Cash ISA expired, now overseas: what really are the options? What are others doing?

matzuba

Hi

Looking for any advice regarding an expired cash ISA deal.

I am a UK citizen but have been living in Australia for the last few years and am no longer considered a UK resident for tax purposes. When i was living in the UK, i invested in a fixed cash ISA for a number of years. This deal has now expired and so i am looking at my options. I understand that i cannot add funds to my current ISA but that i can still keep it open. The ISA is with Santander.

I've built up a reasonable investment in the ISA and need to decide if it is worth keeping this tax wrapper or not. I am not sure when or if i will come back to the UK at this stage. I understand that i could withdraw and bring out to invest in Australia where there more options due to my tax status but there are no such things as ISAs here.

Questions
1. Is it possible to transfer my cash ISA to another cash ISA provider?
2. As rates are terrible, could i transfer all or part of to a Stock and Shares ISA? I've been looking at tracker funds but obviously may have issues around opening with my resident status. I wont be able to put any more funds in but would obviously be paying the management charges regardless.
3. Could i transfer all or part of to an IF ISA when they become available?
4. What are others doing in this situation?

I have a number of UK bank accounts and a home postal address

Many thanks for your time!

xylophone

The rules permit a cash ISA to be transferred to S&S ISA.

The rules permit a non resident to keep but not subscribe to an existing ISA.

It would appear that the rules permit a non resident to transfer his existing ISA from one provider to another.

http://www.thisismoney.co.uk/money/experts/article-2716965/I-no-longer-UK-resident-I-transfer-existing-cash-Isa.html

The question is whether another provider would accept the transfer?

Plus

With whom do you have existing banking relationships? I suspect it will be much easier to open an ISA account with someone you already bank with than to sign up with a new provider (who probably restricts that to UK residents).

You might be able to find one of your existing banks that will let you open a S&S ISA. It might be more tricky if the investment section is a different company from the banking part. But, for example, Halifax, Barclays and HSBC have non-terrible stockbroking operations, even if not the cheapest. (Other banks have 'teamed up with' an investment firm to only sell a limited range of their own products - these are best avoided unless you have no other option)

matzuba

Thanks for the reply xylophone

From what i have read so far - it seems like most if not all will not accept a transfer from a non-resident as the provider does not want the "hassle" of dealing with the additional read tape of a non-resident.

I've read that a lot of providers ultimately do not accept non-residents so they don't need to comply with additional anti laundering processes/procedures etc... but i am a non-resident now so surely the ISA provider would need some sort of process for circumstances like this - of course, if the account holder tells them they are no no longer liviing in the country?

How naughty is it to tick the box on the form indicating you are a UK resident? What rules/regs am i really breaking with the ISA provider if the government allow me to keep the ISA open but not to contribute?

It's possible that a lot of savers tick yes and have not told their banks so they are none the wiser

I also need to consider the 1000 personal savings threshold and that if i do empty my ISA, the yearly limits are quite high so I could open a new cash ISA on my return if that does happen. Again, the cash isa rates are terrible thou. SS ISAs pose more gain/risk potential but i would not be able to top up and would be subject to a management charge eating my investment unless and I believe minimum monthly payments.

matzuba

Hey Plus,

don't laugh ....

-Natwest
-Santander
-HSBC
-Nationwide
-Yorkshire
-Tesco
-M&S
-National Savings
-I need to verify if i hold anything with Interactive Investor anymore.

bowlhead99

matzuba wrote: »

1. Is it possible to transfer my cash ISA to another cash ISA provider?

Technically, the answer to this is yes, in that it's permitted under HMRC's regulations. The restriction on you being a non-UK resident just means that you are not allowed to subscribe to (i.e., put new money into) a new ISA.

When signing up for an account with a new ISA provider, the regulations allow providers to offer either an 'ISA application form' or a 'transfer instruction'.

- If a customer is going to make any new subscriptions, they would need to use an application form that provides date of birth, national insurance number and declaration that they are UK resident and certain other things.
- If a customer merely wants to transfer, then as far as HMRC is concerned they can use a simpler 'transfer instruction' where they don't need to give UK tax details because the ISA monies are already known to be legitimate ISA funds because they're coming from another ISA provider.

However
1) in practice most providers want to use one simple form for all customers - not least because if they didn't collect the tax info they wouldn't be allowed to take in any new money which the customer wanted to add in due course, and they want to make it as simple as possible for people to give them all their money. So, you may find that in practice there is no 'a simple transfer, please' form, and all their forms make you declare that you're a UK resident.#

2) ISA providers do not have to accept transfers in at all, if they don't want to

3) some ISA providers explicitly don't want to offer accounts to customers who are not UK residents, or are residents of other countries (or, e.g., US citizens) because they have extra tax compliance and reporting to do when dealing with customers having overseas residencies, and/or they know there can be hassle communicating with customers overseas

So, you may find yourself needing to look long and hard for a new provider. There have been people posting on here before that they had been left in a situation where an old ISA provider was closing their account for one reason and another, and they couldn't find anyone else to take it on.

How naughty is it to tick the box on the form indicating you are a UK resident? What rules/regs am i really breaking with the ISA provider if the government allow me to keep the ISA open but not to contribute?

It is not really about 'breaking a rule with the ISA provider' which is simply a civil matter between you and a company that you're trying to 'sneak one past' with no harm done. It is about making a declaration for tax purposes that you really really really don't want to make.

IMHO what you don't want to do is use the fact that you have a UK bank account and address that can receive mail, to 'bend the truth' on an application form to say you are UK resident when you are not. At the moment, you live Down Under and you don't need to pay UK tax on any income that isn't from the UK. If you sign off a declaration to a bank, which the bank share with HMRC, saying you're UK resident this tax year, then you will be expected to account for UK tax on your worldwide income for this tax year. So, don't do that.

Really it is stupid to sign your name on a form which supports tax compliance to say you are a UK resident when you are also trying to convince HMRC that you are not a UK resident and don't want to pay tax on all your worldwide income.

2. As rates are terrible, could i transfer all or part of to a Stock and Shares ISA? I've been looking at tracker funds but obviously may have issues around opening with my resident status. I wont be able to put any more funds in but would obviously be paying the management charges regardless.

Again, technically yes you can (HMRC don't prohibit it under the Regulations or their guidance here) , but you may struggle to find a S&S ISA provider who wants the business and doesn't demand a declaration of UK residency because of their own operational rules.

For example I use TD Direct for one of my ISAs and the first bit of the transfer form says:

To apply for an account online please confirm:
You are an individual aged 18 or over
You are a UK resident
You are not a US citizen for tax purposes
If you do not meet these requirements, you may still be able to open an account with us. Please call us on xxx

So, it doesn't mean they definitely wouldn't have you as a customer but it would require a phonecall to find out what's what: maybe they're happy with Aus residents, or maybe they don't want them, or they only want them in their non-ISA investment accounts because of the way they set up their internal admin.

The S&S ISA transfer form at the popular and more expensive provider Hargreaves Lansdown which my Dad uses, does not demand an explicit declaration of UK residence - but it asks for permanent residential address which they'll use to do an electronic ID check. If you use your Aussie address it would fail and then they would have to contact you to ask for some ID (or to tell you that they don't want customers from overseas).

Again, as above you shouldn't use your UK address on the form to 'get through' that sort of check, because you don't want to lie about having your permanent residential address in the UK on a form which is basically to do with opening a tax-advantaged account, and then have to explain to HMRC that you don't want to pay tax on your worldwide income because your permanent residential address is in Australia honest guv but you are just prone to lying on signed declarations.

So with either of these providers, or any others, it would make sense to call them up to understand the rules about the customers they'd accept - and make sure you're speaking to someone in the call centre who actually knows what they're talking about - before you bother to go ahead and apply.

3. Could i transfer all or part of to an IF ISA when they become available?

You would face the same issues as transferring to another cash or S&S ISA provider in terms of them potentially not wanting the business if you're overseas, or only having a route to apply which requires you to confirm your UK residency.

4. What are others doing in this situation?

When I was ex-UK for a while my cash ISAs weren't very big so I just left one where it was and converted the other one back to 'normal' cash. My existing S&S ISA stayed where it was but stayed competitive so the issue didn't come up.

The two easiest choices are:
a) Take out the money from the crappy low-interest ISA and invest it in S&S with an Australia-based financial services business. You can invest in worldwide investment funds and the Aus capital gains tax regime means that capital gains are only charged at half your usual income tax rate if you've held the assets for over a year. You could of course look at Aussie tax efficient investing in pensions/superannuation or whatever other options are around.

b) Take out the money from the crappy low-interest ISA and put it into a normal account with one of your 'number of other UK banks' (Santander 123 current account is good for interest on up to £20k if that's an account you already have). Or with another bank in UK. As a UK citizen you have the same £11k annual allowance as the rest of us before you have any UK income tax liability, so if the amount is below about half a million quid it's not like you are going to pay any tax on the interest. Up until last tax year you would have had basic rate tax deducted at source if you didn't fill out a form, which would have created the hassle of claiming it back every year, but all banks now pay gross.

If you can't find a UK bank which offers great savings rates to non-residents - not surprising at the moment when our bank base rate is on the floor and many banks can't be bothered offering top rates to non-residents who aren't going to be hanging around to be flogged lots of other products - you could look offshore (e.g. Isle of Man) or perhaps stick it in an account in Australia if you don't know that you'll ever really need any pounds sterling again anyway.

matzuba

Very sound and detailed advice - thank you for taking the time to post that!
I have some research to do based on this.

The Santander 123 account is an option but there is the 5 monthly fee (out weighed easily if maxed to 20K holding) and DD requirements - this is more of the problem but would need to be creative.

Never thought or would know how about going investing in the Isle of Man but will do some research.

bowlhead99

matzuba wrote: »

The Santander 123 account is an option but there is the 5 monthly fee (out weighed easily if maxed to 20K holding) and DD requirements - this is more of the problem but would need to be creative.

Paypal is one and a token charitable donation to e.g. NSPCC or Red Cross etc is another.

Never thought or would know how about going investing in the Isle of Man but will do some research.

I wouldn't bother investing there if you are living in Oz because you will have all sorts of investment options on your doorstep via Australian regulated financial institutions.

However if you are looking for a home for pound sterling savings then somewhere like Nationwide International would give you over 1% on fixed deposits and they are well used to having savers who are overseas resident and wanting to store funds in GBP/ USD/ EUR.

uptdale

If you are now tax resident in Australia, you need to check how the interest on your UK cash ISA will be taxed in Australia - it's unlikely to be tax free. If you switch to a UK S&S ISA, you may find that the dividend income and capital gains are also taxed in Australia.

A lot depends on whether and when you are likely to return to the UK. If you expect to be in Australia for the longer term, you'll probably be better off with accounts geared to the Australian tax regime.

matzuba

Thanks for all the input from the forum! much appreciated!

I did contact a number of the investment platforms - TD Direct/TD Direct International/H L and they did not want to know. I've also had a quick look at keytrade and Interactive brokers....still researching so not sure if they are an option.

I did move some of the funds over to Australia and put to good use here, esp as the rate was great at the time. Sadly, i did not get to move all the funds over and now the GBP to AUD exchange is absolutely terrible!

We dont have ISA equivalent concessions here and i dont know if or when i would return to the UK down the line. I know bringing the funds over to work within the Australia system would be best and above board but with the current exchange, it doesnt not seem the best thing to do to maximise my return on these funds.

I have put some of my funds into P2P lending but feel i am now stuck with some ISA funds and some cash funds that are not really doing much for me. Am i wrong to have a hang up about exchange GBP to AUD? If i was to actually find a platform to invest through, does it make much difference if i invest in the fund in GBP via a UK platform or the same fund through a platform in Australia with AUD ? The units i could purchase would still be the same due to the value of the current right?

sorry, in a spin and need to do something more constructive with these funds!

darkidoe

matzuba wrote: »

Thanks for all the input from the forum! much appreciated!

I did contact a number of the investment platforms - TD Direct/TD Direct International/H L and they did not want to know. I've also had a quick look at keytrade and Interactive brokers....still researching so not sure if they are an option.

I did move some of the funds over to Australia and put to good use here, esp as the rate was great at the time. Sadly, i did not get to move all the funds over and now the GBP to AUD exchange is absolutely terrible!

We dont have ISA equivalent concessions here and i dont know if or when i would return to the UK down the line. I know bringing the funds over to work within the Australia system would be best and above board but with the current exchange, it doesnt not seem the best thing to do to maximise my return on these funds.

I have put some of my funds into P2P lending but feel i am now stuck with some ISA funds and some cash funds that are not really doing much for me. Am i wrong to have a hang up about exchange GBP to AUD? If i was to actually find a platform to invest through, does it make much difference if i invest in the fund in GBP via a UK platform or the same fund through a platform in Australia with AUD ? The units i could purchase would still be the same due to the value of the current right?

sorry, in a spin and need to do something more constructive with these funds!

I am curious. Australia is a potential destination for me in the future.

What equivalent tax-free wrappers are there in Australia?? What are the Capital Gains tax, Dividends Tax like in Australia. Are the platforms in Australia similar to what we have in the UK and accessibility to funds via brokerage simple and straightforward?? Availability of range of funds similar?