Moving abroad: a quick financial checklist
Careful planning is the bedrock of a successful overseas move, not least regarding your finances and taxes.
My five-point checklist will help you achieve a seamless relocation and avoid nasty financial surprises:
1. Review you finances
When you arrive overseas, you’ll report to a different tax jurisdiction with new rules and conditions. However, your current assets and investments will likely be pound-based and administered in the UK. Avoid any confusion by contacting an international financial and tax advisor who takes the time to understand your objectives. They can guide you through restructuring your economic profile in line with the local legislation, so you can keep your tax bill to a minimum – a time-consuming process that requires planning at least a year before your departure date.
This expert can provide salient advice around essential financial requirements – from rental income and immovable assets to pensions and ISAs. For instance, they should inform you that you can no longer contribute to an ISA as a non-UK resident.
2 . Plan your pension
You’ve worked hard to build your pension, so give it the attention it deserves before you move overseas. Failure to plan ahead might expose you to several hurdles when the time comes to draw your pension and you’re residing in a different jurisdiction to your scheme.
Having informed the International Pension Centre in the UK of your move, you must consider how you will access both your state and private pension(s) from overseas.
UK state pensions shouldn’t pose any problems, as they can usually be paid directly into your overseas account or a UK account.
UK-based private pensions, including workplace, SIPPS and SASS schemes, and existing annuities, are more nuanced, so consult your financial advisor first. They can provide essential advice around:
· Where they’re taxed
· Double tax treaties
· Paying in and withdrawing funds
· Tax-efficient ways to transfer them into a local or international scheme, like a QROPS
· Moving a UK scheme into a foreign currency scheme to shield you from exchange rates
· Consolidating multiple private schemes into one.
If you’re planning on taking advantage of a tax-free lump-sum drawdown in the UK, be aware that this might become taxable as a non-resident.
3. Tax obligations
The first thing you need to do from a tax perspective is inform HMRC when you’re leaving the UK and stop being a UK tax resident. Once you’ve moved to your new country you must register for tax residency there. If you’re buying a property, you’re typically required to obtain a tax identification number in that country when opening a local bank account.
Consult your financial advisor about switching to a formal tax residency – this is different to a residency visa to live somewhere – as the timing of this decision could have tax repercussions. They can also advise on potential capital gains tax savings by selling certain assets before moving away from the UK.
Unlike much of the world, which uses a calendar year, the UK tax year runs from April to April. This can create a scenario whereby you’re unintentionally taxed twice in the same year. Be aware of this if you sell your primary UK residence after relocating or during the same calendar year as you intend to move – as this can leave you needlessly liable to capital gains tax in your new country.
In most countries, you are generally considered a tax resident if you spend 183 days or more there within a tax year. However, if you move to a new home with the intention of making it your permanent residence, you may be required to register as a tax resident upon arrival.
4. Budget carefully
Don’t overlook buying costs when budgeting for your overseas property purchase. These taxes and fees, payable in addition to the agreed price, are typically higher than in the UK – with the amount dependent on the country in question. Your agent or independent lawyer can advise you on this.
Exchange rates are a key consideration when buying property overseas. Having had an offer accepted in the local currency, be aware that the cost of the property will be pulled back and forth by the exchange rate. Therefore, it’s crucial to protect your budget by securing a competitive rate before transferring what will be a large sum overseas to complete the purchase
5. Consider currency risk exposure
With your budget carefully calculated it’s time to insulate it against currency risk. A currency specialist will guide you through the international payment process when buying property abroad and making ongoing payments, like pension and income transfers.
Once registered, you’ll be assigned a personal account manager and will have access to convenient online payment solutions. For instance, this dedicated currency specialist can explain the benefits of a forward contract. This allows you to fix a current exchange rate when making an offer on a property, securing its value in the coming weeks or months before completing.