Thrifty Loans

UK owners of French holiday homes will benefit from a change in the country’s inheritance tax laws. The threshold has gone up by 200% from 50,000 Euros to 150,000 Euros per parent per child.

Any Brits who own French property will benefit as the country’s tax rules apply to any asset owned in the country even if the owner lives and dies in another country.

Recently elected president Nicolas Sarkozy made the change after property prices in France had pulled more ordinary citizens into the inheritance tax trap.

The law change means that if a couple with two children owns a property worth 800,000 Euros (around £570,000), they should be able to pass on tax free to their children if each was given a half-share at £142,500 by each parent.

French inheritance laws are complex, requiring children to be given certain rights on death, and the tax laws work differently from those in the UK. In Britain each person has an allowance for assets passed on after their death. In France the allowance is per parent per child, which means that larger families can pass on more expensive homes without busting the threshold.

Tax specialists say that while Britons who own French properties will benefit from the changes in France, they will have to plan for the future when dealing with the larger sums of money for inheritance in the UK. The British system of inheritance tax (IHT) says that a property worth up to £600,000 can be passed on free of IHT, but only where ownership is by a married couple or civil partners as tenants-in-common, splitting ownership equally, and each using their personal £300,000 allowance. It highlights the need for people in the UK to use what they have in terms of tenants-in-common and make use of discretionary trusts.

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