Introduction to Money Matters Abroad
Money may make the world go round, but managing finances abroad when you go around the world as an expat is still as complicated as ever.
Expats read finances as two separate issues - money and tax.
Looking after money is the most straightforward of the two with some sensible financial planning.
Managing tax between two conflicting sets of laws can be fraught with problems.
Here are some points to consider when leaving Britain to live overseas:
What is an expat?
You may think you are an expat because you have moved abroad to work for a year or two, but expat is a term that has no legal definition or weight in law.
Many people consider themselves expats just because they live outside the UK, but breaking ties and becoming non-resident for tax is not that simple.
Recent court cases involving businessmen who left Britain up to 20 years ago have ruled keeping a home in the UK and maintaining other connections, like sending children to UK schools mean you are still resident for tax.
A statutory residence test due to come in from April 2013 may simplify this.
Currency exchange rates
It’s a good idea to set up a local bank account to pay the bills, even if you leave some cash offshore for emergencies.
Check out switching large amounts through a specialist currency exchange firm rather than a bank. The commission rates and other charges are likely to be a lot cheaper - and the saving could be significant if moving funds for a large purchase, like a house deposit.
Life and medical insurance
If you live abroad for any longer than a holiday, British insurance firms are likely to reject any claims under life or medical insurance, so consider reviewing your options before or sooner after leaving the UK.
Some global firms have offshore arms that offer international or country-specific policies
UK car insurance will not cover expats living abroad for an extended period
The tax an expat pays depends on where they are legally resident. Contract workers who have moved overseas for a year or two may still find they are resident in the UK for tax.
That means they pick up UK tax relief on pensions and ISAs.
For expats who are now tax resident in another country, any UK tax relief perks on savings and investments are lost, so look offshore for better rates and deals.
Expats should wait until they are classed as non-residents before selling assets like property valued
or investments, as non-residents do not pay capital gains tax except in special circumstances.
Of course, these expats need to take tax advice in the country where they live to see if they are liable for any extra payments there.
Expats who are UK tax resident can continue with their existing arrangements, but those who are non-resident can consider other options, like a qualifying recognised overseas pension (QROPS), which offers more flexible investment options and tax management benefits.