The taxation of UK pensions in France in 2023
The taxation of UK and foreign pensions in France is a complicated matter and the rules differ depending upon the country of origin and your personal circumstances. This article provides general information and an introduction to the rules for the taxation of UK pensions whilst resident in France, but you should solicit personalised and professional advice if this subject is relevant to you.
UK Government and UK local authority pensions
These are normally taxed in the UK according to UK pension tax rules, which are generally taxed at your marginal tax rate besides your tax-free pension commencement lump sum, which is normally 25%. However, if your government or local authority service was conducted in France, you are resident in France and a citizen of France whilst not being a citizen of the UK, then the pension is usually taxed in France.
It is not always clear at first glance if your pension counts as a UK government or local authority pension, you can click here to see a list of UK pension classifications.
All other, British state, company and private pensions
Any pension income is usually taxable at your French marginal tax rate, calculated using the barème progressif de l’impôt sur le revenu, after a 10% tax relief to your pension income is applied. This 10% tax relief is known as an abattement fiscal. In 2023, the minimum 10% tax relief is 422 euros and the maximum is 4,123 euros per fiscal household, but these will soon increase due to inflation. The French marginal income tax rates for income received in 2023 are as follows:
- The first 11,294 euros: 0%
- 11,295 to 28,797 euros: 11%
- 28,798 to 82,341 euros: 30%
- 82,342 to 177,106 euros: 41%
- Over 177,106 euros: 45%
The calculation is based on the income of your fiscal household via a system of parts; known as parts fiscales. A single person has one part, a couple has two and the first two children in the household are allocated half a part each and all children from the third onwards receive a whole part. The parts are used to decide your marginal tax rate and are best explained via some examples:
Example 1: a couple with two children in the household.
Household income: 40,000 euros.
Minus 10% tax relief = 36,000 euros
Total number of parts: 3 (one for each adult, 0.5 for each child)
36,000 euros relief divided by the number of parts (3) = 12,000 euros
Income from €0 to €11,295: 0% income tax
Income from €11,295 to €12,000: 11% income tax which equals 77.55 euros, multiplied by the number of parts in the household = 232.65 euros.
Total income tax: 232.65 euros.
Example 2: a single person household
Household income: 40,000 euros
Minus 10% tax relief: 36,000 euros
Total number of parts: 1
Tranch from €0 to 11,295 = 0% income tax
Tranch from 11,295 to 28,797 euros: 11% = 1925.22 euros
Tranch from 28,798 € to 36,000 euros = 30% which equals 2160.6 euros
Total income tax = 4085.82 euros.
As you can see from the above two examples, dividing the taxable income by the number of parts to decide upon the marginal tax rates and then multiplying the tax by the number of parts can stop your income from going into higher tax brackets and can save you a lot tax. This tax calculation is known as the quotient familial. It is applied automatically if you are declared to the authorities as living together as a couple or if you have any children.
Taxation of lump sum pensions in France
For the taxation of lump sums, you usually have three options:
- Taxation at your marginal rate, reduced by the relief of up to 10% and the number of fiscal parts as explained above.
- Taxation at a 7.5% flat rate of tax, after the application of the 10% tax relief, therefore a total tax rate of 6.75%. The 10% tax relief is not limited in this case. In order to benefit from this tax-rate, you must take your whole pension as a single lump sum and professional advice is strongly advised.
- Via the système du quotient. Your lump sum pension income, minus the 10% tax relief, is divided by four before it is added to your income for the year for the calculation of your marginal tax rate. The amount of tax due is then multiplied by four, however this calculation, similar to the quotient familial mentioned above, can enable you to avoid going into a higher tax bracket.
Social charges on UK pension income in France
If you hold an S1 certificate of health exemption from a European country or you pay for your healthcare via private insurance then you will not need to pay any social charges on your pension income, known as prélèvements sociaux. Otherwise, you may pay a rate from 4.3% to 9.1% depending upon your income and the number of fiscal members of your household. This is in addition to any income tax mentioned above. You should obtain professional advice if you wish to know exactly how much income tax and social charges you should be paying on your pension in France.
The views expressed in this article are not to be construed as personal advice. Therefore, you should contact a qualified, and ideally, regulated adviser in order to obtain up-to-date personal advice with regard to your own personal circumstances. Consequently, if you do not, then you are acting under your own authority and deemed “execution only”. Additionally, the author does not accept any liability for people acting without personalised advice, who base a decision on views expressed in this generic article. Importantly, this article is dated and is based on legislation as of the date. It should be noted that legislation changes, but articles are rarely updated. Sometimes a new article is written; so, please check for later articles. Additionally, check for changes in legislation on official government websites. Finally, this article should not be relied on in isolation.