It would be no surprise if the series of government-imposed lockdowns in Australia were giving you itchy feet. A result of that could well be thoughts of permanently relocating to the UK.
Alternatively, you may already be in the UK but have had your stay extended by the Covid virus and restrictions on overseas travel, which have prevented you from returning home. One outcome of that could well be that you’ve decided to make your stay in the UK a long-term one.
If either scenario applies to you, here are some practical tips if you’re planning to stay for an extended period in the UK.
1. It’s never too soon to start planning
Even if you’re already in the UK, putting together a plan to finalise your relocation arrangements is always advisable. And it’s never too soon to start putting that plan together.
How straightforward your planning and moving process is will clearly depend on your individual circumstances.
For example, if you have sizable and complicated assets in Australia, then planning will be more complex than if you’ve already sold or transferred some of them.
It’s possible that some circumstances will be outside your control – family or job-related issues – but, in general, the more planning and preparation time you have, the better.
2. Getting your UK pensions sorted
If you’ve been working in the UK for any length of time, it’s likely that you’ve realised how tax-advantageous it is to contribute to a pension. If you’re a basic-rate taxpayer, every £100 you contribute to your pension costs just £80 thanks to tax relief. That’s 25% growth on your fund without having to lift a finger!
Higher- and additional-rate tax relief is also available.
So, if you’re now planning to stay in the UK long-term – especially if you’re thinking of retiring here – you should look to maximise your pension contributions as far as possible.
The UK State Pension is based on National Insurance contributions (NICs). It’s worth checking your NICs history and, if you’re self-employed, ensure you’re paying relevant Class 2 contributions.
3. Managing your Australian pension
If you’ve previously worked in Australia, you most likely will have accrued money in a super fund. Unfortunately, you cannot transfer that to a UK pension.
However, once you reach age 60, if you’re living in the UK it’s likely that you will be able to take it as a lump sum. With careful planning, you could be able to mitigate much, if not all, of the tax payable.
The process of withdrawing the fund as tax-efficiently as possible is really one you should manage with an experienced financial adviser. It’s not always a straightforward process and mistakes can prove costly.
In the meantime, you should make sure you’ve informed your super fund administrator that you’ll be living in the UK for an extended period.
4. Make sure you get the best possible rate for currency transfer
At some stage it’s likely that you’ll be transferring a substantial sum of money from Australia to the UK.
How and when you do this can have a big impact on the amount of sterling you get for your Australian dollars.
Just a quick glance at the chart below shows how the exchange rate has varied by almost 10% over the last 12 months.
You need to ensure you’re using an experienced currency transfer company, who can help you get the best exchange rate. They have access to various financial instruments to mitigate any short-term fluctuations.
You might also want to consider setting up a dual-currency account to reduce, and even eliminate, transaction fees.
Always ensure that the currency firm is fully regulated so that your money has full protection.
5. Property purchase in the UK
If you’re now planning to stay in the UK for an extended period, you’ll want to think about property purchase if you haven’t already done so.
It gives you somewhere to set down permanent roots and build a life for yourself in the UK. Given the increase in property value, it could also mean you owning an appreciating asset.
Where you decide to live could be influenced by many varied factors including:
- Where you work – although the prevalence of home-working may make this less of an issue
- Your children’s education
- Friends and family
- Your interests and lifestyle choices.
It’s a decision that could take time to get right, so it’s worth researching this well in advance of your move.
6. Your Australian property
If you own property in Australia and are not planning to sell it at this stage, you should register with a reliable letting agent to manage it on your behalf if you haven’t already done so.
Be aware that the taxation of rental income will depend on your residency status.
If you’re going to sell your Australian property, you could be liable to UK Capital Gains Tax. Here’s one of the issues where advance planning is clearly advantageous. Again, an experienced tax adviser will be able to help you.
We would strongly recommend you consult with a tax adviser both for this and all other tax issues related to sale of Australian assets.
7. Your taxation arrangements
As we mentioned in the previous section, you should look to get professional advice on all tax-related issues concerning making your stay in the UK long term, or permanent.
A tax specialist will be able to advise you on residency matters, which will be important when it comes to ensuring you pay the correct amount of tax in both the UK and Australia.
There is no “one size fits all” answer. Working with a specialist will mean you’ll have the confidence that your affairs are in order, and that you won’t make any expensive mistakes that you cannot rectify.
8. Other Australian assets
We have already considered your pension arrangements but, as well as pension funds, it is likely that you could have substantial other financial assets in Australia.
It’s important that you manage these as tax-efficiently as possible, particularly if, at some stage, you move them between two different taxation jurisdictions.
So, planning and specialist financial advice are both crucial to ensure you maximise the tax advantages and avoid any pitfalls that could end up costing you money.
Get in touch
At bdhSterling, we have a wealth of experience in helping clients with their financial planning.
With offices in both the UK and across Australia, we’re ideally placed to support you.
Get in touch to find out how we can help you.