Managing Your Finances When You Move Abroad
Around 10% of the UK’s population intend to move abroad by 2020, according to the offshore bank Alliance & Leicester International. That’s about six million people, and if you’re one of them you’ll need to consider various matters of finance before you start a new life overseas.
Banking
For quick access to your cash, it’s wise to set up an account in a bank in your new homeland. This will make it easier to pay utility bills, direct debits and so on, and your employer may want to pay your wages directly into your account.
Speak to local friends and colleagues for an indication of how to open an account and ask for recommendations of reliable banks with English-speaking members of staff. Most high street banks in the UK have networks abroad and also offer offshore banking facilities.
It is wise to keep an account open in the UK so that you have readily available funds if you return for a visit. If you open a Giro account at the Post Office, you will be able to quickly get money wired from it.
An alternative is an online banking provider, such the ones listed in our Online Banking category. This will give you 24-hour access to your cash anywhere in the world that has internet access. For more information, see our feature Guide to Internet Banking.
Investments
An independent financial advisor (IFA) will be able to help you with your investment options. For more information, see our article Choosing an Independent Financial Advisor.
Your IFA will be able to guide you on whether or not to continue with investments in the UK, and he/she will make you aware of tax rules that may apply. For instance, if you hold Individual Savings Accounts (ISAs), they need not be closed if you cease to be a resident of the UK. You won’t be able to make any further payments to them until you return permanently to these shores, but you will still benefit from their tax advantages. See our feature on ISAs for more information.
You may be advised to put your money in offshore funds – unit trusts aimed at expatriates. You will receive a gross income from such investments and will be expected to declare these earnings for tax purposes either in the country you live or the UK.
Pensions
If you are receiving the State Pension, it won’t be affected. Just give your local authority details of a bank branch or post office overseas where you wish to receive your money.
If you are being sent abroad by your employer you will be able to continue to participate in your company’s pension scheme.
As an expatriate you can hold a private pension and continue to pay into it for five years. And even though you no longer reside in the UK, you will still receive the State Pension once you reach retirement age. To ensure that you get your full entitlement you must keep up your National Insurance contributions in order to maintain your State Pension entitlements once you move overseas. But you will still receive some State Pension even if you stop paying NI (providing you paid it at some time).
Medical insurance
It is vital that you understand how healthcare operates in your new country of residence. In most nations, you will be expected to pay for treatment, meaning you could rack up a huge bill should you fall seriously ill.
To cover these expenses, international private medical insurance – for people living abroad for more than six months – is the safest solution. Policies typically cover hospital and nursing costs, surgery, drugs, dressings and theatre charges. More comprehensive policies will even cover treatment of long-term chronic illnesses, such as asthma and diabetes. Premiums depend on factors including the country, your age, gender and general health.
Medical insurance is compulsory in some countries, the USA, Czech Republic and Saudi Arabia among them.
Tax
Before you move abroad, you must inform the Inland Revenue, which will probably ask you to complete a P85 tax form so that the taxman can keep track of you. For more information on tax issues for non-residents, read the Inland Revenue’s series of international leaflets (http://www.hmrc.gov.uk/leaflets/c9.htm) or ring 0845 0700040.
In many countries you will have the option to either continue to pay taxes to the UK or register to pay taxes in your country of residence. To decide, speak to a local expert for an estimate of how much you will be charged in your new homeland.
If you keep investments in the UK, they will be taxed at source, while earnings from bank and building societies won’t be taxed – but only as long as you fill in a tax exemption form.
If you keep your house in the UK and rent it out, you will be liable for tax on amounts earned over £4,250 per tax year – but it is the responsibility of your tenants or your letting agent to make sure the tax is paid.
