Emigrating, keep UK savings, advice please - best a/c ? on/offshore ? etc

driver8_2

Hoping someone can help. We have cash from the sale of our house, and we are emigrating to Asia this month. [We didn't want the hassles of letting.]

- I'd like to keep most of the money in pound sterling accounts in UK and take the rest with us.
- We are going for good, and will be visiting UK on holiday only, every few years.
- We have no property, and no other income, either here or abroad.
- There is zero income tax in our new country, but local salaries are relatively much lower than UK. Our new jobs are expected to sustain us overseas but not make us rich.
- We will be looking for local investment opportunities for half our money after 1-2 years.

I've been researching on google and on these boards, and have a few questions.

* offshore accounts - any benefit for me ? Do they deduct any interest at all ?
* 'normal' onshore account - can I not just declare my non-resident non-tax status, so tax is not deducted from interest ?
* offshore - if the bank goes bust (even someone like Barclays/B&B, etc) will I lose everything ? Does the "no more than £30,000 with any one institution" not apply to offshore ?
* if the interest is such that it exceeds the lower tax limit for 'basic personal allowance' (of £5000 or whatever) will I then be eligible for tax on it ? And if all the accounts are in both our names, will the allowance be be twice the limit ?

So we're currently looking at setting up a few savings 'pots', to pay the best interest, but with minimum longterm intervention (don't want account 'erosion' over the years) and access via internet and phone. Half can be tied up for a couple of years.

Any suggestions and advice (or criticism) welcome.

Cook_County

1. Offshore accounts pay interest gross. In Asia "offshore" includes Maldives & Singapore.
2. You will inevitably get better interest offshore than on. It is your choice if you keep onshore accounts.
3. Some jurisdictions (eg Isle of Man) have investor protection others don't. Caveat emptor.
4. There is no UK tax on interest credited offshore if you are non-UK resident, but there is UK tax except in complete years of non-UK residence.

You will continue to have exposure to UK IHT on death, and need to budget for additional costs such as health because NHS coverage will cease when you leave the UK.

digerati

Cook_County answered most of these questions briefly so I'd fill in some of the details.

driver8 wrote: »

* offshore accounts - any benefit for me ? Do they deduct any interest at all ?

Hard to say without knowing your particulars. Most offshore jurisdictions don't deduct tax, however they often don't pay the best interest rates either. Usually the best gross rates for Sterling (GBP) are from UK banks and building societies. Check for the best £ gross rates.

driver8 wrote: »

* 'normal' onshore account - can I not just declare my non-resident non-tax status, so tax is not deducted from interest ?

You'll need to fill out an R-85 form to get UK interest paid gross after you become non-resident for tax purposes. You don't become non-resident the day you leave the UK, but rather after being out of the UK for one full year. Suggest you become fully acquainted with the UK tax rules so as not to make a costly mistake. Seek professional help - most UK banks offer free advise for expats.

driver8 wrote: »

* offshore - if the bank goes bust (even someone like Barclays/B&B, etc) will I lose everything ? Does the "no more than £30,000 with any one institution" not apply to offshore ?

Only bank with those companies you are comfortable with. Barclays Offshore like any major banking group are quite safe. Many offshore jurisdictions have limited or no deposit protection schemes. Others have poor reputations in dealing with complaints by non-residents. Caveat emptor

By the way, under the Financial Services Compensation Scheme your first £2000 is secured but only 90% of the next £33,000 resulting in a maximum payout of £31,700 per depositor at that bank. Fortunately, very few banks go bust. (Finance companies are another matter.)

driver8 wrote: »

* if the interest is such that it exceeds the lower tax limit for 'basic personal allowance' (of £5000 or whatever) will I then be eligible for tax on it ?

Once you are no longer paying UK tax, you are no longer entitled to UK tax benefits. I'd recommend you contact a professional to guide you through setting up your finances in a tax efficient manner and in line with your investment goals.

If you want to maximize the tax-free status of your GBP (Sterling) funds then I recommend this: The day you leave the UK, you transfer your GBP funds to an offshore account at an affiliate of your regular UK bank, or one that offers a decent one-year fixed rate. I usually use a offshore affiliate of my UK banks since there isn't the need to supply as much info to open an account. If you open an account at a different banking group you'll have to supply loads of info (to prevent money laundering). Jersey and Isle of Man operate under English law and the larger banks have close connections with their UK parent banking group.

After one year when your deposit matures, you repatriate it back to a UK bank account where you can enjoy your new non-resident tax-free status. You'll need to get good tax advise from someone as to the ins and outs of UK residency - most UK banks offer free advise. Do it well in advance of leaving so you can structure your finances to be the most tax efficient. There's often loads of paperwork and things to consider.

driver8 wrote: »

And if all the accounts are in both our names, will the allowance be twice the limit ?

I wouldn't initially co-mingle or pool each other's funds since living abroad can be stressful to a relationship. There is no tax advantage to pooling or joint accounts - in fact serious down sides. It's unfortunately quite common for newly expat couples to separate within a few years putting the tax-free status of joint accounts in question. Much better to have separate accounts so if one of you returns to the UK, the other can still enjoy their tax-free status.

Hope for the best, but plan for the worst!

driver8_2

thanks very much for your answers, guys, very helpful. Sorry for the late reply - busy doing all sorts !

* offshore accounts paying gross - I must have got confused with something I'd read (something about a new ruling that offshore euro banks needed to start charging tax).

* I've checked out the rates in Maldives - they're not so good (although HSBC's Sri Lanka website advertises an 18% rate which I'm looking into ! If it seems too good to be true, and all that ...). Will look at Singapore too.

* from the (popular UK) banks I've looked at, the offshore arm seems to offer better rates than onshore, but these don't seem quite as good as the best-buys as a whole.

* I've booked with a Natwest and Nationwide FA for tomorrow - should be able to advise on tax issues. As you said, digerati, opening new offshore accounts seems quite a lengthy process (passport photocopy signed by solicitor !) We already have accounts with these 2, so the process should be easier even if we do not get the very best rates of interest.

* We'll have a cash float for health issues - good point, Cook_County, and something I hadn't specifically thought of.

* thanks for your "what I recommend is this ...", digerati - will be useful for my meets with the FA's tomorrow.

* we smiled at your "stressful to a relationship" advice - very fair and impartial I'm sure, but knowing our personal situation we're hoping this is less relevant. This is the third time we'll be 'emigrating' in our 20 years together (albeit this is the first time we've had any money to consider !) so *yes* we know the stresses all too well !

timoran

More information on offshore banking accounts here