Should I save in pounds or euros?

SpoofWallet24

Hi,

I'm from the UK and i have some money in an ISA. I have been working in Ireland for the last 3 months, and will likely stay here for another year or two. I was thinking of transferring money I save from my Irish current account to my UK ISA, especially now as you get more pounds for euros after Brexit. I know that fees may be charged to convert the money, does anyone know if this applies to converting from an Irish account? I was just wondering if anyone could advise, would it be better to open a savings account here in Euros? I could live in the UK after my time in Ireland, but could also end up living in continental Europe,

Thanks

bowlhead99

It certainly makes logical sense to open up a second account in Euros to keep the Euros that you don't need to imminently spend and want to keep for the future (either to spend during the remaining 2 years in Ireland, or on the continent thereafter), separate from the Euros that you are going to spend day to day. Shop around for the best interest rate for that.

It also makes logical sense that if you expect to come back to the UK, you have some of your savings in pounds rather than take the risk of the Euro weakening significantly before you are ready to do that.

If you don't know in what country you are going to be living long term and therefore you don't know whether you will be spending most of the saved money in pounds, or in Euros, then the most obvious thing to do is 'hedge your bets' by saving some money in Euros and some in Pounds.

I know that fees may be charged to convert the money, does anyone know if this applies to converting from an Irish account?

Is there any particular reason why a bank or money-changer in Ireland or elsewhere would *not* want to charge you for the service of selling Euros and buying foreign currency such as pounds?

iainscomputer

Hi, ISA accounts are only available for UK residents/taxpayers, as you are resident/working in Ireland you can't use your ISA.
It might be possible to put cash in it without anyone finding out.

bowlhead99

iainscomputer wrote: »

Hi, ISA accounts are only available for UK residents/taxpayers, as you are resident/working in Ireland you can't use your ISA.

That's true. You can keep old ISAs but you can't put any more money into them. You usually also need to declare the interest you earn from them to the foreign tax authority where you are resident, because although they are exempt from UK tax, that exempt status is not relevant for many other countries who seek to tax you on your worldwide income.

If you are a Brit living overseas it is no problem really for your UK savings to be outside ISAs, as the UK interest generated would fall within your annual personal allowance anyway unless you had an absolutely massive amount of cash in the UK or lots of other UK source income. Keeping the ISA running (albeit not adding more to it) makes sense if you have lots of UK cash and you are coming back in the forseeable future and it would take many years' allowances to wrap your cash in ISAs again.

It might be possible to put cash in it without anyone finding out.

That's also true, you can simply lie on the form where you declare you are UK resident, give them a UK address and your UK national insurance number, and bingo, you have a current year ISA subscription.

It would however be monumentally stupid to sign a form for your bank that says you are UK resident when you are not. The bank will in due course report the ISA account subscription to HMRC so that HMRC can satisfy itself that you haven't contributed to multiple cash ISAs in the same year or gone over the ISA subscription threshold when counting up the returns it gets from other providers.

HMRC receiving this information will think, "ah, per our records here, Spoofwallet24 told us that he left the country some time ago for a job overseas and he was no longer UK resident, but according to what he tells UK financial services businesses, he is a UK resident as of 22 December 2016. I wonder if he is now correctly paying UK income tax on his worldwide income, like all UK residents should?"

When HMRC subsequently chase you for tax on your Irish or continental European salary for 2016, you would write back and say, "ah sorry that's a mistake, I'm not UK resident actually, I'm Ireland resident, so I don't owe you any tax on my Irish salary, Irish bank interest etc". However, HMRC would query that, because you signed and dated a form which declared you to be a UK resident, and ask you to explain why it exists.

You would then have to say, "ah, well I'm not UK resident really, but I can explain it. The explanation is that I am the sort of person who lies about their tax residency on signed declarations, to reduce any tax I might otherwise have to pay. But I am not UK tax resident, honest guv, here look I'll sign my name to that effect."

Not going to go down well, as fraud and tax evasion is something that HMRC don't like, for some reason.

Pincher

How do you know the HMRC doesn't consider you UK resident any way? If you haven't declared yourself non-resident, you could even have to file taxes both sides.

If you have declared yourself non-resident, then applying for an ISA is just shooting yourself in the foot.

Apodemus

Pincher wrote: »

How do you know the HMRC doesn't consider you UK resident any way? If you haven't declared yourself non-resident, you could even have to file taxes both sides.

If you have declared yourself non-resident, then applying for an ISA is just shooting yourself in the foot.

Quite right, but if the OP has only been in Ireland for three months, then they presumably are still treated by HMRC as UK resident for the 16/17 tax year?

bowlhead99

Apodemus wrote: »

Quite right, but if the OP has only been in Ireland for three months, then they presumably are still treated by HMRC as UK resident for the 16/17 tax year?

If you can say that you're moving out of the UK "indefinitely" for a job abroad, and you do actually stay out of the UK for a full tax year (e.g. 2017/18), then by concession you can have a split tax year treatment in the year you go - e.g. from 6 April 2016 to 20 September 2016 you are UK resident for that "short year" and from 21 September you are treated as non-resident.

This is handy because you get your full £11k personal allowance for the year, but only have a few months of being taxed as a UK resident (ie your old job before you left). Typically results in a tax rebate if you've been on PAYE where it had been assumed by your employer that the £11k tax free was split over the whole 12 months. Then when you're working in Eire or wherever from mid September onwards, you're not accountable to the UK for income tax on your salary, because you're not resident and it's not UK earnings. You fill out a simple form to tell HMRC.