Moving to UK from Spain for work. Keep money in Spanish bank or UK?

vitalis_2

I have some money saved up in ING Direct Spain earning 6% interest and I'm thinking of moving to UK this January for employment.

Would it be better to transfer my money to a UK bank? How is tax charged on the interest earned from a savings account? I'm also thinking of taking advantage of tax free cash ISAs since it seems we don't have those here in Spain.

Reaper

Briefly...

You get an annual tax free allowance, £6,035 for most people. If you earn more than that then you have to pay 20% tax on anything above that figure. This is automatically deducted from your savings interest payments unless you tell them not to. However ISAs do not pay any tax.You can add a maximum of £3600 into a cash ISA each year.

If you are a higher rate tax payer you have to pay extra on earnings and interest to bring the rate up to 40%. Tax tables can be found here.

6% sounds pretty good though. You will struggle to find rates that good here.

gozomark

6% - what currency is that in, and is it a fixed rate ?

Jake'sGran

Have you calculated what you would lose/gain on the exchange rate if you transfer.
If you don't need the money for everyday living expenses I think I would be inclined to leave it there at that rate of interest. Two of my 6% interest paying accounts have already dropped to 4%.

gozomark

Jake'sGran wrote: »

Have you calculated what you would lose/gain on the exchange rate if you transfer..

assuming its not in £ at the moment...

DRS1

You may need some specialist tax advice. I suspect you may not be domiciled in one of the UK countries and so you may find that if you keep all the money (including the interest) outside the UK you will not pay UK income tax on the interest earned; you would only pay UK income tax on the interest brought into the UK. Of course you would still have to worry about tax in Spain.

There have been proposals to change this tax treatment and I am not sure where things stand at the moment - there was a proposal to make non UK domiciled people pay a fee to keep the favoured tax status failing which they would be taxed on their worldwide income like the rest of us UK domiciles. People on the cutting tax board may know more about this.

vitalis_2

I see. I guess there isn't really any reason why I should bring all my money over to UK. @gozomark: The account is in Euro currency

From the moneyfacts website (first result from google) I gather that "Individuals who are both resident and ordinarily resident in the UK for tax purposes and aged 16 and over are eligible to open to a cash ISA." and "Individuals who are both resident and ordinarily resident in the UK for tax purposes and aged 16 and over are eligible to open to a cash ISA."

So, if you earn less than £6,035 can you still contribute to a Cash ISA since you are within the tax allowance? Is there anyway to still contribute to Cash ISAs when you go overseas? Like for example keeping UK bills and rent under your name?

Baldur

vitalis wrote: »

So, if you earn less than £6,035 can you still contribute to a Cash ISA since you are within the tax allowance?

Yes although, unless you are looking long term and expect to earn more than the personal allowance in the future, you may find that taxable accounts could offer you a better rate of return in the short term.

Sam37

It also depends on your circumstances and plans. If you think you may move back to the Eurozone at some stage, or spend a significant amount of time there in the future, it is quite nice not to be completely at the whim of the exchange rate at that time.

I have tried to split my savings between Eurozone and Poundland for that purpose, and I am glad now I did.

jvmills

The exchange rate is almost nearing one for one currently which is fantastic for people changing Euros for GBP.

So get a good fx broker with an up to date rate and you can cash in!