10 Moving Overseas Tips
10 Moving Overseas Moving Abroad Tips.1. Notify HMRC
There is currently a 16 week backlog at HMRC centre for non-residents for people leaving the UK. Whilst it does not stop you leaving, it is helpful to let them know as soon as you can so that your tax affairs can be resolved as quickly as possible.
Complete a HMRC P85 Form. This is a form to notify HMRC that you are leaving the UK. It sets a date that you are leaving.
This helps HMRC calculate any tax refunds that are due. It also sets the clock rolling for capital gains tax liabilities (you have to have been out of the UK for 5 years to become 'ordinarily non-resident' and therefore tax exempt). It also starts the ball rolling for the 3 years that you have to be outside the UK to acquire a "domicile of choice" meaning that you are exempt in the UK for Inheritance Tax on death for Worldwide assets and only UK assets will be considered.
2. Protect State Your Pension
As a British National, you are entitled to a UK State Pension wherever you live in the World, provided you have paid enough National Insurance Contributions. The minimum qualification period is 10 years, you must soon make 35 years contributions to qualify for a full state pension.
Complete the HMRC CA5603 Form.
The current costs is just under £700pa and if paid in full, entitles you to a UK State pension, soon to be a flat rate £144 per week. That's £7,488 per annum.
3. Register for Non-resident Landlords Scheme
If you keep a property in the UK. You are likely to rent it out.
You managing agent, or if you do not have one, you tenant, is legally required to without income tax from the rents paid at 20%.
If you live overseas, all European Nationals are entitled in the UK to their full Personal Allowance. This is the level of income that you can receive without paying income tax. In simple terms, you if you have no other income in the UK, you can rent your property and make rental profits up to the Personal Allowance, with no tax due.
Complete HMRC NRL1 Form.
This will enable HMRC to write to the managing agent or tenant to advise that you have registered as a non-resident landlord and that rent can now be paid without tax being withheld. This of course does not mean that tax is not due where you live overseas.
4.Review existing Pensions and Investments
Laws around the World are different. Many pension and investments schemes are treated differently for tax depending on where you live. For example:
- A tax free lump sum from your pension fund may not be tax free in the country that you live in.
- You can keep your ISAs in the UK tax free, but that does not mean they are tax free overseas.
- Some countries tax you if you have too much of your wealth outside the country that you live in.
- Some countries do not tax assets that are kept outside of the country that you live in.
- Some countries prohibit property or other market investments inside pension and investment funds and tax you if you have these.
- Some countries tax you differently if you have investments in offshore territories such as Isle of Man, Jersey or Guernsey whereas as if your investment was in an EU "offshore jurisdiction" such as Dublin, you may be taxed beneficially.
- Some countries have more flexible tax on different types of pension e.g. different taxes for personal pensions to company pensions.
- Some countries have greater flexibility for drawing your pension, you may benefit from an international pension transfer such as a QROPS or QNUPS.
- Many UK pension schemes cannot make payments overseas
- If you move overseas, you are still allowed to pay into a UK pension scheme. For five years you will also get tax relief even though you are may now be a non-taxpayer in the UK.
5. Financial Advice Overseas
Financial advice laws are different overseas. Some areas of advice are not regulated, some countries have no regulation. These means that the advice you receive may be totally unprotected and you have no recourse with the exception of a lengthy court case, possibly in a foreign language.
Some countries have limited compensation schemes. Just because £85,000 each in a UK bank is protected, this is not the case in other countries.
Get professional, expert expat financial advice before you leave.
6. Review Existing Mortgage
If you leave the UK with a property with a mortgage still outstanding, be aware that many countries have very tight regulations on the arrangement of mortgages and credit. For example:
- In Australia, New Zealand and Malaysia, there are special laws that do not allow mortgages to be arranged by non-resident mortgage firms. Whilst this usually excludes overseas property (in this case your UK home), many lenders in the UK and Offshore will not even discuss mortgages or remortgages with you on UK property if you live in certain countries due to ambiguity in the law.
- You are in breach of your mortgage conditions if you keep your residential mortgage and do not tell your lender that you have left and rented your property. You should approach your lender about a 'consent to let'.
- Many lenders will also only grant a 'consent to let' for between 6 months and 2 years meaning that you may need to remortgage when you are overseas.
7. Set up Offshore Bank Account
If you no longer live in the UK, you will find it extremely difficult to open a new UK bank account. Indeed for many existing bank accounts, some banks my look to close your account after a few years. Try to keep then open.
The offshore banking industry in the Isle of Man and Channel Islands is part of the UK clearing system. It therefore, is very simple to make transfers and set up debits etc to cover UK bills.
It is also helpful to have bank accounts that have facilities for international transfer, multiple currency and currency conversion.
8. Take Advice on Local Tax Laws Before You Go
For many reasons already mentioned such as banking, mortgages and investments it is worth taking tax advice before you go.
Just because you have left the UK it does not mean you are not liable to tax in the UK as mentioned above.
Income Tax, Inheritance Tax, Capital Gains Tax and taxes on savings, investments and pensions all differ. By planning early you can manage your finances to ensure that you do not fall foul of tax laws overseas or indeed in the UK.
- You moves to Dubai in May 2011 with intention of staying and working their permanently. You notify HMRC and you are free to earn income tax free in Dubai. You then lose your job, you are required to leave the country immediately and return to the UK in March 2013. You have been overseas for 22 months.
- Fact: As you have not lived outside the UK for a full tax year (April to April), you are liable in the UK to income tax on all the income you received in Dubai.
- You move overseas to work. You keep your house in the UK as you come back for a few weeks a year to see family. Your home is empty and not rented when you live overseas.
- Fact: As you have access to a permanent home, HMRC may consider you resident and therefore liable to income tax on all the income your earn overseas. This is exactly the same if you leave a partner or children living here.
9. Make a Will – UK Will, Local Will or Both
- Inheritance tax laws differ in many countries.
- Some countries also have totally different laws for how your estate should be divided up such as the civil code (old Napoleonic Code, originally from Roman Law) in France and Spain.
- Some countries do not recognise the use of trusts.
- Some countries have not signed or ratified the Hague Convention on Wills. In short, your UK Will may not be recognised where you live.
10. Buying Property Overseas
We have a saying in our firm: "don’t move to Spain and forget your brain".
You would never think about buying a property in the UK without having a survey and without taking legal advice, yet many do overseas.
- Always get a professional surveyor to survey the property
- Always take legal advice to ensure that the property you are buying has been legally built and if there are any debts attaching to the property (you may be liable) or if they are planning to build a motorway through your land or if there are infrastructure projects that you may have to contribute to.
- Do not pay 'cash in hand' deposits. This may make the property look good and keep the locals happy but it is illegal, it is technically money laundering and later on down the line, you may end up paying higher capital gains taxes or other when you sell.
- Where contracts are in a foreign language, get them translated and ensure that whoever translates it accepts liability for inaccuracy in the translation.
- If you need a mortgage overseas, again take professional independent advice, do not sign up to the first mortgage that you are offered.
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