If you own property in France and have to pay an annual wealth tax, you may be partly responsible. Many French people blame the influx of UK buyers into the property market for the fact that prices have increased so much that many now fall into the tax bracket.

The wealth tax, or l’impôt de solidarité sur la fortune (ISF), which is paid in June, is imposed on assets worth more than €760,000 (£514,000). If you are resident in France the tax is levied on your worldwide assets. If you own property in France, but do not live there, then the tax applies to your French assets only. Note, however, that not only do you become classed as tax resident in France if you spend more than 183 days there in the calendar year, but also immediately on arrival if you are intending to set up home.

Wealth tax is assessed by household, so includes the assets of both spouses and any dependent children. Unmarried couples living in the same home can be taxed as one household. Almost all assets are subject to wealth tax, although exemptions are made for business assets, antiques and fine art.

You are responsible for declaring the sale value of your own assets as at January 1 of the year in question, not the amount which you paid for them. The value of your principal residence is reduced by a 20 per cent exemption and by permitted costs, such as your mortgage. You are also entitled to deduct the amount of any tax bills to be paid, including the wealth tax bill itself.

There are several bands for wealth tax, starting at 0.55 per cent for assets worth between €760,000 and €1.22 million, 0.75 per cent for assets up to €2.42 million, 1 per cent up to €3.8 million, 1.3 per cent up to €7.27 million, 1.65 per cent up to €15.81 million and 1.8 per cent thereafter.

A household with taxable assets of £700,000 will pay around £1,000 in wealth tax, while one with taxable assets of £1 million will pay an annual wealth tax bill of around £2,500. “Above £1 million, the bill begins to rise relatively quickly, and even though avoiding wealth tax is not simple, planning is essential,” says Marjorie Mansfield, associate director at Siddalls, a firm which specialises in advising British people living in France.

But there is hope for those faced with a large wealth tax bill — President Nicolas Sarkozy’s new Prime Minister, François Fillon, has prepared a tax and finance Bill that could cap overall individual taxation — including income tax, wealth tax and residential taxes — at 50 per cent. The proposed reduction of 10 per cent would mean significant savings for many asset-rich people, especially if their taxable income liabilities can be kept low.

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