Income tax

I’ve done it.  I’ve completed my online income tax returns within a week of the forms being available and  five weeks before the deadline!

In the early years the online service was a nightmare, frequently falling over, regularly requiring me to register for a new certificate to complete the returns, once even making me late (not that anybody cared).

It has got much better.  Still, the tax forms are daunting, even more so if you are not a native French speaker.  It’s not the sort of language I come across every day.

For an ordinary French pensioner with no foreign assets or bank accounts, and no change in circumstances, the forms are made as easy as possible.  Much is pre-filled from the previous year – details of your household, status etc.  You just have to add up your monthly income (the French always talk of income in monthly terms) and insert the annual figure.

If you are a foreign pensioner, with pensions originating outside the euro zone, life is much more complicated.  As well as the main tax form (2042), I have to fill in one on foreign income sources (2047) and foreign bank details (3916).  I suppose I should be grateful that I don’t have any other financial assets, as things get even more difficult!

As it is, the main issue is deciding what my income is in euros. I can’t simply convert the figures given in the P60s as these are for the UK tax year April-March, so I have to dig into two years statements from pension providers to get January-March figures  for one year and April-December figures for the next year (not helped by the state pension being expressed in weeks not months…).

Then there is the question of what exchange rate to use to calculate my income in euros.  Way back at the start of our life in France I asked the local tax man this question.  He was absolutely useless (further, he never did understand the UK tax year being April to March) and suggested that I should use the exchange rate for the day on which money was transferred each month.  No way.  Besides it did not make sense as I keep part of my pension in the UK – and yet it has to be declared in euros for tax purposes.  So I decided several years ago to take the average annual exchange rate published by the European Central Bank.  Nobody so far has challenged this.

Where would I be without the ability to have a spreadsheet on my computer?  No wonder I come across other Brits who employ accountants.

The vagaries of the exchange rates  produce some dramatic changes in my financial fortunes.  I see that between 2014 and 2015 my income went up by £536.  But because the exchange rate used for 2014 income was  £1=1.24€ and that for 2015 is £1=1.37€, my income for tax purposes in 2015 rose by 6000€! Well, you could argue that the improved health of sterling should mean that my higher monthly tax bill for 2015 (payable from this summer) should not hurt as my income in euros will also have gone up – or at least that part transferred to France.  But the exchange rate is back at the 2014 level and going down as Brexit fears make the money markets wobble. So I will be paying last year’s increased tax bill with a reduced income.

I pay tax at the rate of 30% (for the income band €26,792 – €71,826.  I would pay 20% if in the UK). I don’t begrudge this, as by French standards I have a reasonable income – and anyhow I believe in progressive income tax.  But I have come across some interesting figures on a site for Brits living in France (www.french-property.com):

In practice, less than 50% of inhabitants in France pay any income tax at all; only around 14% pay at the rate of 30%, and less than 1% pay at the rate of 45%.

Even allowing for French income being lower than British, I find this figure pretty astounding. But it is a salutary reminder than many, many people in France have to make do with much less money than I have.

 

French Income Tax Rate (2015 exchange rate)

Up to €9,700 (£13364) 0%

€9,701 (£13364) – €26,791(£36910) 14%

€26,792(£36910) – €71,826 (£98955) 30%

€71,827 (£98955) – €152,108 (£209561) 41%

Above €151,108 (£209561) 45%

UK Income Tax rates

£0-£10,000 0%

£10,000-£41,865 20%c

£41,865-£150,000 40%

£150,000+ 45%

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