As an expatriate with a tax-free income you have a huge opportunity to use the additional cash to establish a substantial investment and savings portfolio before you return to UK or retire elsewhere. However if you don’t get your taxes in order you could well be risking loosing a significant proportion of that wealth.
Selecting the savings accounts and investment vehicles that offer the highest rates is only part of the wealth building strategy that you need to follow as an expatriate. Number one priority that should be dealt with preferably even before you leave for sunnier climbs, your tax situation.
Here we cover what should be some of your main action points to protect yourself from paying taxes that you don’t need to pay and to ensure that you really do use your time working overseas on a tax-free income to your maximum advantage. Remember that HM Revenue & Customs will determine you tax status and resultant liability on an individual basis so you need to make the appropriate preparation to ensure your liability is minimal.
Firstly you need to ensure that you are outside of UK for one full tax year, not just 12 months as some people think, it must include being away from 6th April to 5th April the following year. If you are planning to leave UK soon make sure to complete form P85.
Ensure you qualify for non-resident tax status
If you are in employment abroad you will most likely qualify for non-resident status from day one at you new job overseas this means you will cease to be liable for UK income tax on both savings and income arising from employment outside of UK. You will also not be liable to UK capital gains tax on any capital gains made on assets both brought and sold while you are non-resident.
As a non-resident, you should make it one of your first priorities to open an offshore savings account within a strictly regulated offshore jurisdiction such as the Isle of Man . You can visit websites such as the Offshore Investment Designer to find out what options are best for your particular investment and savings goals.
European Union Savings Tax Directive
This EU tax directive game into force in July 2005, it requires each state of the EU to exchange information with other member states about residents who earn interest on savings and investments . There are a range of options for legitimate investment and savings vehicles that will not be affected by the European Union Savings Tax Directive, it’s important that you ensure your savings abroad will not be affected by these EU tax regulations.
While working abroad make sure you stay abroad if during a 4 year period you spend more than 3 months per year back in UK you could well be deemed UK resident again and liable for all UK resident taxes.
Domicile and Inheritance tax
Domicile is a specialist tax term and it differs from residency, it’s quite simple for any of us to change our country of residence, however changing our domicile is extremely complex and most tax efficient savings solutions won’t require you to take such legal feats. Basically if you grew up in UK, have British parents and have spent a significant amount of your adult life in UK you will almost certainly be classed as UK domicile no matter where else your residence is. Under the UK’s Self Assessment regime you are now obliged to self-assess your own residence and domicile status. It is important therefore to take accurate advice, so your records will be up to date, offshore investment planners should always provide solutions that provide taxation protection that incorporates both consideration for domicile and country of residence.
Leverage your wealth abroad
If you are going to be saving money while working abroad, your best bet is to set up a full wealth management program we recommend using OffshoreInvestmentDesigner.com to see what’s available over the entire marketplace, and if you’re happy with your current UK banks you can give them a call as they will almost certainly have an international banking and savings services available.