6 practical financial tips for Australians staying long term in the UK

Category: News

If you are an Australian living in the UK, it’s very possible that, at some stage, you’ll want to commit to living here for some time.

Maybe you are comfortable here, having laid down some decent roots and built a good quality lifestyle for yourself. Your children are happy, with their own circle of friends, so you’re more than happy to stay here in the long term.

You won’t be alone. According to the Office of National Statistics, 120,000 Aussies currently live in the UK, and the border restrictions mean that number is likely to increase in the next year or so.

Here are six tips to help you keep your finances in order.

1. Maximise your UK pension contributions

If you haven’t done so already, you should look to maximise contributions to your UK pension.

The tax relief on all personal contributions, paid at your marginal rate of tax, means they are a very tax-efficient way of saving for your retirement.

If you’re working, you can contribute up to a maximum of 100% of your earnings, or £40,000 gross – whichever is lower.

Remember that if either you or your partner isn’t working, you’re still able to pay £3,600 into a pension and get basic-rate tax relief on the contributions.

If you’re planning to return to Australia at some stage, there’s an extra incentive to contribute as much as you can. The respective tax status of UK and Australian pensions means that you can create a very advantageous position for yourself whereby you get tax relief on money paid in, then transfer your fund to a superannuation scheme when you’ll be able to take income tax-free.

However, the process of transferring your pension is not straightforward, and you should get professional advice regarding this when the time comes.

2. Check the arrangements for your super

If you accrued funds in a super before coming to the UK, this will remain in place until such a time as you meet the requirements of withdrawal – even if you have no intention of returning to Australia.

Make sure you have notified your super fund administrators that you have moved overseas so that they can continue managing your fund. Also make sure that the fund is invested appropriately.

Within certain restrictions you can self-contribute to your super while living aboard, but with the tax advantages available, you may want to prioritise UK pension investments in the first instance.

3. Make sure you are accruing a UK State Pension

The amount of State Pension you get is based on your National Insurance contributions (NICs). You need a minimum of 10 years contributions to qualify. If you are employed, contributions will be deducted through your monthly pay, but if you’re self-employed you’ll need to make voluntary contributions.

The HMRC website provides details of how you can check your current State Pension entitlement. It also details how you can make voluntary contributions to increase your State Pension.

Even if you are back in Australia when you reach your State Pension Age, you’ll still receive your pension, although it won’t be subject to automatic escalation after it starts as it would be in the UK.

4. Consider property purchase in the UK

If you haven’t already done so, you may want to consider buying a property in the UK.

The current historically low interest rates mean that a mortgage is often cheaper that rent, therefore providing you with a cheaper place to live, and an asset that could appreciate in value.

The one factor to consider is: how long do you intend to live in the property? If you can buy a home, add lots of value and then sell on your property, you’re liable to make a profit, given the recent increases in property value in the UK.

Bear in mind that if you decide to return to Australia at some stage, and therefore sell the property, the decision to sell before or after returning is a complex one and we would recommend that you seek professional financial advice.

5. Make the most of any property you have back in Australia

If you have property in Australia, there are several advantages in renting this out:

  • All your mortgage payments can be offset against the rental income for tax purposes.  Bear in mind, however, that it can only be offset against Australian tax. Rental income can also be assessable in the UK. Given this, we’d recommend that you consult with a tax expert regarding this issue.
  • Depending on the age of the property, the Australian Taxation Office (ATO) allows property owners to claim property depreciation as a tax deduction.
  • By using a reputable letting agent, you’ll know that you’ve got someone keeping an eye on the property and inspecting it regularly. You can also ensure that any repairs are carried out promptly.
  • If you borrow, for example, 80% of house value and then run a tax loss that accumulates in Australia, on your return you can use that to offset Income or Capital Gains Tax.

This means that, when you go back to Australia, you’ll have a maintained property waiting for you, with only a small outstanding mortgage – if any at all.

6. Sort out your healthcare – both in the UK and Australia

As you’ll probably be aware, healthcare though the National Health Service is provided free at the point of delivery and funded through general taxation. Unlike in Australia, there is no Medicare levy on high earners.

You will also be aware that recent financial issues, including the impact of the Covid pandemic, mean that great pressure has been put on the NHS and there are lengthy waiting lists for many treatments.

You may therefore want to consider taking out private medical insurance, which will provide you with the reassurance that you won’t have to wait too long for urgent treatment should the worse happen.

Private healthcare is a competitive market, so you should do some research and compare prices and services before setting up a plan. Also bear in mind that there may be a private healthcare scheme available through your employer.

If you haven’t already done so, you’ll want to cancel any private health insurance you have in Australia. Bear in mind, however, that if you’re still earning money in Australia, the Medicare levy surcharge will apply if your income exceeds the relevant threshold.

Get in touch

As a cross-border financial planning firm with offices in both the UK and Australia, we’re uniquely placed to help you with your financial arrangements.

Get in touch to find out how we can help.