Pay zero tax on our projects in France

Below are two worked examples based on a 40% tax payer in the UK (earning more than £43,000 per year) earning a rental income of £27,000 per year from a £400,000 property from the year 2020

UK:

Annual rental income £27,000
Mortgage interest payable £15,000
Total rental income on which tax is payable £27,000
Tax at 40% £10,800
Tax relief at basic rate- 20% of mortgage interest £3,000
Total Tax payable £7,800

France:

Annual rental income £27,000
Mortgage interest payable £15,000
Amortisation (3% of £400,000) £12,000
Total rental income on which tax is payable £0
Tax payable £0

*With both examples you are able to also offset maintenance fees & agency fees.

So we can clearly see here that in the UK the income tax you would pay on your rental income per year is £7,800 while in France it would be nothing.

When we add in the other taxes and assume it sold for twice its original value at £800,000 after 15 years making a profit before tax of £400,000 we can show the following:

UK France
Income tax paid 15*£7,800 = £117,000 £0
Capital gains tax 28%*£400,000 = £112,000 20.5%*£400,000= £82,000
VAT rebate when purchased £0 £80,000
Stamp duty paid 8%*£400,000 = £32,000 2.5%*£400,000 = £10,000
Total tax paid £261,000 £12,000

So as we can see the total tax paid on the UK BTL property in this example over a 15 year period with the same rental income is £261,000 compared to £12,000 paid on a French furnished holiday let with onsite hotel services**. If we extended it to just a couple more years of ownership to 17 years the capital gains tax due reduces even further in France such that the net tax due is ZERO.

**A furnished holiday let could be anything from a studio apartment to a large detached villa with a pool.

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