UK residents with a second home in France will have to pay substantially more capital gains tax on property sales starting from next year when Britain leaves the Brexit transition period.
French tax authorities confirmed today that UK residents will no longer benefit from the EU exemption from a social levies tax and will need to pay the full 36.2 per cent tax rate when they sell their property for a profit.
Previously, UK citizens paid 26.5 per cent as they only paid a fraction of France’s social levies, which funds the country’s public services.
This may make holiday homes in popular holiday destinations like Nice, Provence and Cannes less desirable.
The blow comes as media coverage this week has focused on the fact that Britons will only be able to spend 90 days out of every six months in the EU’s Schengen zone from 1 January.
It means second property owners in countries like France, Italy and Spain are much more limited in how long they can spend in their holiday homes if they don’t also have an EU passport.
Real estate giant Knight Frank said in July that British demand for French holiday homes surged this year and that its French office “reported their busiest weeks for more than a decade”.
Enquiries about holiday homes in Provence, for example, soared by 26 per cent year-on-year in the first half of 2020.
Alison Ashby, director of Knight Frank’s French partners Junot Fine, said: “There are those seeking a change of lifestyle post-lockdown, there are others wanting to benefit from record market prices in anticipation of a potential economic slowdown, and for many international investors, there is the appeal of Paris property as a refuge during turbulent times.”