Get an Offshore account in Sterling, Euros or Dollars and get great rates on your savings. Ideal if you live abroad or earn money in a different currency. Find the best Offshore account for you and apply online. Full representative AER rates shown.



 

What are Offshore Savings Accounts?

Offshore savings accounts are specifically designed for savers who work or live abroad, travel frequently overseas or consider retiring in another country, and so want to keep parts of their money outside of the UK.

Offshore savings accounts are usually savings accounts run from the Channel Islands or the Isle of Man, as they have different tax jurisdictions than the mainland. All individuals over the age of 18, who are UK residents, living and working in the UK, are eligible to open an Offshore Savings Account.

Depending on the provider, Offshore Savings Accounts can have fixed or variable interest rates.

Accounts with variable interest rates often include a 12 months bonus, after which the interest rate may drop. While variable interest accounts generally allow clients to have free access to their money, some determine a fixed amount of penalty-free withdrawals.

Fixed rate accounts on the other hand usually require clients to leave their money in the account for a predetermined amount of time, commonly between one and five years. 

Offshore accounts have different opening rates; some require a minimum of £5,000 to £10,000, while others can be opened from £1.

Generally, offshore accounts are more popular among people living outside of the UK, since interest rates are no longer higher than those of onshore accounts. Depending on your requirements, there are accounts which can be operated via branch, telephone, post or online. It's sensible to check these conditions before opening an account in order to find out whether they are suitable.

Different types of Offshore Savings Accounts

  • Euro accounts: These accounts are particularly useful if you are planning to move to a Euro-country or already receive a Euro-salary, as they allow you to make transactions in Euro without paying an exchange rate. There are also accounts for other currencies, such as US Dollar available.
  • Deferred interest accounts: These accounts allow clients to plan their interest income around tax liabilities. You should take into account that most of the accounts pay interest only upon account closure while a few may make an exception and allow you to defer parts of the interest already before the account is closed.

How Offshore Savings Accounts are taxed

Offshore Savings Accounts are not tax free per se, as any income from savings must be declared and hiding taxable income will be legally prosecuted. Hence it is important to declare all your interests in order to avoid fines from HM Revenue and Customs.

One benefit of Offshore Savings Accounts however, is the fact that they pay tax gross, thus before the tax is deduced.

Even though you are required to declare any interest from Offshore Savings Accounts, which eventually will be subject to UK income tax, there tends to be a delay between you earning the interest on your savings and being required to pay tax on it. Hence, if you are being paid interest annually at the end of April, you can hold the interest of the previous year in your account for up to 20 months. Due the fact that tax is deterred, you are enabled to leave money that would normally be deducted longer in your account, which allows you to increase your returns.

A second fact that needs to be taken into consideration is the place where you base your offshore savings, as you might become liable for an overseas tax along with the UK tax on your interests. You should investigate this before choosing the place and provider for your Offshore Savings Account.

Generally, there exist numerous tax agreements between the UK and other countries to prevent double taxation. In case you are still liable to double taxation, the UK usually allows you to claim tax relief on the tax that is paid on your Offshore Savings Account.

Top Tips for choosing an Offshore Savings account

Unlike money in UK bank accounts, savings held in accounts outside of the UK are not subject to the UK Financial Services Compensation Scheme (FSCS), even if your account is with one of the main high-street banks.

They might, however, be protected under another scheme, depending on the location, such as banks covered by the Guernsey Banking Deposit Compensation scheme, protecting up to £50,000 per person or the Isle of Man Depositors Scheme, equally protecting up to £50,000 per individual. Before choosing an offshore savings account, you should thus find out how your money is protected.

When looking for an offshore savings account, it is moreover reasonable to consider similar factors as for UK based financial products. Hence it is important to find the best interest rate, find out whether you receive interest annually or monthly and whether the bank offers a fixed or variable interest rate.

Moreover, always check the terms and conditions of the provider to ensure that your demands are met and protect yourself from unwanted restrictions or penalties.