Relocating from Australia to the UK is an exciting opportunity. However, it also leads to a series of financial planning considerations that can significantly affect your finances if not carefully managed.
By addressing these before your move or soon after you arrive in the UK, you can minimise costly errors and start your new life in the UK on a secure financial footing.
Below are six key issues you should consider:
1. Understanding your tax residency status
Your residency status determines where and how you are taxed.
Australia and the UK have different rules for determining tax residency, and it is possible to be considered a resident of one country while having overlapping tax obligations in the other.
There are also issues to consider around your date of departure, how long you intend to remain in the UK, and your existing ties to Australia. All of these can affect your tax position and, as a result, should feature in your planning process.
We strongly recommend that you seek expert advice to avoid unexpected tax liabilities and maximise any potential opportunities relating to your move and residency status.
Find out more: bdhTax – specialist tax advisory services
2. Managing your super fund
If you’ve been working in Australia, it’s likely you’ve built up superannuation savings.
When it comes to managing these while living and working in the UK, it’s important not to adopt an “out of sight, out of mind” attitude and assume you can ignore them for an extended period.
Instead, you should see your super funds as a valuable component of your retirement income planning and continue to manage them accordingly.
For example, if you have several different funds, it may be beneficial to consolidate these into a single arrangement. This will make them easier to manage, and you could also find that having just one fund can help reduce your fund and administration charges.
You should also review how your funds are invested, both to maximise your returns and to align them with your wider investment strategy.
From a longer-term perspective, you will also want to look ahead to your eventual retirement and think about the potential tax implications of future withdrawals while living overseas.
Find out more: Planning to retire in the UK? Learn what to do with your Australian super
3. Making the most of tax-efficient UK pensions
In addition to managing your super fund in Australia, it’s important to understand how UK pension schemes work.
You also need to be aware of the differences between UK pensions and super funds, especially around contribution limits and the tax advantages.
If you’re employed in the UK, you will likely be enrolled in a workplace pension scheme. Pension contributions made by your employer are a valuable benefit and should not be overlooked.
It’s also highly advantageous to make your own pension contributions to your employer scheme, as well as possibly setting up your own self-invested personal pension (SIPP) for additional personal contributions.
You will benefit from tax relief on your personal contributions at your marginal rate of tax, which means they are a highly tax-efficient way to grow your wealth.
If you plan to return to Australia to retire at some stage, another key part of your retirement planning strategy will be looking at how you can eventually transfer your accrued UK pension funds into a superannuation fund.
Find out more: An international SIPP could be a great option for Australian expats in the UK
4. Building a cross-border investment strategy
As well as managing the alignment between your UK and Australian retirement funds, you will also want to consider what happens to other investment assets you have in Australia and those you accumulate in the UK.
If you are looking to continue investing while living in the UK, you should consider options such as UK ISAs to help you build your wealth tax-efficiently. However, it’s important to be aware that the tax advantages may not apply if you return to Australia, so you should factor this into your long-term planning.
Likewise, certain investments that are tax-efficient in Australia may not receive the same treatment under UK tax rules, and it’s advisable to review your holdings before you become a UK tax resident to avoid any unexpected tax consequences.
Your holistic investment strategy should incorporate both Australian and UK investments to ensure effective synergy across your holdings.
Find out more: 4 important facts that can help guide your cross-border investment strategy
5. Dealing with currency risk
Moving between Australia and the UK and having assets in two different countries means you are likely to be exposed to currency fluctuations between the Australian dollar and the UK pound.
This is particularly the case if you plan to move assets between the two. A favourable exchange rate can significantly increase the purchasing power of your money, while adverse movements can reduce the equivalent value of your overseas assets when converted.
So, if you are planning to access savings and investments in Australia while you are living in the UK, you will want to consider strategies to manage currency risk.
Find out more: Why expats in the UK and Australia need to take currency risk seriously
6. Planning your legacy across jurisdictions
Estate planning becomes more complicated when your assets are spread across two or more countries.
For example, a will you set up in Australia may not automatically apply to your UK assets, and vice versa. Because of this, we would strongly recommend that you have separate wills for each jurisdiction.
Similarly, the UK and Australia have very different tax regimes around inherited assets. Hence, you must understand these differences and structure your legacy planning as effectively as you can.
You should also review the status of any powers of attorney you have in place, as these may not apply in a different country from where they were set up.
Careful planning in this area can help protect your estate and provide clarity for your beneficiaries.
Find out more: Major changes to UK inheritance Tax rules could affect your estate planning. Find out why
Expert advice can make all the difference
As you can probably appreciate, having read about the issues we have raised here, expert financial advice when you are moving from Australia to the UK is key.
It can help you avoid costly, potentially irreversible errors and ensure you take advantage of any financial opportunities arising from your move.
bdhSterling are widely regarded as one of the leading financial advice firms for people moving between Australia and the UK.
All our advice is delivered in-house by dual-qualified UK FCA and Australian ASIC-licensed advisers, which means we have a deep understanding of the key issues that could affect you.
Working with us can give you the confidence and peace of mind that come from having effective, robust financial plans in place.
If you would like to discuss your own financial plans, please get in touch with us today.
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.
This article is for information only; it does not take into account your personal objectives, financial situation, or needs.
Please do not solely rely on anything you have read in this article, and ensure that you conduct your own research to ensure any actions you may take are suitable for your circumstances.
All contents are based on our understanding of HMRC and ATO legislation, which is subject to change.