Are you a French tax resident who owns a house in the UK?

UK Property Matters

I thought I would write this month about the topic I am asked most frequently about at the moment by clients and prospective clients, which is the subject of owning property in the UK as a French tax resident. 

There are many reasons for deciding to keep properties in the UK when moving to France. Whether it be a ‘bolt hole’ to go back to for those that frequently return to the UK for family or work, or as an investment to generate rental income to supplement retirement. 

There are several potential French and UK tax consequences to consider, when owning property in the UK, which I will cover in general terms by each specific tax area.

Wealth Tax

Wealth tax in France is called Impôt sur la Fortune Immobilière (IFI). The assets that are taxable under IFI are all worldwide real estate and investments in real estate which includes, amongst others, the main home as well as second homes. Business property assets are exempted subject to certain conditions.

The tax is triggered by eligible net property wealth of more than €1.3 million. For UK expatriates living in France, foreign assets are exempt from wealth tax for the first 5 years.

Capital Gains Tax (CGT)

As a French tax resident selling property in the UK, you are liable to CGT both in the UK and in France.

Since 2015, the UK has applied CGT on the sale of property of former residents noting that private residence relief, if applicable, is available for the final 9 months of ownership. It is only the gain from April 2015 that is taxable and the normal tax free allowance (currently £12,570) also applies.

French CGT and social charges are applicable in France on the sale of a UK property and are based on duration of ownership. Some exemptions do apply, for example when the property was the principal residence in the previous 12 months, although certain conditions apply.

Under the UK/France double tax treaty, UK expatriates can receive a credit in France for any UK CGT paid on the sale of the UK property, but they cannot offset any UK CGT paid against a social charge payment.

UK Property Rental Income

Rental income from a UK property, when resident in France, still requires the completion of a UK tax return.

As a result of the UK/France double tax treaty, income tax and social charges are not payable in France. However, it is important to note that this income is still declarable in France and is taken into account when establishing the tax bands applicable for all other declarable income.

Inheritance Tax on a Property Held in the UK

The subject of French inheritance tax is a complex subject that could justify an article in its own right, but in general terms, under the UK/French Double Tax Treaty on inheritance tax, the UK property would fall under UK inheritance rules and applicable taxes.

In summary, owning property in the UK has potential tax consequences in both the UK and France and as with all such matters, I would recommend that you seek the advice of a suitable expert in all circumstances.

Download the 2021 French Tax Guide