Individual Savings Accounts For Expats
LEARNING OBJECTIVES
We provide relevant, high quality and up-to-date financial information to Expats around the world.
IN THIS ARTICLE, YOU WILL LEARN THE FOLLOWING:
What ISAs are and how they work once you leave the UK
Options for transferring your UK ISA to an Expat ISA
Whether there are more tax-efficient solutions available
The benefits of ongoing management with an Expat ISA
If you have lived in the UK you will likely have utlised an ISA (Individual Savings Account). Whilst they are tax efficient for UK residents, they lose their fiscal benefits upon relocating from the UK.
In this article, we look at UK ISAs for expats and the options available once you have left the UK.
Individual Savings Account
An ISA is a tax-efficient savings or investment account for UK residents. Holders can contribute up to £20,000 per annum. You don't pay tax on interest, capital growth, or income earned from an individual savings account or stocks and shares ISA.
Currently four types of ISA are available to UK residents. They are:
Cash ISA
Stocks and Shares ISA
Innovative finance ISA
Lifetime ISA
Certain rules govern different ISA's and they offer different benefits.
What Happens to my ISA When I Move Abroad?
In the first instance, nothing. You do not have an obligation to close your ISA. However, you can no longer make any contributions and you cannot open a new ISA.
If you are a crown employee working overseas (or their spouse or civil partner), you can continue to contribute to and or open, an ISA.
Importantly, it is unlikely to be tax-efficient in the country you relocate to.
Can I Transfer my UK ISA?
You cannot transfer an ISA to another investment product outside the UK. In Europe, locally compliant solutions such as Assurance Vie, Portuguese Investment Bond or Spanish complaint Bonds provide a significant number of benefits that an ISA can't.
Outside Europe, an offshore investment platform will be more suitable when looking to invest and save your disposable income. Whilst at the same time offering tax benefits your ISA can not.
However, if you are working abroad for a few years and intend to return, retaining your ISA can be an attractive option. In this scenario, it may be advisable to transfer to an Expat ISA.
So depending in your location and objectives, it may or may not be the most tax efficient investment.
What is an Expat ISA?
An expat ISA is an ISA for non-UK residents.
Much like an International SIPP is a SIPP for non-UK residents. This means you can retain the tax efficient structure of your ISA, and upon returning to the the UK continue to attract all the same tax benefits. This includes no capital gains tax, no income tax and no tax on interest.
Importantly, whilst overseas, your funds can be allocated in accordance with your objectices.
A comprehensive plan can be put into action to ensure your investments are in line with your time frame and investment objectives.
You still won't be able to contribute additional amounts, but you gain access to extensive investment options. This includes:
Mutual FundsETF's,
ESG fund ranges,
DFM's, cash and money market funds that pay interest,
FTSE 100 shares and lifestyle funds.
Is my ISA Taxed as a Non-UK Resident?
Firstly, your ISA is no longer tax-efficient the moment you leave the UK. Tax rates will depend on the country you reside in and we recommend taking tax advice specific to your position. In some countries they can be tax-exempt, however you will always need to declare your ISA on your tax returns.
Most countries, particularly in Europe, will tax the gains including income and interest.
Offshore Bond, Investment Platform or Transfer my UK ISA?
The answer to the above depends on your specific situation and objectives. Those returning to the UK in the medium term should consider a transfer to an expat ISA.
If you have relocated to Europe, it would be prudent to see if there is a locally compliant solution available. This will offer far greater tax benefits including inheritance tax features. International providers can help you convert to a UK compliant product if you come back in the future.
For those residing in 'tax free' jurisdictions such as the Middle East, an offshore investment platform is likely to be more suitable.
There are numerous investment product providers for the 3 different solutions. Selecting the right one depends on several factors. Key considerations include cost, regulation, service, functionality, fund range and portability.
Expat Financial Advice with The Wealth Genesis
At The Wealth Genesis we specialise in product suitability, fund allocation and meeting your savings and retirement goals.
By offering a flat fee no matter the investment value, we remove all conflicts of interest or excessive initial charges that then need to be made back.
Our industry low annual management charge of 0.85% ensures the growth of your portfolio is maximised over the long term. All this whilst providing regular advice on asset allocation to achieve the best outcomes for you and your investments.
Get in touch using the button below to discuss Expat ISAs and any other financial planning requirements you may have.
FAQs
-
Whist it is not tax efficient in the sense of offering tax benefits, it is no different than any other non country specific investment account. As such, you would pay tax on gains, income and interest but, upon returning to the UK regain the significant benefits as discussed above.
You can also continue to invest with peace of mind knowing that your ISA account remains in the UK, subject to the rules and regulations of the Financial Conduct Authority, and being fully covered by the Financial Services Compensation Scheme.
-
Put simply, the management of this money in line with your other financial assets and goals. If you do not want to use a financial adviser, then an Expat ISA may not be of interest. If, however, you want to work with an adviser to have an overall investment strategy implemented, it may be form an important part of your financial planning, whether it be for shorter term goals such as buying a property or falling in line with longer time horizons such as pension planning.
-
Yes, full or partial withdrawals can be made at any point with no exit penalties.
-
The tax-exempt status of your ISA will remain intact after your death, provided the ISA is not closed before then. This status will be maintained until the completion of estate administration or three years from the date of your death, whichever occurs first.
