Several changes in the UK’s autumn budget, announced today, will be relevant to Britons in France who retain UK links - especially if planning to transfer pension money into a European 'Qrops' scheme.
It comes as Labour laid out the party’s first budget in some 15 years, in the first major tax policy statement since coming to power.
The announcements by the chancellor, Rachel Reeves (the first woman to hold this post), included income tax thresholds and certain inheritance and capital gains tax rules.
The government is seeking to make tax rises and spending cuts to plug a shortfall of around £40 billion – but has, at the same time promised not to increase tax on “working people”.
CGT and inheritance tax were predicted as potential targets, as being assets-based and likely to be paid by the well-off.
The budget is a key moment for the UK’s new government, coming as it has been dropping significantly in popularity polls.
We look here at key points to note if you are a Brition living in France, or other national with links to the UK.
Qrops
There is bad news for those considering transferring UK private pension funds into a so-called Qualifying Overseas Pension Scheme (Qrops), as the government says it is ending with immediate effect the exemption on an 'overseas transfer charge' at 25% that currently exists for transfers into schemes based in the EU or EEA or Gibraltar.
The end of the exemption has no impact on such transfers that were made before today.
It had been feared that Brexit could end this exemption, but it had so far been maintained.
Capital gains tax
As in France, capital gains tax (CGT) may be levied on sales of properties apart from the main home, and on sales of other investments that have increased in value since they were bought.
When it comes to real estate, if you live in France any sale of a UK property you retain (for example, to rent out) is potentially liable for UK CGT, however only gains that have accrued since April 6, 2015 are assessable to UK tax for non-residents. UK capital gains tax is also payable by residents of the UK on sales of holiday homes in France.
Some experts had predicted there could be an increase in CGT on property sales, but Ms Reeves said the rates would not change from their current level (18% or 24% depending on a person’s tax bracket).
However, she said CGT on financial investments would increase. The lower rate is set to increase from 10% to 18% and the higher rate from 20% to 24% (aligning them with property).
This may affect, for example, people selling off UK assets when moving to France.
Read more: Some main homes targeted for capital gains tax under new French plan
Income tax
The UK income tax bands for the zero rate personal allowance and for entry into the second chargeable (‘higher rate’) 40% band: respectively, £12,570 and £50,271, have been frozen since the financial year 2021-2022.
This means that each year, more people are liable to pay tax, or more tax, than before. The freeze was originally announced as part of plans to address the impacts of the pandemic.
Today it was announced that the freeze will, as decided by the previous government, continue for the next three financial years, but the chancellor said that from the year 2028-2029 the bands will be updated in line with inflation.
In terms of residents of France, UK income tax relates mainly to such UK-sourced income as government pensions and from letting out UK properties.
Inheritance tax
UK inheritance tax is levied on the estate as a whole, rather than on individuals’ shares. It is payable by heirs who live in France and who inherit from a person in the UK.
It is currently paid on estates worth over £325,000, at 40%, though an additional £175,000 allowance is possible in the case of passing on a home to children or grandchildren.
The chancellor said these levels will not be updated until April 2030, following the previous government’s announcement of a freeze until at least 2028.
She also said that inherited pension sums would be taxable from April 2027. The chancellor said this would remove "the
opportunity for individuals to use pensions as a vehicle for inheritance tax
planning, by bringing unspent pots into the scope of inheritance tax".
Buying second homes
People looking to buy a UK second home or investment property will be affected by plans to increase stamp duty on these purchases. They are subject to 'higher rate' duty, currently starting at 3% up to a value of £250,000 (then at rising rates for larger values). This will rise to 5% immediately.
Air travel
The chancellor said air passenger duty has not kept pace with inflation so they will introduce an increase of £2 on economy class short haul flights (for example UK flights to France). She also said they would hike the duty by 50% for flights on 'larger' private jets.
Read more: Planned French air travel tax hike will push up ticket prices, say easyJet
Euro 2028 preparations
Sports fans may be interested to know the budget included commitments to building new 'multi-use' sports facilities across the country to support both 'elite and grassroots sport' and 'scaling up work' in preparation for hosting the Euro 2028 football championships.
Exchange rates
Experts predict volatility in the exchange rates this week as the markets react to the announcements. You may therefore need to take extra care if you are making large sterling related transfers at this time.
