Moving to Austria and UK savings

rubberdinghy

Hi MSE forum users,

This topic might have been already discussed, but my search didn't bring a definitive answer. So here's my question (with hope someone could shed some light on the matter or share experience).

I'm not a UK-born citizen, but am an EU citizen. I've been working in the UK since February 2011, so in this sense I'm a UK tax resident.
My circumstances will change on the 1st of January, as I'll start working in Austria, where I'll become a tax resident (I'm planning to stay there for a couple of years). The main question: what's best for my savings? Currently I have a current account with TSB with a five-figure sum saved up. Would it make sense to open a savings account (or ISA)? Would I need to declare the income on savings in my Austrian tax declaration?
Or does it make more sense to use one of the FX brokers like HiFX and transfer all my savings in one lump sum, once I open a Euro account in Austria?

Since I don't see any big spending coming up in the next year or two (and will definitely keep my free TSB account in case I need to visit or come back), I would be OK with locking my money into a financial tool that gives stable return.

Thanks for your insights and suggestions!

Archi_Bald

I have no idea what would be best for you, not least because you are not saying what your medium to long term plans or your tax band are. E.g. do you expect to become a UK resident for tax purposes again.

In general, you have to abide by the tax laws of the country you are a tax resident in, and in particular, you will remain subject to the European Savings Directive.

For most UK tax payers, current accounts still pay the best interest rates in the UK at present. You won't be able to open any new UK current accounts if you are no longer a UK resident but you can keep your existing accounts.

Given the ECB rate is even lower than the BoE rate, I doubt you could get anything like the UK current account rates in Austria for quite some time but I could be wrong and you would have to do your own research on Austria.

Out of interest, why do you have a 5-figure sum in a TSB current account if they are only paying interest up to £2,000?

rubberdinghy

Hi Archi Bald,

Thanks for your initial answer. During my full stay in the UK I was a 20% tax payer. With TSB it's a bit better than you say - I have the Enhance option which pays interest on sums up to £5,000. Agreed, I never had the time nor any pressing need to look into ISAs or any investment/savings tools, so that's why the money sits on a current account. I'll have a look around the Austrian banks again tomorrow and see their AERs for current accounts. You are right that the ECB's 0.05% doesn't look great compared to BoE's 0.5% and I guess that's also one of the reasons I'm asking this question in the first place.

Spidernick

To answer another part of your question: most tax treaties will tax interest based on tax residence irrespective of where the interest arises, so it's likely that any UK interest would be taxable in Austria and not the UK once your tax residence changes to Austria. On that basis it would then make sense to get the UK interest paid gross, otherwise you would need to reclaim this.

Archi_Bald

rubberdinghy wrote: »

With TSB it's a bit better than you say - I have the Enhance option which pays interest on sums up to £5,000.

Sorry, you are of course right. Though since the interest rate drops to 1.5% on November 4, it's off my radar already.

rubberdinghy

Hi all,

Archi Bald: You are right, the AER will go down on the 4th of November.

Spidernick: That's also correct. Austria has sadly a 25% tax on interest paid from savings. The best AER I found (post-tax) was 1.06%. That definitely looks a bit shy compared to the UK rates.

All in all, I won't be able to open any new accounts once I move and this is the most limiting factor. If I sign up for an account while still in the UK and then the rates fall once I leave, I won't be able to do much. So I guess it makes sense to use an FX broker and just move the money in bulk once I have an Austrian account. A bit smaller interest, but more convenience.

Thanks for all your insights and help!