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Moving is difficult and stressful enough for those staying in the UK. However, with the additional challenges of ensuring all lose ends are tied-up and trying organise a new life in another country (often with different languages, procedures and legal systems), moving overseas can become overwhelming.
When you become an expatriate you undergo a surprising number of changes - your tax situation often improves, as generally does your standard of living. However, you usually lose state healthcare and free schooling, your company pension freezes and your life assurance may become invalid. Furthermore, you still have to be aware of your tax liabilities back home for when you repatriate or dispose of an asset.
Whilst it is always recommended that you get sound, impartial advice on your individual circumstances, the notes below are designed to ensure you get the financial basics right when moving ‘offshore’.
Taxation Before leaving the UK, you should submit a form P85 ("Leaving the United Kingdom") or P85(S) ("Leaving the United Kingdom at the end of my assignment") to the tax office handling your employer’s payroll. Your employer should issue you with form P45 showing details of your pay and tax to date of departure. This should be submitted with form P85 or P85(S).
Assuming that you are resident and ordinarily resident in the UK before you leave, you will cease to be UK resident from the day after you leave the UK if:
1. You leave the UK 2. You are abroad for at least a complete UK tax year (6th April to 5th April) 3. Whilst abroad you work in full time employment 4. Your return visits to the UK total less than 183 days in any tax year and average less than 91 days per tax year (the average is taken over the period of absence up to a maximum of four years
If you meet all the above conditions, you are treated as not resident and not ordinarily resident in the UK from the day after you leave the UK.
Once you are deemed non-resident, you will only be liable to UK tax in respect of investment income arising in the UK; i.e. share dividends and rental income. If you are to become resident outside the EU, interest from an offshore bank account will also be free of UK tax or EU withholding tax.
Offshore Banking UK offshore bank accounts work in exactly the same manner as ‘onshore’ accounts; i.e. you receive a debit card and cheque book, you can set up Direct Debits and receive rental income into the account. However, there are substantial benefits to those resident outside the EU which include tax-free interest and an extended range of currencies in which you can hold your savings.
For those resident in the EU who have large sums of cash or investments, they may wish to place these in an offshore investment bond to enable them to grow tax-efficiently.
Life Assurance If you have life assurance, critical illness cover and/or income replacement protection, it is vital to ensure that these will remain valid if you move overseas. If not, international life assurance can be arranged with the offshore arms of the major UK life assurance providers.
Additionally, many expatriates decide to take out additional life assurance to either to provide a lump sum of money to enable their family to return home should the income-provider die or provide a lump sum of money to cover the cost of the whole family returning home should either parent suffer a critical illness.
Medical Insurance In most Gulf countries, expatriates are expected to pay for any medical treatment they receive and this can rapidly become very expensive. As such medical insurance is highly recommended – in many countries, it is now mandatory for expatriates to hold valid medical insurance.
Retirement Planning Since April 2006, it is now possible to continue contributions to a UK personal pension. However, the structure of UK pensions makes them very unfavourable when compared with the offshore alternative. It is recommended you speak to an independent offshore advisor regarding whether you would be better served contributing to your existing pension scheme or establishing an international pension policy.
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