How Does Financial Planning Differ For Expats?

Although international travel looks to decrease substantially over the next few years, many Brits will still choose to live and work abroad. Being an expat isn’t easy. Not only do you have to grapple with a new language and a different culture, there are also a whole host of financial considerations. This is a difficult and often overlooked part of the expat experience that’s important to get right. If you’re already living abroad or thinking of moving in the near future, here are some matters that you should consider:

Get your pensions sorted

Expat pensions are a common source of controversy. When you move abroad, you risk paying higher rates of tax or having your pensions frozen.

A common solution to the expat pension headache is to get an offshore pension transfer. By transferring it offshore, you avoid both the threat of a pension freeze and UK taxes. Anyone who is entitled to a British pension and has left the country can transfer their pension into an offshore scheme, known as a Qualified Recognised Overseas Pension Scheme (QROPS).

You’ll need to consult an independent financial adviser before doing so. They will value your pension and investigate the possibility of transferring it offshore.

Be wise about your bank accounts

Whether or not it’s a good idea to keep your bank account open will depend on a number of factors.

On one hand, keeping a British bank account can be useful for managing any remaining financial interests in the UK. However, if you wish to win residency status in your new country of residence and take advantage of the local tax jurisdiction, closing your British bank account might be necessary in proving your lack of ties to the UK.

It goes without saying that you should make sure that you do your financial admin sooner rather than later. Remember to cancel monthly direct debits and standing orders in advance to avoid annoying penalty charges.

Your tax status

Moving abroad means that you could fall under two different tax jurisdictions. Double taxation agreements exist between some countries, for instance the UK and Spain, so you’ll need to make sure that it’s clear which country you will pay taxes to. It can be useful to speak to a knowledgeable adviser to ensure that you don’t get caught paying tax in separate jurisdictions.

Build up an emergency fund

The current COVID-19 crisis has again proved how important it is to have a sum of money instantly available for disruption. When you live abroad, this fund needs to be larger than it would be for someone staying at home.

As a foreign national, you may not be eligible for the local “safety net” and you will need to factor in the cost of expensive last-minute plane tickets back to the UK in case of an emergency. You’ll need to take into account planning for factors like the deterioration of the local security situation, something that you might not normally consider. A good financial adviser will be able to calculate how large this fund should be.

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