French tax changes to affect Britons

The announcement of an increase in tax in France is set to have repercussions on British investors.

A 1% rise on share, property rental and other investment income - announced by President Nicolas Sarkozy - is intended to reduce the country's welfare trap, in which it can be unprofitable for unemployed individuals to return to work.

The repercussions are that British investors with interests in French rental property or companies will have to pay more tax to the French government.

Senator Alain Lambert, a member of President Sarkozy's centre-right coalition, said: "I'm going to need a few minutes to understand why we're raising tax on investment revenue when we brought in inheritance tax a year ago."

The latest increase will bring the tax charges on French investment revenue up to 30%.

President Sarkozy's changes to French taxes come in the wake of the country's economy contracting by 0.3% in the second quarter of 2008.