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Pension and savings tax tips for expats

November 11, 2009

Thousands of Brits leave the UK each year to start a new life abroad and pay a fortune in unnecessary tax because they fail to take financial planning advice.

Some simple financial moves can save expats a fortune when moving abroad - but they are often forgotten in the hustle and bustle of moving to a new country.

So here are some simple tips on how to save cash when moving overseas:

  • Don’t forget to file a P85 tax form with HM Revenue and Customs as soon as you leave the UK - this is a declaration of residence for tax purposes and means you can save tax on savings earlier
  • Open an offshore bank account as soon as possible to limit currency fluctuations eroding your spending power on income and savings
  • Look in to transferring any UK pensions in to a QROPS scheme - this gives tremendous additional investments opportunities and tax benefits to expats.

With a QROPS, your pension can grow in a low rate tax jurisdiction like the Isle of Man or Channel Islands while you can move wherever you like in the world outside the UK

  • If you can afford to, leave your state pension paying in to a UK bank account as spending money when you return home, so the spending power is maintained and as another hedge against currency fluctuations.

The currencies to consider hedging Sterling against when moving abroad are the Euro, US Dollar and Australian Dollar.

Government statistics show the most popular places for expats to move to are France (16%), Spain (10%), USA (8%) and Australia.

Figures show emigration trends among particular age groups.

Australia is the most popular place to live for the 16 to 35,yeards old age group (33%).

Pensioners favour Canada (12%) as their ideal overseas destination, just ahead of Australia, New Zealand and Spain - all at 10%.

According to Halifax International, 4% of British expats own overseas homes with about a quarter (27%) saying they want to buy or move abroad. Nearly a third (32%) of Britons considering the move are aged below 35 years old and more than two-fifths (41%) of those who have made the move said they have no intention of returning home.

An estimated 5.5 million Britons live abroad according to research, with 400,000 leaving the UK in the last year alone.