A guide to organising accounts, tax and pension status
So, after months of deliberation, you've finally made the call: you're going to take that job offer overseas and become an expatriate.
Congratulations, you've made a decision that will potentially lead to one of the most rewarding chapters of your life. Moving abroad and becoming an expatriate is a fantastically exciting thing to do, and brings with it many benefits.
Opening up to new, foreign cultures may ultimately make you a better person, and that isn't hyperbole. It's been proven that expats are generally more resourceful and creative, and while this isn't a knock on people who choose to stay in their country of birth, it takes a certain level of bravery to up-sticks and move abroad.
However, amid the excitement, don't overlook the important work that will have to be done before you leave, namely assuring that your affairs are in order, especially your finances.
It's highly possible that your move abroad is motivated by financial factors. After all, expats can often take advantage of higher salaries and favourable offshore legislation, and for this reason it's all the more important that you sort out your finances before you leave.
Remember to get any financial admin tasks out of the way in the appropriate time; you'll need to cancel direct debits and standing orders to avoid annoying penalty charges. Remember to cancel other monthly payments such as satellite television, Internet, mobile phone bills etc.
Although it sounds obvious, you'd be amazed at how easy it is to forget such minor details when dealing with a move abroad. The bills mentioned here will need to be cancelled quite a bit of time in advance, possibly with notice of a month or more. Some other commitments, including milk or newspaper/magazine subscriptions, can be cancelled closer to your move.
The next thing you'll have to think about will be your bank accounts. Whether or not you keep your bank account will depend on a number of factors. You may think that having a bank account in your home country will be useful for paying bills and other existing commitments that will remain. However, if you wish to win residency status in your new destination and thus take full advantage of foreign tax jurisdictions, closing your local bank account will be imperative in showing your lack of home country ties.
The useful solution to your new banking needs may very well be taking out an offshore bank account. Most offshore bank accounts are perfectly suited to expatriates. With an offshore bank account you will be able to use multiple currencies, which is ideal if you are still going to be using your former currency to finance commitments back home.
Buying or renting a home?
Aside from banking, you should also have the foresight to plan and budget for your new home before you get there. Find accommodation beforehand so that you can factor in how much rent you will be spending. Do some research into living expenses in your new country, it could be less or more expensive than you think, either way you will need to know.
Make sure you have a reserve of money for emergencies, and for when you first arrive, there will no doubt be expenses that you may not factor in, such as impromptu entertainment and such.
Your tax status
Before you leave you must also remember to visit your local tax office to inform them that you will be living and working in another country. For those that leave the UK, it's necessary to complete an HMRC's P85 form. There will also be forms to complete if you expect to still be earning money in your home country, perhaps from property-based income such as rent.
Expat pensions for UK expats
Expat pensions are a source of much controversy. Most UK expats currently have a pension plan built up through their current employer, and having lived and worked in the UK you will always be entitled to this. But did you know that in many countries UK expats find that their pensions are actually frozen?
Yes, the UK government is currently under fire from enraged expats around the world who have entered retirement and discovered that their pensions have remained frozen.
This means they have not enjoyed the same rises people back home have. This has led to serious repercussions as people simply cannot get by on the meagre amounts they are left with. Taking your UK pension abroad will also mean you have to pay, often high rates of UK tax on your pensions.
The solution? An offshore pension transfer.
Offshore pension transfers, such as a QROPS, can be highly useful to UK expats. Anyone who is entitled to a UK pension who is no longer in the UK can transfer their pension into an offshore QROPS. By doing so you will avoid the threat of a pension freeze, and also avoid UK taxes, which will mean you pocket a considerable amount more than you would have. Before you go, consult a specialist independent financial adviser to have your current pension valued and investigate the possibility of transferring it offshore.