13 money related matters to consider if you’re thinking of moving overseas

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For a few months, restrictions on movement and a collapse in international air travel have made moving around the world all but impossible.

As restrictions start to ease, however, you may decide that your overseas move is back on. Indeed, lockdown has given lots of people time to reflect on what is important and so emigrating might be more of a priority now than it was before.

There are dozens of factors to consider if you’re planning to move abroad, and tackling your financial matters is certainly an important one. So, to help you, here are 13 money related matters you should consider if you’re moving out of (or back to) the UK.

1. Timing a split tax year can be beneficial

Under UK tax law, if you are resident for tax in the UK you have to pay tax on your worldwide income and capital gains to HMRC.

If you are planning on emigrating part way through a UK tax year, you may be able to split the tax year into two parts. You’ll only pay UK tax in the part of the year that you were considered resident for tax in the UK.

This can offer a significant benefit if, for example, you’re moving to a country that has much more favourable tax rules.

2. Use currency providers, not banks

If you’re exchanging significant savings to live on, or the funds needed to buy a house, even small margins in the exchange rate could cost you thousands of pounds or dollars.

So, it’s important that you get the very best exchange rate – and this is likely to be through a specialist foreign currency provider and not a bank.

In addition, many UK banks can charge up to £30 for a foreign currency transaction. So, sending money online with a specialist foreign currency provider is likely to be the cheapest way to send money abroad.

3. If selling assets, consider when best to sell

If you are moving abroad then you may be treated as a non-UK resident for income tax purposes.

However, even if this is the case, you are only treated as temporarily non-resident for Capital Gains Tax purposes for up to five years. This means that if you dispose of some property, shares or other assets during this period, you could be taxed if you return to the UK within five years.

You may need to think carefully about when you sell assets to avoid paying Capital Gains Tax at 10% or 20% (18% or 28% for residential property).

4. Budget carefully

Moving abroad is exciting, but it can be expensive. Not only do you have to budget for the cost of the move itself – travel, shipping and so on – but you also have to budget carefully so you can maintain your standard of living when you arrive.

Bear in mind currency fluctuations and the relative cost of living in both countries when you are doing your calculations.

5. Find out the basics before you arrive

Don’t be caught out when you arrive in your new country. Do some research before you leave and learn about the financial basics such as:

  • How to open a bank account
  • How the tax system works and what you need to know
  • Getting the right visas and/or residency documents.

6. Consider contributing to your UK pensions

If you leave the UK to live abroad, you can continue to pay money into your UK pension, although you might not benefit from tax relief.

Many people consider transferring their existing UK pension fund into a Qualifying Recognised Overseas Pension Scheme (QROPS) where the tax treatment of your money, both whilst saving and when looking to draw benefits at retirement, might be more beneficial.

For example, you may be able to move your pension to an Australian scheme with minimal tax implications and the ability to withdraw funds tax free.

Before you move overseas, it may be advantageous to consider maximising contributions to your UK pension as the tax benefits could be more beneficial when compared to pensions in your new country. You may avoid high levels of tax depending on local pension rules. Speak to a qualified adviser for advice.

7. Consider moving your assets to local currency portfolios

Holding non-sterling assets opens you up to foreign exchange risk. While this is advantageous if the value of your assets rises against the pound, it can damage your returns in the opposite scenario.

If you’re planning to move overseas permanently, it could be beneficial to move your assets to local currency portfolios. Again, professional advice can help here.

8. Dealing with your home while you are overseas

Many people emigrating from the UK decide to keep their UK home and rent it out. If you do, there are several factors to consider:

  • How will you manage the property? Will you appoint a letting agent to find tenants, collect rent, deal with maintenance etc.? If so, expect to pay 7-15% of the monthly rental income in fees
  • How will the rental income be taxed? Speak to HMRC and let them know of your plans. You may be able to apply for the Non-Resident Landlord Scheme which could have some significant tax advantages
  • Will the property be insured? Look for expat landlord insurance that will cover you and your property
  • Does your lender know? Inform your mortgage lender of your plans otherwise you risk breaking the terms and conditions of the loan.
  • Is your UK property your primary residence and therefore exempt from UK Capital Gains Tax?

9. Consider offshore investments

Even if you are emigrating, you may be unsure where you will finally settle. Perhaps your job is taking you overseas for a period, but you don’t know when you will return to the UK?

If so, you may want to consider offshore investments. Speak to an adviser with experience dealing with expats and international clients.

10. Negotiate your relocation package

If you’re moving overseas because of your job, make sure you agree a relocation package with your employer. This should include an allowance to cover the costs of relocation such as an accommodation budget, annual flights home and school fees for your children. These ‘living away from home’ allowances are commonplace in Australia.

Some packages may even cover the estate agent fees for selling your UK property and your mortgage payments while the house is on the market.

Make sure you agree exactly what your employer will cover.

11. Manage your overseas assets if you return to the UK

A significant proportion of Brits eventually move back to the UK after living abroad. When this happens, you may have overseas assets, including property and pensions that you need to manage on your return to the UK.

It can be better to deal with these assets before you leave, so it’s important that you seek professional financial planning advice before departure to secure the best outcomes.

If you have assets such as a property, there are additional planning opportunities available to mitigate potential tax on income or capital gains from assets. A qualified adviser with experience of helping international clients can help.

12. Think about your Will and Power of Attorney

Even if you are organised and have put both your will and Power of Attorney in place, these documents might not be valid in your destination country. Will the jurisdiction you are moving to be able to recognise and enforce a document that is valid in your jurisdiction?

It’s therefore important to put in place a similar Power of Attorney document in the foreign jurisdiction where your property or money is situated.

Even if your UK Power of Attorney is recognised abroad, there may still be local requirements that will have to be met before it is used.

13. Consider using a financial adviser with expertise in both countries

As we have seen, moving overseas can create a range of issues from a financial perspective. Getting the right advice can be absolutely essential, particularly when it comes to your tax and pensions.

If you can, find a financial planner with experience in both the UK and the country you are moving to. For example, bdhSterling are the only Chartered independent financial advice company with financial planners located in the UK and Australia, so we’re perfectly placed to advise clients with UK and Australian connections.

If you would benefit from advice, please get in touch or call (01372) 724 249.

Please note

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Your pension income could also be affected by the interest rates at the time you take your benefits. Levels, bases of and reliefs from taxation may be subject to change and their value depends on the individual circumstances of the investor.

The Financial Conduct Authority does not regulate estate planning, tax planning or will writing.