If you are an expat or thinking of becoming one, one of the most important tasks is tidying up your finances.
Cross-border bank accounts, savings, investment and tax can be complicated and time-consuming to sort out – and even worse to unravel if you are in a financial mess.
One crucial point for expats moving overseas to live or work is that if you no longer have an address in a British postcode, you need to think about offshore banking and credit cards as UK financial institutions are shedding customers from outside the country.
Another important point is as soon as an expat becomes tax resident outside the UK, they also lose any UK tax breaks that come with ISAs, pensions and investments, like the Seed Enterprise Investment Scheme (SEIS) and the Enterprise Investment Scheme (EIS).
The likelihood is most expats will want a bank current account in the country where they live – and if they own property in more than one country, in each of those as well.
If they want to stay with brands they know, many of the big high street banks and building societies have an offshore presence in Gibraltar, the Isle of Man or Channel islands, although choice is shrinking.
The latest casualty is Britannia International, a subsidiary of the strife-torn Co-Op Bank.
Banking offshore comes with some advantages.
Generally, interest is paid gross – without tax deducted – and any income tax is paid at the prevailing rates in the country where the expat is tax resident.
The British-linked offshore territories and European Union financial institutions have a financial compensation scheme in place should the bank collapse. However, the compensation rules are different in each financial jurisdiction and typically offer less cover than the £80,000 per person per bank available in Britain.
Rainy day money
Although interest is paid before deducting tax, keeping cash savings offshore can also have some drawbacks.
In line with other savings, the interest rates are not great, and to get the best return on your money, you will have to tie up a large wad of cash for some time.
Fixed term deals offer the best returns and they come in terms from six months to five years, which means what may seem a good return on investment now could easily become a paltry return farther down the line.
Many financial institution demand savers put between £20,000 and £50,000 on deposit as well – with penalties for pulling the money out early.
So rather than tie up every last penny in a fixed term deal, it’s a good idea to keep a rainy day fund as well.