French tax hikes end many Brit’s dreams of owning a place in the sun

Those Brits who own second homes on the continent haven’t had a lot to cheer about in recent news, and the decision that has been taken by the new leader of France, Francois Hollande, to raise taxes, is another body blow.

It is a sad fact that the glory days of owning a home in the sun have gone, and those who own holiday homes in Spain, France etc are becoming increasingly nervous as these cash strapped countries launch assaults on their wealth.

Add into the mix the ever declining value of the euro against the pound, and the overall instability of the eurozone, it is little wonder that so many are giving up their dream and returning to Blighty.

Mr Hollande, the recently elected socialist President, ensured he grabbed the headlines across the world by his budget that raised the income tax on the rental income of those who own homes in France, but live elsewhere, by a substantial amount.

These tax hikes have come about due to France deciding to impose an element, known as the ‘social charge’, to the taxes paid by those homeowners who live permanently outside of France. On paper, these rises are certainly significant, with capital gains tax rising from 19% to 34.5%, and rental income tax rising to 35.5% from the previous 20%. The first starts at the end of July, while the latter is being backdated to the 1st January 2012.

The capital gains tax allowance in France is extremely complex so in reality, if you combine this with the limited number of people who are renting out homes and the relatively low income they generate, there are actually only a few of the estimated 200,000 Brits who own French properties that will actually be hit with huge tax bills. There are still fears, however, that they will looked upon to help France out of its crisis.