Interest on ISA taxed when living abroad?

Aurora777

Hello everyone,

In a few months I will be leaving the UK to live in Canada for approximately 2 years and so have been trying to get my finances in order before I move.
I currently hold an ISA with the Nationwide, and read that whilst I am not resident in the UK although I will be able to keep my ISA, I will not be able to make any further deposits into it. Thats fair enough, but I also read that it is possible that what interest I do earn would possibly be subject to Canadian tax. Does any one know if this is correct and if so if there are any exemptions in place (or if anyone had any other ideas) that would enable me to get around this?

In relation to this I also hold e-savings with Nationwide, and will presumeably also have to declare this for tax purposes in Canada, and so was wondering where it might be possible to find out about the rate at which tax on interest will be charged?

Thanks in advance.

MiserlyMartin

Its taken me a long time to find this out and I'm not 100% sure.......

But from what I see Australia's tax office don't care if its an ISA. An ISA is a perk for UK tax payers not Australian ones.

You'll be "not ordinarily resident in the uk" if your absence from the UK covers a complete tax year (i.e. 6 April to 5 April), and you spend less than 183 days in the UK during the tax year, and your visits to the UK do not average 91 days or more a tax year over a maximum of 4 years. (For visits to the UK, days of arrival and departure are not normally counted as days spent in the UK.) If you become non-resident, you will normally only be taxable on your income arising in the UK.
http://www.hmrc.gov.uk/cnr/faqs_general.htm

Regards to your ISA, UK tax is no problem. But your e savings could be subject to tax in both countries. They have double taxation treaties to prevent being taxed in both countries (applies to most other countries too)

So you are an Australian tax payer and they will see it as foreign investment income (your interest) so they will tax you on it.
http://www.ato.gov.au/individuals/content.asp?doc=/content/64070.htm&pc=001/002/012/015/009&mnu=1026&mfp=001/002&st=&cy=1

Tax rates for 2005-06

Taxable income

$0 – $6,000
Nil

$6,001 – $21,600
15c for each $1 over $6,000

$21,601 – $63,000
$2,340 plus 30c for each $1 over $21,600

$63,001 – $95,000
$14,760 plus 42c for each $1 over $63,000

Over $95,000
$28,200 plus 47c for each $1 over $95,000

More detailed Aussie tax info and rates : http://www.ato.gov.au/individuals/content.asp?doc=/content/12333.htm&mnu=5464&mfp=001/002

Cook_County

There is no reason why you should not retain your ISA while living in Canada, but you will indeed become Canadian resident and taxable on worldwide income. You need advice therefore about investments in UK pension funds, ISAs etc before you go. For some folks an immigrant trust is helpful.

MiserlyMartin

Oops I just realised its Canada, silly me. !!!!!!.

I think that its the same answer though.

Try here for your answers:
http://www.cra-arc.gc.ca/tax/nonresidents/individuals/newcomer-e.html

I hope that Australian info helped somone though. Perhaps I ought to repost it somewhere else.

Aurora777

Thank you everyone for taking the time to look into my questions, it is much appreciated. I have read up on immigrant trusts, but to my understanding, for the sum of money I have to invest these probably would not be an option (they seem to require a very large sum), which is a shame as in the Canadian case they appear to offer no tax for up to 5 years.