Life Insurance Taxation: What's New in 2025?
Summary: Review of tax and savings changes, and advice on optimizing existing policies.
Life insurance: still an attractive investment
Life insurance remains the French people’s favorite investment, notably for its flexibility, advantageous tax regime, and ease of transfer. However, the taxation surrounding this product evolves regularly in line with reforms. The year 2025, with the announcements from the draft finance bill, brings its share of new features. What major changes should you anticipate? How can you adjust your savings strategy and optimize your current policies?
Main tax changes in 2025
The legislator has confirmed several developments regarding life insurance taxation as of January 1st, 2025. Here are the key points to remember:
- Change in withdrawal taxation: The flat tax (PFU) remains at 12.8% for gains from payments less than eight years old, but a new 15% bracket is introduced for policies exceeding €500,000 in assets for the same policyholder.
- Reduced exemption cap: The annual income tax exemption cap on gains, for partial withdrawals after eight years (€4,600 for singles, €9,200 for couples), is lowered to €3,500 and €7,000 respectively.
- Promotion of green unit-linked accounts (UC): Payments directed towards “sustainable investment” labeled supports will benefit from an additional €1,000 allowance on realized gains, thus encouraging responsible savings.
- Transfer and inheritance tax: Exemption thresholds in the event of death remain unchanged, but the declaration process is simplified thanks to the introduction of a single digital portal.
Impacts for savers
These changes require increased vigilance in managing your life insurance. Heavily invested savers will need to monitor the €500,000 threshold to avoid higher taxation. The tightening of the exemption cap also makes partial withdrawals less advantageous, especially for those who used this mechanism to build up tax-free additional income.
Conversely, the bonus for green supports encourages diversification into responsible funds, an opportunity to combine performance and societal impact.
Tips for optimizing your policies in 2025
- Anticipate tax thresholds: If your policy is nearing the €500,000 threshold, consider partial withdrawals before the end of 2024 or spreading your savings across multiple policies or institutions.
- Adjust your withdrawals: Reassess the frequency and amount of your partial withdrawals to stay under the new exemption cap.
- Diversify with green unit-linked accounts: Include labeled supports to benefit from the additional allowance and boost your portfolio.
- Update the beneficiary clause: Take advantage of the simplified procedures to check the relevance of your beneficiaries and optimize your estate transfer.
- Consult with an advisor: A wealth assessment allows you to anticipate the impact of the new rules and adapt your strategy to your objectives.
Conclusion
Life insurance remains a competitive tax wrapper, but upcoming changes require more detailed and proactive management. Take this transition period to audit your policies, diversify your supports, and consult a professional. This way, you will continue to make the most of your life insurance, even under the new 2025 tax regime.
