I am a British citizen but have been living in France since 2015 with my husband. We rented at first and when the lease was up in 2018, we bought a house to also operate as a B&B. It was in a lovely village that is popular with tourists, weddings and house hunters so it seemed ideal.
We needed to create three en suite guest rooms and completely redecorate. My brother-in-law gave us a loan to help us buy the house and pay for the renovations, and we eventually opened in May 2019.
We planned to pay him back over five years but then of course Covid struck and on March 20, 2020, President Macron told everyone to stay home. While we were allowed to open in July and August, restrictions were then put in place again. The same happened in 2021.
We relied on loans and my brother-in-law supported us financially during those two years. His support saved us and we will for ever be indebted to him. This year we stopped running our house as a B&B and I decided to withdraw my UK pension. I worked in the UK until I was 45 and built up a pension that was worth a little under £180,000 at one company. When I turned 55 in April, I took this whole pot in one go, mainly so I could repay my brother-in-law and be debt-free.
The problem is that my pension company charged me too much tax. I had a letter from HM Revenue & Customs in May confirming that it owes me a tax refund of nearly £59,000. I have called HMRC several times, spending hours on hold, and have even sent letters.
HMRC’s app tells me I can expect a reply in March. Surely if it knows that it owes me £59,000 then it should not then take ten months to process this refund?
Mark, Dordogne, France
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Katherine Denham writes
It was generous of your brother-in-law to help you out and I could appreciate why you wanted to pay him back his £50,000 and £12,000 interest as soon as possible.
I was concerned that handing over so much of your pension would leave you with little to live on in retirement but you said you used your spare time in the pandemic to get a professional private driving licence and had set up a successful business. You said you hoped to be working full-time at that for at least another ten years, which would give you time to top up your pension. Plus, you now own your house outright with no mortgage.
You said: “Everyone said it was bonkers to take the whole pension pot in one go but we are French tax residents and are happy to pay what tax is due. We needed the cash to pay our family and to give us peace of mind.”
How tax is calculated on your pension is complicated because you now live in France. But generally, withdrawals from UK pensions are taxed as income, along with any other pension payments or wages earned during that tax year. This is why it’s usually not a good idea to take an entire pension pot in one go because you could end up in a higher income tax bracket. It’s often better to spread out large payments over separate tax years.
When you withdrew your pension, HMRC didn’t have enough information about your income so didn’t know how much tax to deduct and you ended up paying emergency tax rates. It also assumed that you would get 25 per cent of your pot tax-free so you were charged emergency tax on the remaining £133,511.
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But you are a French resident so you are entitled to full UK tax relief on your pension income because you will pay tax on it in France instead. (When you get your state pension, this will also be taxed in France.) This is because the UK has a double taxation agreement with France (and other countries) to stop you from being taxed twice on your income. It does, however, mean that you do not get the 25 per cent tax-free pension lump sum, as you would if you lived in the UK.
It’s possible to be a citizen in one country but a tax resident in another. Where you are a resident usually determines where you pay tax.
To claim this relief you had filled in a R43 form with HMRC and forwarded a French certificate of tax residence to prove that you were paying tax in France. So why was it taking so long to pay you back?
The tax office told me that improving customer service and recruiting more advisers was a key priority — the same old tune it has been singing for a while now and yet I still get regular complaints about its service. The good news is that after my call, your refund of £58,458 arrived within two days. HMRC said: “We have apologised to Mark and issued his refund.”
I asked if HMRC would pay you interest and compensation for the delay but it would only pay you £100. A decent savings account could have paid you about £1,000 interest on this money over the past five months so I thought that was very disappointing.
You will now have to declare your £180,000 pension income in your French tax return for 2025 (France’s tax year runs from January to December) and you expect that you will have to pay about €30,000 when that tax bill is due next autumn.
Tomm Adams from the accountancy firm Blick Rothenberg explained that France has a special rule for people who take a whole pension in one go. You get a 10 per cent tax-free allowance (which could be capped) and the rest could be taxed at 7.5 per cent. You also have to pay a social charge, an additional tax levied on most forms of income. For pensions this is charged at 9.2 per cent or 7.4 per cent for low earners — you expect to get the lower rate. By comparison, if you took your pension as regular income, Adams said this would be added to your other income and taxed using France’s normal rates of up to 45 per cent, with social charges on top. So it sounds like you have been savvy by taking your pension in one go.
For now, though, HMRC’s refund has meant that you have not only paid back your brother-in-law, but also been able to invest in your business, with some spare cash left over.
RAC left my young family stranded in a depot at night
In August my car broke down in Bristol just before 4pm while I was travelling with my two young children, who are four and nine. We had been on holiday and I was driving back to our home in Berkshire.
After waiting for a couple of hours, an RAC driver eventually arrived but said my car couldn’t be fixed by the road. He couldn’t take us home but said RAC would arrange this. It wasn’t until 8.40pm that RAC called to say one of its partner companies would come and collect us. RAC said my car would be taken to a depot, where it would then be transported to a garage and that it would arrange a taxi to take us home.
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A tow truck eventually arrived at 10.30pm and took us to an unlit industrial depot where the car was unloaded. The driver left a note for the depot with my phone number on it. There was no taxi in sight so the driver waited with us for a while but he eventually had to leave for other jobs. It was clear that no taxi had been arranged so having lost faith in RAC I paid for my own taxi, which cost £122. We got home after midnight.
I then discovered that RAC had taken my car to the wrong depot and I had abusive messages from site security telling me to collect my car immediately. I called RAC multiple times but it took five days for my car to be collected and taken to the garage. Is this how a rescue service is supposed to operate?
Jane, Berkshire
Katherine Denham writes
Breakdown cover is meant to give you peace of mind that you will be rescued in situations like this yet RAC and its partner company ditched you and your children in a dark depot at night.
RAC told me that by the time its responder had realised he couldn’t fix your car, local garages were closed so it had to be taken to a depot temporarily. Your breakdown policy included onward travel so the RAC should have provided transport to get you home and it has agreed to reimburse your taxi fare.
RAC said: “We’re very sorry that our customer didn’t experience the high standard of service we provide to thousands of drivers every day. We have apologised to her and her family.”
It offered you £100 as a gesture of goodwill, which you said was insulting. I asked it to increase this and it has now given you £250.
• £1,894,582— the amount Your Money Matters has saved readers so far this year
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