Financial planning for British expats in Asia
The keys to freedom
British expats are able to avoid most of their liability to UK taxes by simply selling up and buying a one-way plane ticket. This is because most UK lifetime taxes are based on where you live not your citizenship. But under UK tax law, any income which arises in the UK, whether from bank deposits, UK real estate property, or dividends from UK shares and funds is taxable, regardless of where the owner is living or his or her citizenship.
Remember too that when someone dies with UK assets, those assets are subject to Inheritance Tax. So from a tax financial planning perspective restructuring assets away from the UK is a key consideration. As well as growing tax-free, offshore funds also provide investors with a much wider choice of investments.
There are several options available to British expats for holding your investments offshore. Professionally exam qualified financial advisers can recommend financial planning solutions that provide you with the safest, most convenient and best value solution for your circumstances.
Real estate planning
Many British expats who choose to include real estate as part of their investments do so through property funds or real estate funds. This option provides the benefit of liquidity as well as tax free growth. For those British expats who choose direct investment in real estate, other considerations apply.
One of the biggest drawbacks for British expats to direct real estate ownership is Inheritance Tax. When the owner of UK real estate property dies, it is subject to Inheritance tax. This applies regardless of where you live and regardless of your nationality. This means that British expats who directly own UK real estate cannot escape this tax. It also means that your friends who own property in the UK who are not British citizens will also suffer. Inheritance Tax is triggered by the death of an individual.
One of the key considerations with real estate planning is to structure the ownership so that property is NOT owned by an individual. Up until recently this might have been achieved through the use of trusts. Recent changes to UK trust law means that this may no longer be an option or at least may not be your best option. If you are one of the many British expats planning to return to the UK or any of your intended beneficiaries are living in the UK, an alternative solution may need to be considered.
There are several options available for structuring assets in this way. Professionally qualified financial advisers can help design the best financial planning solution for your needs.
British working expats
Despite the recent changes to UK pension law, those living and working in the UK are given relatively modest limits to what they can invest tax free when saving for retirement. At retirement, most of a British retirement or pension fund is still subject to taxation, wherever you happen to be living and regardless of your nationality.
By investing offshore in a recognised International Financial Centre, a British expat can invest unlimited tax free amounts. As a British expat you can also take your retirement money when you choose and free from tax.
For working British expats in Asia, the relatively low cost of living and generous remuneration packages provides disposable incomes far greater than would normally be achievable in the UK. With proper financial planning this means that British expats can be in a position to be able to retire comfortably, wherever you choose to live; even in the UK!
We would usually recommend British expats to hold most of their bank balances outside of their country of residence as it is often easier to transfer money into than out of a country. British expats often keep their bank account at one of the International Financial Centres in the British Isles and are able to access their cash at any ATM machine in the world. Another reason to hold your cash outside of the UK is to avoid both Inheritance Tax and probate.
The right advice
Professional financial planning advice can help you achieve your long term financial planning goals as a British expat. This may include restructuring your assets, including real estate, to mitigate or eliminate liability to tax, investment management and succession planning.
Your financial planning should be flexible enough to change with you and make your life easier. A UK exam qualified financial adviser will have detailed financial planning knowledge of UK Inheritance Tax, trust planning, UK and international pension planning, succession planning, estate planning and of course investment management; All areas of personal financial planning that affect British expats.
Financial security is ultimately about protecting and growing your money.
What value do you place on your financial security?
It’s your money and your peace of mind.
Richard Colburn is a UK exam qualified financial adviser with Sterling Assets.
Questions to the author can be directed to: email us