The Expat Guide to Living and Working Abroad AESINTERNATIONAL.COM
This introductory guide has been put together to provide you with information that is worth considering before you undertake moving and living abroad. It has been assembled by a team of advisers who have gone through the process themselves. Many are still living the expatriate life abroad, whilst others have since decided to move back home. AES International are specialists at helping people to move, live, and work abroad, as well as assisting them to move back to the UK. We offer a range of services covering insurance, investments, foreign exchange, and private and offshore banking. We hope you will find this guide useful. If you have questions concerning any aspect of what is covered, then do not hesitate to get in touch: Contact AES Directly: AES Website Find out more at the AES blog: Expat Financial Advice Telephone: +44 (0) 203 051 7999
As with much of the legislation concerning taxation, the rules are never set in stone.
Before You Leave Timing In many cases, the date of departure is not a decision that is left down to you. If it is however, it is preferable to leave just prior to the start of the coming tax year; in the UK this is before the 6th April.
Residency As far as Her Majesty’s Revenue and Customs (HMRC) is concerned, a person is thought of as a non-resident for taxation purposes from the day they leave the UK. A person will qualify as a non-UK tax resident for a particular tax year if they fulfil the following criteria: • They are in the UK for less than 183 days in that tax year, and: • They have not been resident in the UK for more than an average of 90 days out of any 365 day period during the duration of their time abroad. A phrase that is often encountered when considering residency and HMRC is the phrase ‘ordinarily resident’. This is considered to be the country that a person normally calls home, year-on-year. It is therefore possible to be ‘ordinarily
resident’ but not ‘resident’. This covers moving overseas for relatively short periods of time, such as a year. Even if you spend more than one tax year abroad, you can still be considered ‘ordinarily resident’ in the UK. As with much of the legislation concerning taxation, the rules are never set in stone. It is possible for example, to be resident in more than one country at once depending on how your time is split between them. What tax you pay on your income will be dependent on what the particular revenue rules are for each country, and whether there are existing double taxation agreements between the countries. To know exactly where you stand in relation to your residency status, it is recommended that you seek some professional advice prior to leaving, to prevent any nasty surprises. If you are planning on leaving the UK permanently to become a non-resident, you should fill out a P85 form, and submit it to HMRC. Online: Contact an Adviser Telephone: +44 (0) 203 051
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For those looking for the security of a system that is similar to the UK, it is recommended that you look into The Isle of Man, Jersey, and Guernsey.
Banking
UK Bank Accounts Whilst living abroad, it is recommended that you maintain a UK bank account. There are several reasons for this: • • • •
Ease of payment of any outstanding UK bills, such as mortgages, rentals, fees Helps you to maintain a UK credit score Allows access to your money when you return for holidays Gives you the option for currency transfers
When moving abroad it is important to remember to change the contact details on the account, so your statements will be sent to your new address.
Offshore Banking Virtually every country has their own banking system, each with particular features and nuances. Arriving from a banking system that is as regulated as the UK, you may find that banking reliability
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or efficiency in your new country is not what you are accustomed to. It is worth doing some personal due diligence on the following points to ensure you don’t arrive and find your financial situation is not what you were expecting: • What do you need to set up an account? In some places this is a hugely complex and drawn out issue, taking several months. • What are the circumstances under which your bank accounts can be frozen? This can be the case in the event of a loss of working visa. • What compensation is offered in the event of a bank collapse? • What are the details of access to funds, withdrawal limits, overseas transfers, and processing times? • What are your fundamental needs, day-to-day payments, savings, or multi-currency?
Alternative Options For those looking for the security of a system that is similar to the UK, it is recommended that you look into The Isle of Man, Jersey, and Guernsey. All of these jurisdictions have robust compensation policies in places in the event of a collapse, will have staff that speak English, and will offer services similar to those in the UK. Looking into this before departure will mean less hassle when you arrive, and help ensure you can receive your wages as soon as possible AES International can provide private offshore banking solutions. Get in touch with us to find out how we could help you.
privatebanking@aesfinance.com
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Property and Insurance Mortgages If you are leaving properties behind in the UK and they are to be rented out, it is important to inform your mortgage provider that it will be rented out rather than being lived in permanently by yourself. Depending on the particular circumstances, they may either simply give you their consent to do so, or switch your mortgage and rate to a buy-to-let version. As well as this, you should also change your residential home and contents insurance to landlords’ insurance. This is important because many residential covers will only insure your property and contents if you are living in it. If you decide to buy a property abroad, or invest in property in the UK whilst living abroad, it is possible to obtain mortgages through UK lenders. It is however a complex procedure, especially compared to what most people have experienced before. If you are considering doing this, then get in touch with one of our mortgage advisers to discuss the options available to you, as well as the various mortgages and plans to get the most out of your investment.
Insurance Many employers will offer employee health insurances and death benefits when they are working abroad. Often though, the level of cover is not enough or has significant areas left out, presenting serious issues in the future. If you decide that it is necessary to buy your own cover, it is absolutely vital to check all aspects of the cover offered, as some will preclude particular conditions or only insure for one-off events rather than ongoing illnesses. On top of this, the price of regular non-emergency healthcare can present a significant financial outlay, particularly dental cover. Always check what is offered before committing to a plan, as you will not be able to buy cover after a particular condition has already been diagnosed. Prior to leaving you should investigate the local health benefits on offer; is there a public healthcare system? If so, then how do you qualify? If you are moving away from the UK the chances are that your destination will not offer the degree of cover that the NHS does. It is, however, important to check where you stand in relation to what, if anything, is on offer. If you already hold life and critical illness cover in the UK, call your provider to see if your destination country is covered. There may also be restrictions applied if you are moving, or additional cover that could be sensible to include. It is also worth noting that certain areas are not covered by other insurance plans, such as those areas that are particularly dangerous, but also less obviously, the USA.
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Certain areas are not covered by insurance plans, such as areas that are particularly dangerous, but also less obviously, the USA.
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Retirement planning does not necessarily mean only saving for a pension. An offshore bond could be what is needed as it allows you to make lump-sum contributions on an ad hoc basis. If you are living abroad, the income you receive from this bond will also only be subjected to local taxes, allowing you to enjoy more of your money.
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Retirement Planning UK Pension Contributions/ Tax Relief
Overseas Pensions - QROPS & SIPPs
Many expatriates leave their UK pensions behind in the UK to freeze at the level they are at, and pay very little attention to them whilst they are abroad. You are allowed to contribute a maximum of £3,600 per annum into your scheme for the first five years that you spend offshore. The main drawback of a UK pension as an expatriate is that they have to be contributed to in sterling, meaning you may suffer due to unfavourable exchange rates. There are also limits on withdrawing your pension, and other restrictions that often mean they are not the most financially shrewd choice.
QROPS are pension arrangements that allow non-UK residents to transfer their UK pensions out of the UK tax system. It is also possible to transfer your UK pension into a SIPP. With both of these transfers, the general benefits are: • Earlier retirement age • Increase to your spouse’s benefits • Increased death benefits for your spouse and dependents • Wider investment choice • Gross payment of income
Offshore Investment Bonds Retirement planning does not necessarily mean only saving for a pension. For some, such as those who are self employed and cannot make regular contributions, an offshore bond could be what is needed as it allows you to make lump-sum contributions on an ad hoc basis. If you are living abroad, the income you receive from this bond will also only be subjected to local taxes, allowing you to enjoy more of your money.
Regular Contribution Offshore Savings Plans As with an onshore pension, under these plans a monthly amount is paid in. The difference however is the increased flexibility of many aspects, including the range of investment vehicles at your disposal, the age at which you are able to access the fund, the ability to take 100% of the amount as a cash lump sum, and being able to pass all of the remainder on in your will. As with offshore investment bonds, the income will only be subject to local tax assuming that it is withdrawn post-retirement. The primary drawback is in the event of your premature death, in which case the plan reverts to part of the estate and is subject to inheritance tax.
As this area of expatriate finance is relatively new and complicated, AES has a dedicated information guide that helps explain the benefits and drawbacks of transferring a UK pension out of the UK tax system. To get your copy, follow the link below:
QROPS Guide For more information on any aspect of the available retirement planning schemes, do not hesitate to get in touch with an AES adviser for a complimentary retirement shortfall analysis: Online: Contact an Adviser Telephone: +44 (0) 203 051
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The UK, Australia, and the USA are the highest regulated jurisdictions for financial transactions in the world. If you are planning to move somewhere other than these three countries, it is important to be aware of the quality of advice on offer from financial advisers and their respective firms.
Personal Tips
Education Planning As an expatriate seeking to send your children to a school or university in the UK, you will pay higher education fees than a UK resident. Depending on the subject choice, fees can range from around ÂŁ13,000 for a humanities subject up to ÂŁ31,000 per year for a clinical subject. It is therefore of the utmost importance to put a plan in place for these costs when you relocate. This may involve regular or lump-sum savings plans, or one of any number of other investment methods.
Currency Transfers Large amounts of money can be lost or gained through fluctuations in the exchange rate between two currencies. If you are going to be regularly transferring money back to the UK, it may be worth employing a long-term FX broker to help you reduce transfer fees, and save you money on the actual transfer. AES are able to help you with this on an ad hoc basis if needed. One aspect of the AES International Private Banking Service however, is the integrated, in-house foreign exchange option that can be added to your account.
UK Credit Scoring It is easy to forget about your credit rating once you have left the UK, or to not be concerned if you are assuming that you will not be returning. Circumstances can and frequently do change, and as such it is strongly recommended that all accounts that are linked to your credit file are settled or maintained whilst abroad.
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Any mark on your credit history will remain there for six years, so it is worth making sure everything is in order so you are not penalised in the event that you return to the UK.
Air Miles Depending on where you decide to relocate to, you may find that you are accumulating significant numbers of air miles returning home to visit family, or exploring the world around your new home. Whatever the reason, as an expat you will tend to fly more than you would normally. As such, it could be beneficial to set up a credit card or frequent flyer bonus scheme with the airline you are likely to be using the most. This will allow you to collect air miles and benefit from the rewards and discounts that many airlines offer.
Offshore Financial Advisers The UK, Australia, and the USA are three of the highest regulated jurisdictions for financial transactions in the world. If you are planning to move somewhere other than these three countries, it is important to be aware of the quality of advice on offer from financial advisers and their respective firms. Due to hugely varying levels of service, the offshore ‘financial world’ is littered with unregulated and unqualified financial brokerages and advisers.
It is extremely important to do your own due diligence on any company being represented and the adviser, no matter how ‘charming’ they may be. It is vitally important to do this before doing any business with them. Many UK firms that are regulated and have advisers qualified to Level 4 or higher, are able to advise you in the offshore market. There is also advice to be found on what to do before committing to a particular adviser on the AES blog.
Driving Licenses In most countries, a full UK driving license, photo card, and paper slip is enough to obtain a foreign license. There are some countries, such as the United Arab Emirates, that demand an International Driving Permit first. If this is the case, you can apply for one via The Post Office in the UK. It can take up to four weeks, so make sure to plan ahead.
Practical Advice Telephone: +44 (0) 203 051 7999
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Repatriation For most expatriates, the return home will mark the end of a successful time spent overseas, and will herald the time to enjoy the fruits of their labours. There are, however, some important aspects to plan well in advance of returning home, in order to make the most out of your retirement. One aspect that is often overlooked is allocating an appropriate amount of money for your return. It is therefore highly advisable to adopt a flexible and less volatile investment strategy in the run up to repatriation. This will generally mean a gentle move towards a higher level of financial liquidity. Depending on the assets you have acquired whilst abroad, repatriation can be either extremely easy, or highly complex. What cannot be stressed enough however is to plan your repatriation well. Speaking to an adviser throughout the process will help you to make the most of aspects such as tax rebates, various investment vehicles, and tailor an approach that is most appropriate to your individual circumstances. If you are considering returning to the UK, then we advise you begin planning it the tax year before you are aiming to move. For more information on what options may be open to you, get in contact with an AES adviser: Online: Contact an Adviser Telephone: +44 (0) 203 051
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Moving abroad can be a very daunting experience. There are often extremely complicated local laws, especially for expatriates depending on where you move to. Financial circumstances may change quickly and without warning, leaving you in a difficult position and in need of help. However, with the right financial advice, you can have peace of mind to make the most of your money, and ensure a safe future for you and your family. If you would like to know more about anything mentioned in this guide, or another aspect of expatriate life, then do not hesitate to get in touch with an adviser who would be glad to assist.
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