Q&A: Ask the experts
Our experts give their advice on income tax, cancelling home insurance and refunding tax agents’ fees
ABecause the property is in France, the rental income is subject to French income tax, so you will have to declare the income in France. As UK residents, you also need to declare the income on your UK tax return.
Non-French residents are normally subject to a minimum 20% rate on the taxable income. In addition to this, the taxable rental income will be subject to social charges which currently total 15.5%, although President Macron has proposed increasing it by 1.7%.
To avoid being taxed twice, the tax is eligible for double tax relief in the UK, but not the social charges because they are not considered to be ‘tax’ by the UK authorities.
The French tax year is the same as the calendar year and the deadline for submitting the return is normally May or June of the following year. For 2016 income, the deadline was 17 May 2017 for non-French residents. If the rent from the holiday let is your only French income and it is not a one-off (so you will be letting it out each year), then it will be taxed as furnished lettings income. You will need to complete two forms: Form 2042 – Main tax return, and Form 2042 C PRO – Supplementary return, to declare the furnished lettings income. As the income is below a certain threshold (€33,200), by default, a simplified method of taxation applies whereby you declare only the gross rental income; your expenses are automatically deemed to be 50% of the gross rent (or a higher percentage of 71% if it qualifies as a meublé de tourisme or chambres d’hôtes). Under this simplified regime, you do not have to take account of your actual expenditure.
It is possible to opt out of the default simplified tax regime and instead determine your taxable profit (or loss) based on your true expenditure. This may be beneficial if the actual expenditure is more than the deemed 50% of gross income, however it will involve more paperwork as you will have to register the rental business, keep proper records of income and expenditure and prepare accounts. Normally you would use an accountant for this. You will need to weigh up the additional costs against any tax savings.