Financial Planning for Moving Abroad—Everything UK Expats Should Know

In this guide, we’ll outline the key steps for financial planning for moving abroad, helping you have a smooth transition and ensure financial stability in a new country.

Setting Up an Emergency Fund and Moving Budget

The initial period of getting familiar with the new environment can be unpredictable and uncomfortable. Setting up an emergency fund and a moving budget will give you peace of mind in the first few months after moving to a new country.

Creating an Emergency Fund and Moving Budget

An emergency fund is a financial safety net for unexpected expenses, such as medical emergencies, urgent travel, housing problems, or job loss.

Some steps that may help you build your emergency fund include:

1. Assessing your monthly expenses: Look into the average monthly costs in your new country, including housing, food, utilities, transportation, and insurance.
2. Calculating the total amount needed: Aim to save enough to cover at least three to six months’ worth of living expenses. This will provide you with a financial buffer to manage any unforeseen costs.
3. Setting up a dedicated savings account: Open a separate savings account for your emergency fund to avoid accidentally using this money for other expenses. You can also set up automatic transfers from your main account for additional convenience and consistency.

A moving budget refers to all the anticipated expenses related to your relocation, including:

Banking Options for UK Expats

When planning an international move, you can manage your finances in two main ways:

1. Keeping your existing UK bank account.
2. Setting up a dual bank account in your new country.

Maintaining both a UK bank account and an account in the destination country offers several advantages, including:

• Managing mortgage payments, paying insurance premiums, and organising other UK-based expenses.
• Receiving income from renting or investment interest in the UK.
• Holding funds in GBP, protecting you from unfavourable and unpredictable exchange rate fluctuations.

Managing dual accounts may cause additional fees and tax compliance-related issues, such as account maintenance charges, reporting requirements for overseas accounts, and potential penalties for failing to comply with His Majesty’s Revenue and Customs (HMRC) or local tax authorities.

Accessing Funds Abroad

Accessing your funds during the transition period is often straightforward, as most UK banks provide accounts and cards that can be used internationally. Still, you should contact your bank before moving to learn of any foreign transaction fees and inform them of your travel plans to avoid transaction blocks.

If you’re worried about using your UK card in a foreign country, consider getting a prepaid travel card or using digital banks like Wise or Revolut, which offer multi-currency accounts.

Should You Consider a Multi-Currency Account?

A multi-currency bank account allows you to send, receive, and hold funds in several currencies. This enables you to make payments in foreign currencies without opening a separate bank account in your destination country. It also allows you to keep your money in multiple currencies in the same account and convert when the exchange rates are favourable.

Some multi-currency accounts, especially those offered by online banks, also provide debit cards, so you can make payments directly, without withdrawing or exchanging money.

Can You Open a Bank Account Before Arriving?

Opening a bank account before arriving in a new destination could simplify your financial situation.

Research banks in your destination country and find out if they allow non-residents to open accounts remotely. Some banks may offer this service, whereas others may require proof of address or residency.

Understanding the Impact of Currency Fluctuations on Your Finances

Managing your finances in different currencies can present several challenges related to your financial resources and obligations, including:

• Income: If you receive income in GBP but spend it in another currency, exchange rate fluctuations can impact your purchasing power abroad, depending on the strength of the main currency in your host country.
• Savings and investments: Holding your financial assets in GBP while moving to a country with a stronger currency, like Kuwait or Oman, would lower their value.
• Regular expenses: If the pound loses value, regular expenses like rent, utilities, and groceries can become more costly.

Using a reliable currency transfer service could help you mitigate these risks. Titan Wealth International’s international currency transfer service will allow you to smoothly manage money transfers across borders and access your funds with minimal fees.

Your Tax Obligations as a UK Expat

For UK expats, taxes are a significant aspect of financial planning for moving abroad. The first step you should take before moving is to notify HMRC by filling in the form P85. By telling HMRC about your leave, you’ll avoid paying tax obligations that you may be exempt from as an expat.

Double Taxation Agreements

The UK has double taxation agreements with many countries, allowing you to avoid being taxed twice on the same income if you are a tax resident of the UK and another country.

If the UK does not have a tax treaty with the country you’re moving to, you can claim a foreign tax credit to lower your UK tax liability by the amount of taxes paid on the same income in that country.

Capital Gains Tax Considerations

Capital Gains Tax (CGT) is a critical area you should consider if you have properties or investments in the UK. CGT applies to any gains made from selling your UK assets after moving abroad, depending on your residency status.

The 2024/25 rate you will have to pay is determined by your income bracket, with the basic rate threshold set at £50,270:

Securing Health Insurance Coverage in Your New Country

The healthcare systems and coverage for expats is a broad topic as the requirements can vary by country. The top three options you can consider are:

1. Public healthcare: In some countries, expats who work and contribute to social security have access to public healthcare—similar to local residents. Still, some countries require self-employed or non-working expats to contribute independently to access national health services.
2. Private health insurance: Expats can sign up for private health insurance in countries that don’t offer public healthcare to non-residents. Some UK expats opt for international private health insurance that covers various healthcare needs in different countries.
3. Temporary coverage with UK GHIC or EHIC: If you’re moving to the EU or Switzerland, you can use the UK Global Health Insurance Card (GHIC) or European Health Insurance Card (EHIC) for emergency treatment until you secure permanent coverage.

Remember to get travel health insurance if you’ll be visiting your destination country for shorter periods before moving there permanently. It will cover emergency medical needs but will not provide the full coverage required for long-term care once you become a full-time resident.

Does Your Insurance Cover Dependents?

When relocating with family, ensure your health insurance policy includes coverage for dependents. Most international health insurance providers offer coverage for a spouse and children within the same plan, but the exact details may vary by provider and policy type.

Estate Planning for UK Expats Explained

A major part of financial planning for living abroad for UK expats is related to:

1. Managing your UK property and mortgage
2. Understanding inheritance laws

Managing UK Property and Mortgage

Expats leaving the UK have three main options regarding their home in the UK:

1. Selling property: Deciding to sell your property can incur capital gains tax (CGT) even if you’re a non-resident. However, you’ll only need to pay taxes on gains made after April 5, 2015, which is when the UK extended CGT to non-residents.
2. Renting property: Many UK expats decide to rent their home instead of selling it, securing additional income and a safety net in case of unexpected issues abroad. If this is your intention, remember that the Non-Resident Landlord Scheme requires you to pay taxes on your rental income, even as a non-resident.
3. Keeping the property empty: If you leave your property unoccupied, you won’t need to pay any income tax. However, you’ll still have to pay ongoing costs like council tax maintenance and insurance, which can strain your budget.

You may be eligible for tax relief if your country of residence has a double-taxation agreement with the UK to avoid double taxation on your rental income.

Understanding Inheritance Laws

After leaving the UK, you should update your will to comply with local inheritance laws. This will help you avoid forced heirship rules enforced by some countries and distribute your assets as you wish in case of death.

If you accrue assets in different countries, remember that these countries will likely have different inheritance laws. To help prevent conflicts and streamline the distribution of assets, you should create separate wills for each jurisdiction.

The Inheritance Tax (IHT) could be incurred on your estate (money, possessions, and property) after you pass away. The current threshold is £325,000, with any value above this taxed at 40%. Still, certain exemptions apply:

• If you leave everything above the £325,000 threshold to your spouse, civil partner, a charity, or a community amateur sports club, no IHT will be due.
• If you give your home to your children (including adopted, foster, or stepchildren) or grandchildren, your threshold can increase to £500,000.

These rules can impact how your estate is taxed after your passing, so it’s important to plan accordingly.

Pension Contributions and Retirement Planning

Moving abroad might affect your pension contributions and retirement plans, as different countries have unique taxes and rules for pensions.
UK expats have six main options regarding pension contributions after moving abroad:

1. Continue contributing to a UK pension: UK expats can continue contributing to a UK pension plan indefinitely, but tax relief on personal contributions comes with certain conditions:
   • First tax year after leaving the UK: You can contribute up to 100% of your UK taxable earnings or £3,600 gross, whichever is higher, and receive tax relief.
   • Subsequent five tax years: If you have no taxable UK earnings, you can continue contributing up to £3,600 annually with tax relief. After this period, personal contributions don’t get any tax relief, and many pension providers won’t accept them.
2. Join a Self-Invested Personal Pension (SIPP): If you want to keep your pension plan in the UK but need more financial freedom, you can switch to an SIPP account. This is a tax-efficient retirement savings scheme available in the UK, allowing you to allocate your assets to a wide range of investments.
3. Join a local pension fund: UK expats may also join a local pension scheme in their new country, allowing them to benefit from local tax incentives. Still, eligibility depends on certain requirements, such as your residency status, employment type, and local contribution rules.
4. Transfer to a Qualifying Recognised Overseas Pension Scheme (QROPS): A QROPS allows UK pension holders to transfer their pensions to an overseas scheme that meets HMRC criteria. This option offers lower taxes on pension withdrawals, more control over investments, and lower currency fluctuations risk. Still, a QROPS could lead to a 25% transfer tax if specific residency conditions aren’t met.
5. Transfer to a Qualifying Non-UK Pension Scheme (QNUPS): A QNUPS is an unapproved overseas pension scheme that doesn’t provide tax relief on contributions.
6. Join an International Private Pension Plan (IPPP): IPPPs are designed for expats who change their country of residence frequently, such as those working for international companies. These plans offer investment flexibility, multi-currency options, and no contribution or benefit caps.

If you plan to return to the UK in the future, it’s best to keep your pension funds in the UK. This will simplify your future tax obligations and withdrawals.

If you transfer your UK pension abroad but later choose to repatriate, you can return it to the UK. However, doing this can be complicated, so it’s best to talk to a qualified financial adviser firm, such as Titan Wealth International, who can guide you through all the steps.