated to parse out who you can and cannot take advice from – for example, some UK-based advisers have continued to give advice to EU-based clients, even though this can be particularly risky if the investments they recommend do not follow EU regulations.

There are also expat-oriented financial advice services that are located outside of France, but seek to offer tax advice to people in France.

She added: “Be smart and sensible. If you choose an adviser in Dubai or Spain for example, you will now be adding another regulatory organisation into the mix, plus another language.

“There are free, government-based services in the UK that can help you understand your private pension – Pension Wise and Money Helper. Before doing anything, you should consult the free services. Any financial adviser worth their salt would recommend this too.

“These services have begun to have longer wait times, so be sure to book well in advance of when you plan to draw from your pension.”

Deciding whether to transfer your pension

Another question that is important for Brits to think about is whether or not to transfer their pension into either a UK-based SIPP for non-residents, or a QROPS (Qualifying Recognised Overseas Pension Schemes).

The SIPP will keep your pension in the UK, while the QROPS moves it out of the UK, to Malta specifically.

These options can be helpful for French residents, but you need to familiarise yourself with their benefits and drawbacks.

“The QROPS is not for someone who is unsure of their future in France, as if you return to the UK within five years of the pension transfer HMRC will seek their tax back as if it was a full encashment,” Maeve said.

In France, a QROPS is considered a trust, you may also have additional reporting requirements to fill out along with your annual declaration (more info here).

You should beware of scams on this subject, as the post-Brexit period saw many scammers seeking to persuade Brits that it was now mandatory to transfer their UK pension – always be wary of any cold-calling or unsolicited financial advice.

Determining how you will want to draw from your pension

The next question is how you want to receive your pension – either as regular income or as a lump sum. The option that you chose will have tax implications in France.

If you receive it as a regular income, when doing your yearly French tax declaration, you will add up your pension income for that year and you will be taxed at the normal marginal rates for income (the barème). These rates go up to 45 percent (for the highest earners only) plus social charges if they apply (more on this below).

Pension income can also benefit from a 10 percent tax deduction, as long as it does not exceed €4,123 or fall below €422 per household.

Lump-sums are more complicated. Technically, French tax authorities would allow a return of once off pension capital to be taxed at a flat rate of 7.5 percent.

But in reality, Hoffman explained that anyone seeking to do this would need the express, written confirmation from French tax authorities that this rate will be applied.

She also explained that the type of private pension matters when seeking to get the lump-sum flat rate.

“There are plenty of different types of private pensions in the UK, but the old ‘defined benefit schemes’ have been the gold-plated standard. These are the types of pensions that give you a portion of your salary for the rest of your life.

“In principle, you should be able to take out lump-sum of 25 percent of your ‘defined benefit scheme’ pension and be taxed at the 7.5 percent flat-rate. That being said, some people get refused, so you cannot make any assumptions and you need clarification from the French tax office.

“As for all of the other types of private pensions in the UK, like the money purchase or personal pension schemes, these are considered to be ‘funds’. If you want to benefit from the lump-sum then you would have to take out the entire pension. You would not be able to just take out 25 percent and get the lump-sum rate.

“For anyone considering taking their whole pension and seeking to use the 7.5 percent rate there are conditions to be met, so I advise people to write to their French tax office and explain their own situation in detail. Be sure to clarify the tax rate you are seeking to have applied and ask what documents they would need from your UK pension company to confirm that the contributions to this pension have been tax deductible.”

Healthcare and social charges

Deductions in France come in two types – impôts (income taxes) and prélèvements sociaux (social charges).

People who retire to France (and have never worked in France) and have already reached the state pension age can apply for the S1 – this means that the UK continues to pay for their healthcare costs and they would not be charged prélèvements sociaux. Non-working spouses of an S1 holder can also benefit from this.

People who take early retirement and make the move before they reach state pension age may have to pay social charges in addition to taxes until they reach the state pension age and can apply for their S1. However, there are several exemptions to social charges, so even if you expect a bill, you may not end up being charged. More information in our guide.

Social charges help pay for a lot of services from the French government, including access to healthcare. In France, you can access the state healthcare system (and get a carte vitale) after three months of residency.

READ MORE: Why you might get an unexpected French health bill

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