Introduction: Brits in Crete portal has invited Richard Colburn, Cert PFS, FAIQ (CII), a UK qualified financial planner to help state how Brits who are moving abroad, say Crete, can avoid some of the pitfalls in their tax obligations in the UK.
Some of the main components of professional financial planning include estate and tax planning, investment management, the need for regular reviews and, of course, what to look for in a financial adviser. British citizens are able to avoid some 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 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 planning perspective restructuring assets away from the UK is a key consideration.
Offshore funds provide investors with a much wider choice of investments and will also grow tax free. There are several options available to ex-patriates for holding your investments offshore. A professionally qualified financial adviser can recommend the one that provides you with the safest, most convenient and best value solution for your circumstances.
Despite the recent changes to the 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 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, British ex-patriates can invest unlimited tax free amounts. You can also take your retirement money when you choose and free from tax.
For working ex-patriates, a relatively low cost of living and generous remuneration packages provide disposable incomes far greater than would normally be achievable in the UK. With proper planning this means that you are in a position to be able to retire comfortably, wherever you choose to live; even in the UK.
Many investors who choose to include real estate as part of their investments do so through property funds. This option provides the benefit of liquidity as well as tax free growth.
For those who choose direct investment in property, other considerations apply. One of the biggest drawbacks to real estate ownership is inheritance tax. When the owner of UK property dies, it is subject to tax. This applies regardless of where you live and regardless of your nationality. This means that British ex-patriates who own UK property cannot escape this tax. It also means that your friends who own property in the UK who are not UK citizens will also suffer.
Inheritance Tax is triggered by the death of an individual. One of the key considerations with property 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 planning to return to the UK or any of your intended beneficiaries are living there, an alternative solution needs to be considered. There are several options available for structuring assets in this way. A professionally qualified financial adviser can help design the best solution for your needs.
We would usually recommend ex-patriates 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. UK citizens 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
The EU savings directive is not intended to tax the savings of those living outside of the EU. However if you have not informed your bank that you are living outside the EU, you will be treated as though you are until you advise
"Avoid some UK Taxes, sell up and buy a one way plane ticket out"
them otherwise. This currently means 15% tax, rising to 35% over the next few years. It is worth remembering that withholding tax, under the EU savings directive has been adopted by some countries and territories that are not themselves EU states, such as the Guernsey, Isle of Man, Jersey and Switzerland.
Professional financial planning can help you achieve your long term financial goals. This may include restructuring your assets to mitigate or eliminate liaibility to tax, investment management and succession planning. Your plan should be flexible enough to change with you and make your life easier.
A UK qualified professional adviser will have detailed knowledge of UK Inheritance Tax, trust planning, UK and international pension planning, succession planning and of course investment management; All areas of personal finance that affect you.
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.
About the Author: Richard Colburn Cert PFS, FAIQ (CII) is a UK qualified financial planner and Managing Director of Sterling Assets Ltd, a specialist wealth management consultancy based in Thailand. More information can be found by visiting their website at www.sterling-assets.com.
FYI - Advice on Inheritance Tax for Foreign Residents in Greece