8 practical tips if you’ve passed the five-year milestone of staying in the UK

Category: News & United Kingdom

The five-year milestone is an important one when it comes to time spent living and working in another country.

It’s a long enough period to have established a decent lifestyle and to have become very settled.

Five years is often how long people moving from Australia to the UK give themselves before deciding whether to make a long-term commitment or to return home.

Understandably the decision could well have been clouded by the rather draconian Australian lockdown conditions and restrictions on both tourists and those returning home. At the same time, things returning to close to normal in the UK may well be influencing your decision.

If you have decided to stay, here are some key issues for you to consider, ensuring that you have good financial resilience as you stay longer term in the UK.

1. Check your super arrangements back in Australia

Before you moved to the UK, it’s likely you’ll have accrued funds in a super.

It’s not possible to transfer this fund to your UK pension, so it will remain in place until such a time as you’re eligible to start withdrawing it – even if you have no intention of returning.

If you haven’t already done so, you should notify your super administrators that you’re living overseas so that they can continue managing your fund.

You will also want to check how your super is invested and ensure the investment profile still matches your attitude to risk and future plans.

Although you’re able to make contributions while you’re outside Australia, the tax advantages available when it comes to UK pension contributions mean that you should probably prioritise your UK pension.

2. Maximise your UK pension contributions

The tax relief on all personal contributions means they are a highly tax-efficient way of saving for your retirement.

For every £80 you contribute, the UK government will pay in another £20. That’s 25% growth on your contribution before you’ve done anything!

Higher and additional rates of tax relief can be claimed through your annual tax return.

You can contribute up to £40,000 gross each year tax-efficiently, or 100% of your earnings, whichever is lower.

Because of the generous tax incentives, it’s also worth your spouse or partner contributing as much as they can to a UK pension. Even if they aren’t working, they are still able to pay £2,880 into a pension and get basic-rate tax relief on the contributions.

3. It can be a win-win pension situation if you return to Australia

Although you’ve stayed in the UK for five years, it could well be that you’re planning to return to Australia at some stage.

If and when you do, you’ll find the respective tax statuses of UK and Australian pensions means that you could be in a very advantageous position.

You’ll have got tax relief on money paid in and then, if you transfer your UK pension fund to a superannuation scheme, you’ll be able to take income tax-free.

4. Make sure you’re accruing a UK State Pension

Even if you’re back in Australia when you reach your UK State Pension Age, you’ll still receive a UK State Pension if you’ve built up enough entitlement.

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 – so after five years, you’re halfway there!

NICs will be deducted through your monthly pay if you’re employed, but note that you’ll need to make voluntary contributions if you’re self-employed.

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.

5. Maximise your ISA contributions

After your pension, a key financial priority should be to consider opening an Individual Savings Account (ISA).

Each individual over the age of 18 can save up to £20,000 in an ISA in the 2021/22 tax year, and many offer a range of different investment options to help you grow your fund.

The key tax advantage is that they are tax-free accounts, so you won’t pay tax on any investment growth or accrued interest.

6. Sort out your healthcare arrangements

As you’ll probably be aware, healthcare in the UK through the NHS is funded through general taxation and is provided free at the point of delivery.

You’ll have also seen a lot of publicity about the strain the NHS has been under due to the Covid pandemic. The impact of this is that there are lengthy waiting lists for many treatments, especially elective surgery that has become a very low priority.

If you have an emergency medical condition or have an accident that results in you requiring treatment you’ll still be treated promptly. Beyond that, however, you might want to consider taking out private health insurance for yourself and your family.

This will give you the comfort of knowing that you won’t have too long a wait for treatment should the worst happen.

Ensure you shop around for the best deal. Also bear in mind that your employer may offer a subsidised private healthcare scheme.

As well as sorting your UK healthcare arrangements, you’ll want to cancel any private health insurance you have in Australia.

One consideration, however, is that if you still have an income in Australia, the Medicare levy surcharge will apply if your income exceeds the relevant threshold.

7. Consider property purchase in the UK

The current historically low interest rates in the UK mean that it’s often cheaper to buy a property than it is to rent.

If you haven’t already done so, it therefore makes a lot of financial sense to take out a mortgage and buy your own house or flat.

There is also a healthy “buy-to-let” market in the UK. So, even if you already have a property of your own, you might want to consider another property as an investment. Not only could this provide you will an appreciating asset, but you could also see a regular monthly profit after costs have been considered.

Bear in mind, however, that there are tax implications on buy-to-let property, so we would strongly recommend you get professional advice before committing.

Along the same lines, we’d also recommend specialist advice when you decide to return to Australia and are looking to sell your main residence.

8. Look after any property you have back in Australia

If you aren’t already doing so, we would recommend that you use a reputable letting agent if you’re either already renting an Australian property out or are planning to do so.

It’ll give you the reassurance of knowing 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 and any issues with tenants are dealt with effectively.

By doing this, not only are you looking after a key financial asset but, if and 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.

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.