To reduce the public deficit, which is expected to reach 6.1% this year, the government has planned a whole arsenal of measures aimed at restoring public finances.

Public expenditure is to be reduced by €60 billion, accounting for two-thirds of the plan. The remaining third "will be supported by exceptional, temporary tax contributions targeted at companies and households that can participate in this solidarity effort," said the Budget Minister, Laurent Saint-Martin, in his presentation speech.

The principal measures affecting households are as follows.

Income Tax

Around 65,000 of the wealthiest households (less than 0.3% of taxable households) will be asked to contribute on an exceptional basis. The individuals concerned are those subject to an existing tax, the contribution exceptionnelle sur les hauts revenus (CEHR). This tax concerns households who earn more than €500,000 in taxable income per year for a couple, and €250,000 for a single person. These wealthy households will be subject to a minimum tax of 20%.

The basic income tax scale will be increased by 2%. The government's objective is to "neutralise the effects of inflation on the level of household taxation."

French Pensions

Retirement pension increases will be delayed by six months, taking place in July 2025, and not in January. To justify this six-month delay the government highlights "exceptional increases in recent years (in particular an increase of more than 5% this year, while inflation should be around 2%)".

Electricity Prices

Whilst the regulated electricity tariff was due to decrease by up to -15% in February, the government is proposing to increase one of the taxes on electricity services which will reduce the amount of the decrease. The details of the change have yet to be revealed. Households on an unregulated tariff will see an increase in their prices.

Health Charges

The level of the reimbursement from the social security system for GP consultations is to reduce from 70% to 60%. The charge for these consultations is also due to rise to €30 in January (previously announced). Although complementary insurers will pick up the reduced cover by the state, it is inevitable that insurance premiums will rise.

VAT on Gas Boilers

The draft bill puts an end to the reduced VAT rate of 5.5% on gas boilers, rising to the standard rate of 20%. In reality, this is the consequence of a European directive on the energy performance of buildings, adopted in April 2024.

Zero Interest Mortgages

To facilitate home ownership, the prêt à taux zéro will be extended to the entire country for first-time buyers, "under conditions that will be specified and debated" later, the government stated. Currently, the PTZ can be granted for the purchase of a new home located in areas of housing shortage - only 1,800 municipalities in France. Elsewhere, it is only available for existing homes, on the condition that major energy work is carried out, up to a minimum of 25% of the cost of buying the home.

Furnished rentals

Currently, non-professional landlords of furnished lettings can deduct depreciation from their rental income, and if they sell the rental property the depreciation they have deducted is not included in the calculation of the capital gain. This reduces the taxable capital gain. Under the proposed measure this tax advantage will be removed, with depreciation added back into the capital gain.

The change does not affect landlords who use the 'micro' system of taxation.

High Polluting Vehicles

The threshold for triggering the CO2 penalty for high polluting vehicles will be lowered. Since January 2024, this threshold has been 118g of CO2 per km, which corresponds to a tax of €50. It will be lowered by 5g of CO2 per km in 2025 and then by 7g of CO2 per km in 2026 and 2027. For the most emitting vehicles, the maximum rate of this tax will be increased by €10,000 per year until 2027.

Flight Tickets

The taxe sur la solidarité des billets d'avion (TSBA) will be increased, which is likely to result in an increase in ticket prices. The details have yet to be presented, but the indications are that the government wishes to triple the rate of the tax.

Timescale

The draft budget is now in the hands of the parliamentarians, and it is unlikely to be finalised until the end of the year, possibly into next year.