- Many risk their financial future because of failure to take basic steps
Britons leaving the UK for work could actually find themselves worse off in the future because they fail to take basic steps to prepare themselves financially, warns AES International.
Each year, an estimated 78,000 Britons leave the UK to work overseas(1), often enticed by higher pay and lower taxes. However, while there is the potential to earn much more when working abroad, people often let themselves down by not taking relatively simple steps to secure their finances before they leave.
Sam Instone, chief executive of AES International, which specialises in providing financial advice to British expatriates before and after they move overseas, said: “Moving overseas is obviously a hugely exciting time, but it can also be stressful and complex.
“Often farthest from people’s minds are things like tax, inheritance and pension savings, but getting these right can help to secure the financial future people are often chasing when they move abroad.
“We sadly see many cases where people have moved overseas and who have seen their earnings significantly improve, but who have been caught out by UK taxes, local laws or by the sales tactics of unscrupulous offshore salesmen.
“Clearly taking professional financial advice in this situation is highly recommended, but failing that, there are some simple steps people can take before they move which could really make a difference financially.”
Here are the five steps AES International believes all aspiring British expatriates should take before leaving the UK:
1) Let HM Revenue & Customs know you are leaving
Before leaving the UK, you must complete form P85. Despite this, more than half of British people we surveyed who were preparing to move abroad, had no idea what a form P85 was.
The form is crucial for expats to ensure they will not be chased for tax and so that they can claim tax relief or any tax refunds they are owed. Furthermore, if you plan on becoming non-UK resident for tax purposes, you will need to complete this form and cut all ties with the UK.
Failure to do so could be very costly in the future. The high-profile case of Robert Gaines-Cooper, a businessman who moved to the Seychelles in 1976, but was still deemed not to have cut ties with the UK, should act as a warning.
2) Contact your mortgage provider
Letting your home when you move abroad is a logical and very sensible decision to make. Using the rental income to cover the mortgage and overheads frees cash for you to live elsewhere. However, if the home was bought with a residential mortgage, you must inform your provider. Otherwise, you could face high charges or worse, as, without informing them, it will be deemed a breach of the mortgage contract.
3) Update your insurance
If you fail to inform your insurer that you have moved abroad, then you may find your policies are invalid. It is likely that the life insurance cover you have, which will also cover mortgage costs in the event of your death, is only valid within the UK. In the most extreme cases, this could mean your spouse and any dependents could be left having to pay off a mortgage on a property with no insurance pay out at all.
4) Understand your pension options
When you leave the UK, you may still want to keep up pension contributions into a UK scheme.
This is allowed, but you are very restricted as to how much you can pay in. As the rules stand, you are currently allowed to put up to £300 per month into a UK pension, capped at £3,600 per year for five years. Contributions made over and above this and after five years will not be tax relieved and so you may ultimately receive a tax bill from HMRC. In comparison, the current annual allowance in the UK for pension contributions is £40,000.
5) Do not take financial advice from an unregulated firm (find someone before you go)
Unfortunately, the minute a British person arrives overseas they become the target for unregulated offshore financial salesmen. Seek financial advice from a regulated firm with qualified individuals. It is usually relatively straightforward to check a company’s credentials online these days, but if in doubt, go elsewhere. It can be very costly if you take bad financial advice.
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