An overseas move is a major life change, but along with deciding where to live, accepting an employment offer, transitioning into retirement, or shipping your belongings to your new home country, there are multiple other tasks to consider.
While all prospective expats will appreciate the need to have a valid visa or residency permit and make plans to bring their pets with them, missing out on an important area of planning, such as understanding your tax status, could cause headaches further down the line.
The specialist expat wealth management team at Chase Buchanan have created this concise guide to highlight some of the significant areas that you should ensure you have addressed before moving abroad from the UK – and those which command speedy decision-making post-relocation.
Planning for an International Relocation
Insurance is a valuable safeguard for expats, and although many visa categories require foreign nationals to hold a minimum level of private coverage for medical care, it is also worth assessing additional cover and alternative insurance.
Among the many options, you may wish to purchase enhanced health insurance to cover a wider range of potential conditions or accidents, income protection insurance to safeguard your earnings, and good cover for your belongings and possessions to reinforce standard marine insurance.
Other areas that require review ahead of your move include:
- Bank accounts: opening an account in your new country of residence before a move can be optimal, allowing you to time currency transfers to align with exchange rate fluctuations and set up direct debits for ongoing costs such as utilities. You may also decide that keeping a UK bank account is sensible to ensure any residual costs, such as upkeep associated with a rental property, can continue without disruption.
- Income: whether you are working, retiring, continuing to run a UK business or have another income stream, it is important you know how your earnings will adjust and what your net income will look like if it is converted into a different currency.
- Savings: some savings products are tax efficient in the UK, but less so for foreign tax residents. Likewise, you may wish to consider the type of accounts your savings are held in and whether there are better options based on your destination.
- Investments: retaining investments, particularly those based in the UK, may or may not be advantageous depending on the type of products, the make-up of your portfolio, and how investment income earned in Britain will affect your tax residency status.
The ideal approach is to consult an independent financial adviser to make informed decisions when moving abroad from the UK.
Pension Planning
British expats will normally retain eligibility for the State Pension following a move abroad, although in some countries, you will not receive an annual increase in your payments if you relocate to a country outside the EU and without an agreement with the UK.
Private pensions are a different consideration and a complex topic, but you might opt to:
- Keep your pension savings within the UK, accepting the currency exchange risk.
- Transfer pensions to an overseas scheme within the scope of the HMRC approvals system.
- Reinvest pension funds in a tax-efficient plan or choose an alternative investment approach.
Again, there isn’t one universally suitable option, but assessing your pensions and making plans about how you will manage your funds once you relocate is beneficial, particularly where you are moving as part of your retirement.
Creating a Comprehensive Relocation Checklist
The practicalities such as selling a UK property, applying for a visa and arranging places at a local school are often at the top of an expat’s to-do list, and you’ll normally have arranged a place to live, whether renting or purchasing a new home.
From there, you should also think about other aspects of living abroad, including how your tax residency status will change.
Any UK national moving overseas needs to notify HMRC of their plans, which is essential to avoid the potential of unnecessary tax obligations – the usual process is to complete and submit a P85 form.
If you know you will be paying taxes in another country but will continue receiving income originating in the UK from savings, investments, property assets, business interests or employment you will also need to notify the tax authorities and the banks, businesses or financial institutions affected.
For example, interest income should be reported, and although you won’t normally pay tax at source, you will need to prepare a separate R105 form to notify HMRC if you anticipate the earnings being taxed abroad.
However, things aren’t always straightforward. Tax residency is a changeable status and assumes you are living permanently, and for at least half of the year, in one country. If you split your time, you may need a more in-depth evaluation of your circumstances to ensure you are reporting and paying taxes correctly.
Another common scenario is where you retain a British property and rent it out, often delegating the day-to-day management to a lettings agent. This situation typically means you are considered a non-resident landlord for tax purposes and require another HMRC submission.
Long-Term Financial Decision-Making when Moving Abroad from the UK
In addition to the many considerations we have mentioned here, it is equally vital to keep oversight of your finances from a long-term perspective and ensure you are comfortable that your wealth and income are sufficient to sustain the lifestyle you expect as an expat living overseas.
Some costs may be substantially lower or higher in another country, so you need to be mindful of the following:
- Education fees for private schooling or university.
- Social security contributions and tax deductions from your income.
- Capital gains tax on property sales and other disposals.
- Tax planning efficiencies available against your assets and investments.
- Health insurance and the potential cost of private medical treatment.
Chase Buchanan Private Wealth Management recommend all expats work estate and succession planning into their arrangements since living abroad can have a tangible impact on how your estate is distributed to your beneficiaries and the tax liabilities they incur.
A good illustration is forced heirship, where many countries impose automatic distributions, regardless of what your will might indicate to the contrary.
Knowing how this works, which options will ensure you retain the right to control your estate, and how you can manage the inheritance tax exposure linked to your estate will ensure your relocation is successful – both in the immediate future and into the years ahead.
*Information correct as at May 2023