Understanding investment options for expats

Becoming an expat can create additional complexity when it comes to choosing investments, but it is important to understand the investment options for expats as many people choose to live and work overseas.

Moving abroad involves navigating and understanding different or unfamiliar tax systems and rules. Additionally, you’ll have the added complication of dealing with currency fluctuations. Yet there are a number of opportunities when it comes to investment options, and it’s important to take advantage of your expat status whilst you are living and working overseas.

During any period of time where UK tax might not apply you may be able to build your capital – especially if you’re living in a low or zero rate tax regime. As an expat you may even enjoy a higher income together with a lower cost of living. This can provide you with a great opportunity to save and develop an investment portfolio.

Setting financial goals for your time abroad

The first step in any investment strategy or financial plan is to sit down and consider what’s important to you and your family. You can then work out what you’d like your financial plan to achieve. Consider what your ideal future looks like. Are you planning on making your move overseas permanent or do you see yourself returning to the UK at some point? When and where do you plan on retiring? If you have children, how would you like your wealth to be handled after you’re gone? Although you might not have the answer to all of these questions keeping them in mind when planning your financial future can help make your investment decisions much easier.

Expat investment options

Investment options for expats are varied, and include offshore accounts, international stocks and shares, offshore bonds, and pension scheme options which are not available to UK residents. Typically, expats can consider a range of onshore and offshore options; offshore can offer tax breaks and other benefits such as being more portable if you opt to change location again.

1. International stocks and shares – Looking into internationally managed portfolios might be a good option when considering investing well abroad as you may have a wider option available to you well outside of the United Kingdom.
2. Offshore investment bonds – Offshore bonds give you the option to invest a lump sum or regular payments and can help to grow your capital tax efficiently over time. The tax rules on offshore bonds allow you to defer tax over the course of the investment and manage the eventual tax liability in line with your own circumstances.
3. Property – Owning property has always been a very popular option for British expats. Many people, when moving overseas, choose to retain the family home in order to keep a foot on the UK property ladder, perhaps in preparation of returning in the future. Doing so can offer an investment opportunity, especially if you plan to let your property to produce an income stream or cover costs.
4. Investment platforms – There are a range of investment platforms – or custodians – on which to hold your investments whilst you are overseas. You can use these to hold a number of investments including direct stocks, ETFs, unit trusts, investment trusts and more. It’s important to always research the cost of trading on each platform so that you don’t impact any potential investment returns.
5. Pensions – In many countries a pension scheme is not a statutory requirement, so it’s even more important to have a robust pension plan in place if you’re an expat. As part of your move overseas, it’s important to review your UK pensions and consider your options. There are a range of specific expat pensions to choose from, all of which can help you to have more control and flexibility over your pension funds.

It’s important to mention that investment returns are largely based on the amount of risk you are prepared to take as well as the amount of time you spend invested. A good financial planner will consider both attitude to and capacity for risk before making any investment recommendation.

Things to be aware of

It’s useful to remember that certain schemes are only available if you’re UK resident. This includes ISAs – you can still hold existing plans, but you can’t make additional contributions while living overseas. The same goes for your UK investment portfolio – once you’ve moved abroad you may still be able to hold it but not invest additional funds into it. Consider too that it might be subject to unexpected tax charges once you’ve established non-UK resident status.

Another factor are your ties to the UK – the UK tax authorities carefully consider your UK links when reviewing residence status. Any ties could jeopardise your position so it might not be wise to continue to hold or invest in UK-based investment schemes and pensions.

Overseas investments and returning to the UK

Capital gains tax (CGT) is an important consideration for any expat if they are planning a return to the UK. If you plan on returning after living overseas and have assets (perhaps a home or investments) which you have established whilst abroad it might be worth considering realising those gains whilst you are still non-resident to avoid CGT.

What are the tax implications?

Making the most of your tax status is likely to be one of the key benefits whilst living overseas. When you’re thinking about your tax position do bear in mind:

• Any UK tax which you’ll face depends on your personal circumstances and decisions you’ve taken about your investment portfolio.
• Legislation known as the Common Reporting Standard, means information about offshore holdings are shared across countries so important to be transparent and understand each territory’s tax implications.
• Double tax treaties may apply to avoid you paying tax in two locations – but they don’t apply everywhere.
• If you’re concerned about your tax liabilities, it’s vital to seek advice from an expert.

Need help investing as an expat?

Progeny has teams around the world, all of whom are highly skilled in handling financial matters for expats. Our helpful team has a solid understanding of the complexities and opportunities available to you. We’ll work with you to create a comprehensive investment plan and review it regularly to help ensure it stays on track. If you would like to find out how we can help you, please contact us today.