ARCHIVED - Blacktower offer advice on investment management and the future of your ISA abroad

Becoming an expat means that you could lose the benefits of holding ISAs

When you become an expat there are certain investments and financial products which, although beneficial when you were a UK resident, are either no longer possible to hold or no longer serve your financial interests.

An ISA is a notable example. As an expat you cannot:

• Open a new ISA

• Add funds to an existing ISA

• Transfer funds from one ISA to another

However, there are some things you will still be able to do. These include:

• Use your ISA platform to manage and/or change your investments

• Add funds to the account within the same financial year in which you move

This last fact means that you can max out on the ISA annual contribution limit (currently £20,000) before the beginning of the tax year in which you move abroad.

Are you a UK resident or a resident abroad?

Whether you qualify as a UK resident will depend on a number of factors including how many days you spend in the UK during each tax year (6 April to 5 April the following year).

You are considered automatically resident if:

• you spend 183 or more days in the UK in the applicable tax year; or

• your only home was in the UK – you must have owned, rented or lived in it for at least 91 days in total – and you spent at least 30 days there in the applicable tax year

You are automatically non-resident if:

• you were in the UK for fewer than 16 days (46 days if you have not been classed as UK resident for the three preceding tax years); or

• You work abroad full-time (at least 35 hours a week) and spend fewer than 91 days in the UK, of which no more than 30 were spent working.

If you are able to satisfy HMRC that you are still a UK tax resident during your time abroad, you will still be able to make contributions to your ISA. Similarly, if you are a crown employee working overseas, or the spouse or civil partner of a crown employee, you may continue to keep your ISA as if you were a qualifying UK tax resident.

If you are no longer a UK tax resident, you must immediately notify your ISA provider. On becoming resident outside the UK you will be able to keep your ISA open and still receive UK tax relief on its money and investments; however, depending on your country of residence you will need to consider the tax implications of your ISA as some jurisdictions levy high tax liability on this type of foreign investment.

If you retain your ISA in the UK, when you make a permanent return you will again be able to contribute funds to the account.

You've become an expat, what should you do with your ISA?

On becoming an expat you will have to make a decision about the future of your ISA. If you intend to return to the UK, would it be wise to keep the account in place? Would it be best to transfer the funds to a similar overseas regular savings vehicle? How might investing the money in an offshore account affect your savings? Should you put the money into a pension or would foreign property be a better investment?

There are so many things to consider and the route that is best for you will depend on your individual circumstances. For example, exchange rate swings can be problematic, so if you plan to return to the UK, it may be worthwhile retaining some financial interest in your home country.

Conversely, if you plan to reside outside the UK permanently, exchange rate risk is still likely be a problem, while the potential for tax liability can be a further problem; ISA investment growth, dividends and savings interest may be tax-free in the UK but can be treated punitively in many jurisdictions.

For instance, in Portugal worldwide investment income is taxed at 28%, while in Spain the figure is scaled at between 19% and 23% and in France there will be associated tax and social charges on your investments. Please see our free-to-download Tax Guides for more information.

Seek financial advice

The best thing to do is to seek professional, personalised expat financial advice and investment management advice in respect of all your savings, assets and investments, so you can understand your options, including whether it might be in your interest to liquidate certain UK investments and move your assets abroad to an appropriate vehicle.

Similarly, if you decide to keep an ISA in the UK, the fact that you are not allowed to transfer the account once you are settled abroad should encourage you to ensure you find an account that has the best possible rate of return, before you leave the UK.

With offices across Europe – including in Portugal, France, Sweden, the Netherlands and Germany as well as Spain – Blacktower Financial Management brings both local and international expertise to cross-border fund and investment management.

We have more than thirty years' experience of helping our clients meet their financial, pensions and retirement goals. Although we are not a tax adviser, we aim to help you understand how your cross-border situation affects your ISAs and other investments, in both the short and longer term, and to ensure that you have the products and portfolio mix that best serve your interests. For more information, contact us today.

Disclaimer: The provision of information in this communication is not based on your individual circumstances and does not constitute investment advice. Blacktower Financial Management is not a tax adviser and makes no recommendation as to the suitability of any products or transactions mentioned.