Connected financial thinking for moving and living abroad.
When it comes to moving abroad and living life as an expat, there are several stages to the process that necessitate unique planning points.
This article will highlight key points for an expat to consider before you move abroad, including financial planning touch points, tax regulation, estate planning and everything in between.
BEFORE LEAVING THE UK
Choosing to leave the UK is a big step. There are a number of considerations to research and decisions to make before you make your journey.
As well as understanding what needs to be handled from a logistical perspective, there will be a new country to get to know and customs to learn, so thorough research on these elements will put you in good stead in terms of what to expect.
A useful step is to contact the appropriate embassy or consulate who can share relocation information.
Visa requirements
Most countries will need a visa or work permit to be issued ahead of your move.
If moving for work, check if your company will cover the visas you and any of your family may need. If not, you’ll need to speak to the relevant embassy to understand the process of applying for the visas required.
Living costs
Take some time to research living costs in the country you’re moving to and make sure you can still afford to save what you need for retirement. Think about travel costs to and from work, rent, food and utility bills and compare them with your current cost of living. This will prepare you for what to expect, and you may be able to factor your findings into any salary negotiation. A financial planner can help you map your projected finances out with cashflow modelling.
Education
If you have children of school age it will be vital to consider what options are available. Good schools can be over-subscribed, and generally at a premium when compared to the UK. It will be important to thoroughly investigate and if possible, visit your options to determine the best place to educate your child or children.
Reviewing your Will
When moving away from the UK, it is important to review your current Will to ensure that it is valid and continues to reflect your current circumstances and wishes.
If you do not have a UK Will in place then it is recommended that you put one in place.
It is far easier to discuss your circumstances and UK requirements with a legal professional in the UK rather than navigate advice and paperwork when you have reached your new country and are likely to have many other tasks to complete.
Before you leave the UK, it is also a good time to start researching the local inheritance and guardianship laws of the country where you are moving to. As an expat, your financial circumstances are going to become ‘cross-border’ and following your move you may require Wills in other jurisdictions outside of the UK to protect any non-UK assets that you may acquire.
It is important that you take time to look into the laws and customs of your new country, the advice available and where this can be obtained to allow you to confidently seek your own legal advice from a suitably qualified legal adviser when you arrive.
This is a complex area and therefore you will need to ensure you gain specific advice around your personal circumstances from a legal expert.
Powers of Attorney
When you embark on your new journey, you are very likely to retain assets in the UK, particularly your family home either to rent out or move back to when returning or in case things don’t work out as you would have hoped. Despite not living in the UK, you will retain assets that will need to be protected in the event of your death, but also if you are unable to manage your own assets, perhaps through an accident or illness.
Putting a Property and Financial Affairs Lasting Power of Attorney in place will enable you to appoint one or more individuals to manage your UK property and finances in the event that you are unable to providing you with peace of mind should you or your family find themselves in this difficult situation and away from home.
You may also wish to consider making a General Power of Attorney to grant a person within the UK authority to act on your behalf in relation to your property, finances and other legal affairs in case it is not convenient for you to make such decisions or sign necessary legal documents. General Power of Attorney can only be used when you yourself retain mental capacity and, whilst technology may have reduced the need to have a UK attorney of this kind, having this document can often avoid difficulties that may arise when you are not present due to distance.
Retirement planning ABROAD
If you move abroad, UK pension contributions might be limited and then cease after 5 years. Therefore, it’s unlikely that you will be building pension assets as you would have in the UK. Some companies may offer some sort of alternative savings scheme, but this is usually a benefit rather than a legal requirement and you won’t benefit from tax relief on contributions (which is a major benefit to UK pensions).
As such, you need to be more proactive about building retirement savings yourself to plan for future years.
Tax considerations
There are a number of tax considerations to be aware of when moving abroad.
Understanding the rules in the UK, and the country you’re going to be living in is very important. Here are some key changes to consider:
Non-UK tax resident: Whether an individual is UK resident or not is dependent on the Statutory Residence Test (SRT). The SRT is the UK’s legislation and is essential in understanding your UK tax position. This is because the amount of UK tax you pay is determined by your residence status. If you are UK tax resident you are, potentially, taxed in the UK on all your income and gains arising anywhere in the world (including overseas employment income).
If you are a non-UK tax resident, liability to UK Capital Gains Tax could be limited to the disposal of UK land and property, with all other income and gains being exempt from UK tax provided various conditions are met.
Understanding when you will become non-UK tax resident under the complex “split year treatment” rules and how a non-UK tax residence status can be maintained is a key part of your plan to live abroad.
Reporting to the tax authorities: If you have employment or pension income in the UK, you may wish to advise HMRC of your non-UK residence status on a P85.
Some non-UK residents are required to complete a UK Self-Assessment Tax Return each year, especially if they have UK sourced income or are spending some time working in the UK, which could be taxable.
Double Taxation Agreements: The UK has various tax agreements to help avoid you being ‘double taxed’ on the same income and gains. Currently, more than 130 of these double-tax agreements are in place so there’s a significant network.
Your tax adviser will be able to help you understand double taxation and how the agreement can assist.
Capital Gains Tax: Capital Gains Tax (CGT) is typically not charged to non-UK residents, unless on the sale of UK sited land or property.
Inheritance Tax: Up until 5 April 2025, UK Inheritance Tax (IHT) was determined by your country of domicile. If you are UK domiciled then IHT will be charged on your worldwide estate, regardless of your residence position. From 6 April 2025 a new ‘Long Term Residence’ (LTR) test has been introduced and is replacing the domicile concept.
Keeping UK property while living abroad
Many British expats choose to keep a foothold in the UK by holding onto the family home, renting it out or buying an investment property whilst living overseas. Some of the key considerations are Stamp Duty Land Tax (SDLT) and letting your UK property if this is what you intend to do as any profit made from this will remain taxable in the UK. If you are letting a property you will want to familiarise yourself with the non-resident landlord scheme. You should be aware that when calculating the profit for UK tax purposes, mortgage interest and repayments are not taken into account. Instead, the interest charged can reduce any UK tax liability by 20%.
Individual Savings Account (ISAs)
ISAs offer a tax-free way to save and can be a valuable addition to your investment portfolio. If you have an ISA, it may make sense to top it up before you leave the UK. Making use of your annual allowance is sensible before moving abroad as you cannot continue to do so as a UK non-resident. You can then continue to manage the investments within the ISA whilst living abroad.
OUR TEAM OF GLOBAL EXPERTS
Our teams have helped many British expatriates relocate abroad. Getting the right financial planning and tax guidance in place will make your move overseas a much smoother process. With connected teams across the UK and overseas we can help support you with all of the above before you leave the UK, during and after your move abroad and when you feel ready to return. If you are thinking of moving abroad and need some guidance, please contact us here.
Important Note
The information contained within this document is subject to the UK regulatory regime and is therefore primarily targeted at consumers based in the UK.
This article is distributed for educational purposes only and should not be considered financial advice.
If you are unsure about the suitability or otherwise of any product or service, we recommend that you seek professional advice.
The opinions stated in this document are those of the author and do not necessarily represent the view of Progeny and should not be relied upon to make a financial decision.
Information contained herein has been obtained from sources believed to be reliable but is not guaranteed.
Please note
Tax treatment depends upon individual circumstances and is based on current UK tax legislation, that is subject to change at any time.
Past performance is no guarantee of future performance.
The value of an investment and the income from it can fall as well as rise and investors may get back less than they invested. Your capital is therefore always at risk. It should be noted that stock market investing is intended for the longer term.
Author James Sutton is based in Hong Kong: Progeny (Hong Kong) Limited (company no: 51255393) is registered in Hong Kong. Licensed to conduct investment advisory and asset management in Hong Kong by the Securities & Futures Commission (SFC) under CE no. ATY965, and as an insurance broker by the Insurance Authority (IA) under licence no. FB1207. Registered office: Suite 3601, Two Pacific Place, 88 Queensway, Admiralty, Hong Kong. Telephone No: + (852) 2526 9488, Email: [email protected] Website: https://theprogenygroup.com/en-hk/
