When I first moved abroad I was totally unaware that anything other than my surroundings had really changed! I didn’t know much about the concept of being an ‘expat,’ I didn’t know about the P85 form in the UK, I wasn’t aware that I could have an offshore bank account without being some sort of international criminal, and I certainly had no idea that there were essential money matters that I needed to know about…
The learning curve was sharp and fast and now, many, many years on, (I moved abroad when I was very young!), I can appreciate how those who have newly relocated may not know about their liabilities and opportunities, and at the same time, I am well aware of them so would like to impart some useful knowledge in the form of 5 offshore money basics for new expats.
This is not designed to be a patronising insight into saving rather than spending, or a boring discussion about how your tax status will change when you become resident in another nation – it’s a straightforward and accessible report for those who are living abroad and who want to know what they can, can’t, should and might like to do when it comes to their money matters.
1) Moving abroad at least semi-permanently can change the way you pay tax and the amount you owe – sometimes for the better! When you relocate overseas from the UK, (rules can differ depending on your original home nation so do check), the taxman’s rules are as follows: - “Normally if you leave the UK to work abroad full-time, you will become not resident and not ordinarily resident in the UK if your absence and employment from the UK covers a complete tax year (i.e. 6 April to 5 April), and you spend less than 183 days in the UK during the tax year, and your visits to the UK do not average 91 days or more a tax year over a maximum of 4 years. For visits to the UK, days of arrival and departure are not normally counted as days spent in the UK.”
So, if the above applies to you, you need to make sure you tell the British taxman that you’re off – and you can do this by completing a form called the P85. At the same time, you need to inform your new tax authority of your existence. Perhaps if you’re working abroad your employer will do this for you, alternatively, if you need a visa and/or a tax code for entry, residency or employment in your new country, informing the new taxman will be automatic. However, in all of this confusion you need to know that the onus and the obligation is very much on you to ensure that you have sorted out your tax situation. Because it can be a little complex at times to say the very least, you can always ask an accountant to help out.
You can find an accountant in your new nation that’s used to helping expats simply by asking fellow foreigners for advice – or you could try speaking to a financial adviser who works with expats to see if they have a recommendation for you. Always check out the credentials of anyone you use to advise you…and as a bottom line, you can speak to your consulate or embassy to see if they can at least advise you about your obligations.
2) Basic banking and money management can suddenly become complex – but there are ways round the hassle. All of a sudden you may discover that you’re in a position with a bank account back home that you can’t access when abroad, your new employer wants to pay you but can’t because you haven’t got a local account, and you can’t even get a mobile phone without a local bank account. People back home are calling for cash and what should be so easy to sort out suddenly isn’t! Expatriates often find that they need a whole host of bank accounts to do one simple job – i.e., manage their day-to-day money. You personally may need an account back home to pay any liabilities you have in the UK or wherever, an account in your new nation to pay your rent and receive your wage, and an offshore account to help you manage your money internationally!
It makes sense for many people to retain an account in their old home nation in case they ever want to repatriate – although you must check that you’re allowed to keep such an account open. What’s more, a local account can be essential for you to pay bills and receive wages for example. But for those who don’t really want to keep all their money onshore when they don’t have to, who don’t want authorities knowing how they manage their money if they don’t have to tell them, and who want to protect their cash from any instability in terms of economy, politics or just currency, an offshore or international bank account can be an essential.
Opening a straight offshore account is very easy, you simply approach the bank you’d like to have an account with and complete their due diligence checks and paperwork…but if you’d like a more secure, private or flexible solution, it can make sense to form a company and open an account for your company. It’s not necessarily difficult or expensive, however you should get advice before you commit, and you need to again be aware of your tax and reporting requirements. If you’d like more information about this, use our expatriate financial services pages.
3) You honestly, genuinely, really may be able to make more of your money now you’re living abroad – you just need to know how! In countries like the UK there is a great deal of regulation in the financial services industry. This can be a good thing, it can help to prevent the mis-selling of financial solutions and services for example. However, it can also restrict an individual’s choice about how much they save into a given solution such as a pension for example, and it can prevent someone having access to the underlying investment assets, currencies or fund managers they want. So, when you move abroad and can often suddenly have much greater investment freedom, this can mean you can do far more with your money – and potentially make it work far harder and more successfully for you. Of course, there are no guarantees when it comes to investing! And you need to tread carefully, examining what’s available, what’s suitable, what’s appropriate and what’s even legal!
The good news is that there are advisers who specialise in the giving of financial advice to expatriates such as you – the bad news is that you have to make sure you do your due diligence on these individuals to make sure they are backed by a legitimate brokerage, that they give you best advice and so on. The additional bit of good news is that we have a dedicated report to help you understand how you can go about finding the right advice – see ‘How to Protect Yourself and Your Wealth from Offshore Investment Scams.’
4) Currency exchange rates can be a real pain – but you can protect yourself against them. As anyone from the UK who has moved to the eurozone will be only too painfully aware, currency exchange rate fluctuations can take an individual’s situation from comfortable to barely being able to afford to live quite rapidly! If you’re living abroad, earning in one currency, perhaps paying out in another or having to transfer pension funds overseas or pay a mortgage back home, the constant erosion of exchange rates can really begin to eat away significantly at your wealth…
The good news is that you can protect yourself if you want to move a one off large sum of money, or if you want to make regular payments. Again, we have an article all about this called ‘Easy Guide to Internationally Transferring Money for Expats and Property Buyers.’
5) A new start abroad can be a step towards a whole new you – you can decide who you want to be now, tomorrow and in ten years time, and use your expatriate financial advantage to make your plans come to fruition. Expats are often in an advantageous position compared to their peers back home. They can take advantage of tax breaks, use the offshore financial world to enhance their savings position, they may be earning more, spending less, living in a cheaper nation and so all of these factors can help one enhance one’s financial position quickly and effectively.
However, you need to know what you can do with your money, you need to understand your own attitude to risk, what you ultimately want to achieve financially speaking, and explore all the options that are open to you before you dive in and begin enhancing your wealth to the max. You can speak to fellow expats for advice, you can look online to learn about what’s available to you, you can work alone to determine what your objectives are, but ultimately you cannot beat professional, qualified, best advice.
To conclude – the expat world is a great place to be, there are so many opportunities on so many levels that at times it can almost feel overwhelming. Remember there are those out there who can help and advise, counsel and guide but that you need to always, always double check their credentials, and only make a move and a decision when you’re totally comfortable with the advice that you’ve been given.
