Tax on French Property Income for UK Tax Residents - ESDG Accountancy

Tax on French Property Income for UK Tax Residents

Photo of author

Aimee Nichols

Tax is never straight forward at the best of times, especially when multiple jurisdictions are concerned. In this article we explore how UK Tax Residents are taxed on overseas income from French rental properties.

If you live in the UK and you let out a property in France, you may be liable to UK taxes on the property income. You will need to declare this on your self assessment tax return.

If you are reading this and haven’t before declared the income in previous years, you might need to consider making a voluntary disclosure to HMRC using the Worldwide Disclosure Facility.

Am I Tax Resident in the UK?

Establishing tax residency is not always straightforward but broadly speaking, if you live and work permanently in the UK, it is likely you’re resident for tax purposes, regardless of where you were born. It does not matter that the properties are not located in the UK. If you are tax resident in the UK, you will be taxable on your worldwide income.

A Chartered Accountant can help you to determine your residency status if you’re unsure, which will involve looking at how many ties you have to the UK as well as the days you spend here each tax year.

What if I’ve already paid taxes on property income in France?

UK Tax residents are taxable on worldwide income, even if that income has already been taxed abroad.

Tax relief may be available for foreign tax paid but the details of this depend on the double tax treaty between the UK and the country in question. For French property income, tax relief is available for a portion of the French tax paid, but not the full amount.

There are also often differences on how tax is applied to rental income and expenses in each country; for example, mortgage interest could be treated different in each country meaning you would end up with different taxable profits.

How do I work out my UK tax liability?

There are a number of factors you may need to consider in working out the UK tax liability on French property income. An accountant can help you with this full process and explain how the tax is calculated.

  1. Tax Base: To work out your UK tax liability, you will need to first determine your taxable rental profits. Because tax legislation differs from country to country, your rental profits may not be the same in the UK as they are in France. For example, the tax treatment of mortgage interest and mortgage fees may be different.

  2. Tax Rate: The rate at which you pay UK income tax on French property income depends on your overall income levels. If you are a basic rate tax payer, this will be 20%. If you are a higher rate tax payer, this will be 40%. If you are an additional rate tax payer, this will be 45%.

  3. Relief for Tax Paid: Under the UK/France Convention, certain French taxes are admissible for relief in the UK whereas others are not. For example, l’impôt sur le revenu is admissible, whereas ‘contributions pour le remboursement de la dette sociale’ is not.

  4. Payment of French Tax: Tax relief can only be claimed when taxes have actually been paid. In the 2020 and 2021 tax years, some French income tax on property was waived due to the pandemic. In which case, no tax relief would be available in the UK.

  5. Forex: Rental profits, as well as French tax paid will need to be translated from euros to pounds sterling at a forex rate that is acceptable to HMRC.

  6. Other reliefs: You may be entitled to tax relief for other items such as charitable donations or pension contributions.

FAQs:

Q: What should I do if my rental profits are different in the UK and France?

  • You need to calculate rental profits separately according to each country’s tax legislation. Usually you would have an accountant in both the UK and France and submit calculations to each tax authority.

Q: How do I handle the different tax years in the UK and France?

  • The UK tax year runs to the 5th April each year, with the tax return and payment due by the following 31st January (approximately 10 months after). In France, the tax period runs to the end of December each year, and is due by the following May.

Q: Can I claim tax relief in the UK for all French taxes paid?

  • No, only certain French taxes, like l’impôt sur le revenu, are admissible for relief.

Q: What forex rate should I use to convert my rental income and tax paid?

  • The forex rate selected must be acceptable to HMRC for conversions from Euros to GBP. We will review your transactions and determine the best and most appropriate exchange rate to use which will be accepted by HMRC. This may be the spot rate on the day of the expense or average rate in other circumstances.

Q: How does owning property through a Société Civile Immobilière (SCI) affect my taxes?

  • The UK and French tax treatments differ for Société Civile Immobilière (SCI), so you must account for these differences in your tax calculations. Seek specialist advice from the UK Accountant who has experience with these matters.

Q: Will I owe CGT in the UK if I sell my French property?

  • Yes, CGT is due on worldwide disposals for UK residents, with tax credits available for equivalent French taxes paid. Broadly speaking, you will be taxed on the profit you have made less allowable costs such as legal fees, accountancy fees and qualifying renovations. The higher rate capital gains tax rate on disposal of residential property currently stands at 24% for the 2024/25 tax year (accurate at 21st June 2024).

Q: Do I need to consider IHT on my French property?

  • Yes, if you are UK domiciled, IHT is due on worldwide assets, including French property. If you were not born in the UK it is possible HMRC may assess you as “deemed domicile” without appropriate steps to mitigate this.

ESDG Accountancy can help with French Property Income on a UK Tax Return

To ensure full compliance with HMRC and correctly calculate your income tax due on French property income, it is advisable to engage a Chartered Accountant or tax advisor with experience in international taxation. It is important to note that in the UK, accountancy is not a protected profession, so you should ensure your advisor is registered with an appropriate professional body such as ICAEW or ACCA.

We are always happy to have a no obligation and confidential conversation with you about calculating and reporting tax on your French Property income. Please contact us or call our office if you wish to make an enquiry.

Our French language skills may be limited but our tax knowledge is not!

Get help with your tax return:

Office Phone: 020 4522 9740
Email: hello@esdgaccountancy.com
Address: 44 Royal Parade Mews, Blackheath, London SE3 0TN

Please enable JavaScript in your browser to complete this form.

ABOUT THE AUTHOR

Ed is qualified Chartered Accountant and founded ESDG Accountancy in 2020. He has gained extensive experience in various sectors, working with business owners, international groups, & private equity investors.