As an expatriate you have four basic banking options: –
- You can operate your main banking activity through your account back in the UK
- You can open a new account locally and use this for your transactional activity (normally used for local bills, rent, mortgage, schools, mobile phone etc
- You can bank offshore
- You can combine the above three approaches (usually the most successful approach).
A British Bank Account
Retaining a UK bank account, even if you just leave fifty pounds in it, can make long-term sense for many expatriates. Unless you’re attempting to change your country of domicile and sever all ties with the UK forever, retaining a British banking presence will mean that if ever you want to repatriate, the path will be smoother for you. You may well find that you will not necessarily have to go through such rigorous client due diligence checks upon your return if you want to rent a property, raise a mortgage or even apply for a credit card for example. And in the interim, a British bank account will potentially allow you to manage any financial obligations that you still have in Britain with ease, such as paying a mortgage for example.
However, it does not make sense to earn your money abroad and then transfer it all back to the UK, incurring currency exchange costs and risks every time. Nor does it make sense to manage international finances through a British account or to necessarily make your financial affairs known to British authorities when you legally have no obligation to do so – i.e., when you are no longer tax resident in the UK.
A Local Bank Account
Opening a local bank account in your new nation of residence may make a lot of sense and also be a requirement. For example, your employer may insist you have such an account into which your salary can be paid each month. You may also need such an account to have utilities connected to your new property, to get a mobile phone, rent a house, raise a mortgage or purchase a car for example.
However, it is not usually in your best interests to bring all of your capital and wealth into your new nation of residence and bank it locally. For a start you don’t have to! If you do then your capital is immediately in the tax system of the country in question and it is very difficult, if not impossible to change your mind or reverse this situation in the future. If you are concerned about your banking options you should speak to an adviser who has been recommended to you, or you can contact us for assistance. For the vast majority of expatriates there are severe taxation disadvantages to bringing all of your money onshore into your new nation of residence. You are strongly advised to discuss your individual situation at length with a financial adviser, and to not make any decisions before you have covered everything with that adviser.
Remember, why keep all your money in your new country of residence when you don’t have to, and when there can be very real advantages in not doing so?
An Offshore Bank Account
An offshore or internationally located bank account can be an incredibly secure and flexible account ideally suited to those who live an international lifestyle – i.e., expatriates. Such an account can mean an individual has maximum accessibility to their assets, and offshore banks generally provide multiple currency & account access options – from online banking to telephone banking. What’s more, offshore banks often attempt to entice new customers by offering them handsome incentives in the form of online services and tools to allow them to make the most of their deposits.
For many expatriates there are also specific taxation advantages to be had from banking offshore, the most commonly accessible advantage is that if you are able to invest offshore, or keep some of your money offshore in a bank account, then there are usually ways to defer any tax liability until a time when it is convenient for you. This often proves to be financially beneficial to the majority of expatriates, no matter what their financial situation – i.e., you don’t have to be a multi-millionaire to take advantage of the benefits of being an expatriate.
Without tax deducted on a regular basis, your bank deposits and investments will grow a lot quicker. In addition, depending on how you structure your affairs, you may also legitimately only be required to pay tax on the growth that you bring into your new country of residence.
Expatriate Banking Advice
As an expatriate, arranging your banking affairs is one of the first aspects of your financial planning preparations to get right. At Expat Money Guide we can discuss your options with you and help you make the right decisions based on your own personal circumstances. Once you have this most fundamental element of your entire financial portfolio arranged, you can move forward with maximising the expatriate savings and taxation advantages available to you and your family.