Paying into HtB ISA/LISA whilst Abroad 26 April 2017 at 1:16PM edited 30 November -1 at 1:00AM in ISAs & Tax-free Savings 7 replies 2K views

QuiveringCoward

Hey folks,

I'm hoping to be living and working in Canada next year. I was going to set up a help to buy and lifetime ISA before I go, but does anyone know if there are restrictions on the isa being paid into from abroad? Was hoping I could pay in whilst away and buy a flat/house when I return

Cheers,

Luke

jimjames

If you're not resident then you can't pay into an ISA. You can retain any existing ISAs though

bowlhead99

Yes, you can't pay in while you're away and non-resident, and you wouldn't want to be claiming you were UK resident just to fund a LISA when you weren't really, because by claiming to be UK resident you'd be liable to pay UK tax on your entire worldwide income.

But you can contribute for the 2017/18 tax year while you're here, and for example if you leave in a years time on 26 April 2018 you'd have 20 days of that 2018/19 tax year to stuff your ISA/LISA before you left. Then when you come back on, say, 6th April 2020 you could make a contribution for the 2020/21 tax year and a month later cash it all out with the bonus to buy your property.

In that example you would have only missed the chance to contribute for 2019/20 due to being out of the country that whole tax year.

isasmurf

bowlhead99 wrote: »

But you can contribute for the 2017/18 tax year while you're here, and for example if you leave in a years time on 26 April 2018 you'd have 20 days of that 2018/19 tax year to stuff your ISA/LISA before you left. Then when you come back on, say, 6th April 2020 you could make a contribution for the 2020/21 tax year and a month later cash it all out with the bonus to buy your property.

In that example you would have only missed the chance to contribute for 2019/20 due to being out of the country that whole tax year.

He would miss out on both 2018/19 and 2019/20. If you become non-resident during a tax year all subscriptions to an ISA made during that tax year must be removed, and in the case of a LISA, the bonus repaid to HMRC.

QuiveringCoward

isasmurf wrote: »

He would miss out on both 2018/19 and 2019/20. If you become non-resident during a tax year all subscriptions to an ISA made during that tax year must be removed, and in the case of a LISA, the bonus repaid to HMRC.

Damn. So I can't keep it ticking over with the money it had in there before I left in to claim the bonus?

I guess I might be able to set up a Canadian savings account, but its not gonna be quite the same is it...

badger09

isasmurf wrote: »

He would miss out on both 2018/19 and 2019/20. If you become non-resident during a tax year all subscriptions to an ISA made during that tax year must be removed, and in the case of a LISA, the bonus repaid to HMRC.

Can you link to the source (legislation) of your assertion please.

bowlhead99

QuiveringCoward wrote: »

Damn. So I can't keep it ticking over with the money it had in there before I left in to claim the bonus?

I guess I might be able to set up a Canadian savings account, but its not gonna be quite the same is it...

In my example where I quoted you leaving the UK on 26 April 2018, my assumption was that you would claim 'split year' treatment for your 2018/19 tax residence.

I.e., you would tell HMRC that you were UK resident from​ 6 April 2018 to 26 April 2018 and then Non-UK resident due the remaining 344 days of the tax year.

HMRC allow that standard concession where you are leaving indefinitely to work abroad and your absence will continue for at least a full UK tax year (apart from the odd holiday or whatever). Effectively:

For that 21 day period at the start of the 2018/19 tax year until the point you leave, you are a 'normal' UK resident - with the ability to put a full year's allowance in an ISA or LISA, and usefully you have a full 'annual personal allowance' for income tax purposes of £11500 to use against your UK income earned from your job in that 20 day period. Then from the point you leave the UK, you're no longer resident and you are taxable as a resident only by Canada or whomever.

When you open and subscribe to an ISA/LISA you must declare that you meet the residence qualification. Then once you've become non-UK resident you simply tell HMRC that you've left (to make sure you get back as much tax back as possible as you've probably overpaid PAYE), and you have an obligation to tell the ISA manager that you no longer meet the residence qualification. The ISA need not be closed and the money need not be withdrawn. You just can't add new money to it against your normal subscription allowance because you no longer have a normal subscription allowance. You're banned from making new normal subscriptions unless and until you meet the residence qualification again (i.e. once HMRC consider you tax resident again, in Adobe future year).

So, you certainly *can* "keep the account open and ticking over with the money it already has in it.

Isasmurf is probably talking about a situation where you mistakenly applied to open an ISA and put money in it declaring yourself to be UK tax resident, but later agree with HMRC that you would not be resident for the whole of that tax year - in which case your subscription must be reversed because it wasn't allowed because you weren't actually tax resident on the date of subscription, as it turned out.

However, for the normal situation of 'going to work abroad for a couple of years', you'll be able to get split year treatment so you *were* still resident when you made the subscription and there is nothing to reverse. In the year of return you can also usually get split year treatment too (thus allowing full year's ISA allowance and full personal allowance on UK earnings compressed into a relatively short space of time), as long as you've been away a full UK tax year.

badger09

bowlhead99 wrote: »

Isasmurf is probably talking about a situation where you mistakenly applied to open an ISA and put money in it declaring yourself to be UK tax resident, but later agree with HMRC that you would not be resident for the whole of that tax year - in which case your subscription must be reversed because it wasn't allowed because you weren't actually tax resident on the date of subscription, as it turned out.

That's not how I interpreted isasmurf's post, hence my request for the source legislation.

I'm assuming from his/her username that his/her knowledge of ISA & residence rules is more current than mine (which wouldn't be difficult:o)