If you are a U.K citizen living offshore, for working or retirement. You do have some options to look for from an investment perspective mainly back in the U.K and offshore and will need to consider what is viable options for you, so help clarify in this article.
How do you classify if I am a resident in the U.K or not?
You’re considered a UK resident for tax purposes if you spend at least 183 days in the UK each tax year, or if your only home is in the U.K.
Is it worth investing back in the U.K. if I am a non-resident?
It depends on your situation, for tax, whether you intend to go back to the U.K, and where you are based as some countries have pension agreements and double taxation agreements set up with the U.K.
It is completely unique to you and will need to see a financial advisor on your situation what are your best options but will aim to help guide about what are the options.
If I go abroad can I still invest in an ISA for tax free investments?
No, technically if you are not a U.K resident you can’t keep paying into your ISA this doesn’t mean if you have already paid into your ISA it becomes frozen or that all the money is lost.
It just means that you can’t add into the ISA and get the 20,000 a year tax-free lump sum or any other forms of ISAs (Junior, young ISA, help to buy ISA) if you are outside of the U.K.
Although, this doesn’t stop people from investing in the ISAs when abroad using their parents (or other family members) address. This is not recommended due to legislation.
Should I use an investment platform in the U.K or offshore for investing?
This again depends on your situation and your tax rate and is very individual to your situation and circumstances. To get better clarification, chat to using the box in the bottom right.
The U.K does have lower fees for those just looking to self invest and know what they want to invest in. These are 0.25%-0.5% per annum for ETFs and set portfolios (see below).
While the offshore platform fees are 1-1.5% as an average but can come with greater tax efficiency. You will need to weigh up the options and is recommended to get advice before making any decisions that might impact your financial or tax situation.
A list of the top platforms in the U.K are:
Hargreaves Lansdown
Charges 0.45% of anything under £250,000 and anything over it has 0.25% going to 0.1% for anything over half a million and no charge on anything over 1 million.
This has a wide funds selection is voted one of the top SIPPs providers
Nutmeg
It helps you invest in one of its select portfolios so you don’t have to choose.
Fees 0.75% for anything under £100,000 and 0.35% on anything over £100,000.
AJ Bell
It has the lowest fee of 0.25% of anything less than £100,000 0.10% on anything over. Any amount over 1 million is free.
Good fund option nationwide service.
Vanguard
Charges 0.15% a year what is capped at £375 a year it also has no exit charges. The lowest cost provider.
Investor interactive
This is for those with £60,000+ and want little or no changes to the portfolio, it comes with a few options ranging from £9.99 to £19.99.
There are a range of options available in the U.K if you are wanting to do DIY investing. We just ask that before you start you do your own due diligence and research.
I was reading the FT advisor last week where they sent a financial journalist, out to find the fees in platforms for SIPPs she had 25 years of experience and spent 50+ hours on this and quote “made her drink gin every night” trying to figure this out. Basically advisors don’t want you to look at the fees as you pay for advice that I get but also how are you supposed to figure this out if the experts can’t. Basically you will have to go shopping if you want to advise but do know from looking at numerous reports from different companies in the U.K that they can vary significantly, but the average seems to be 1.25% all-in for the platform, and advisor fee and 1% initial. That will, stand up for and say it is reasonable if you are getting good advice. So if you are looking for advice on your pension look for it around this guideline.
If you are looking to set a portfolio please refer to my guide on how create and research your own investments
Different Levels of Advice in the U.K and Offshore
When it comes to comparison of financial advice in the U.K. and offshore. I found that the fees can be competitive in both areas (if done properly and ethically) but offshore is a more expensive route.
What fees would you want to pay?
Based on U.K. reports and offshore reports that have read and done (over 100 in Both U.K and offshore). And averaged 1.2%-1.5% per year all in for advice and platform so would look mainly for around this annual figure when seeking advice in the U.K and offshore.
Although, the offshore has a disadvantage at the fees can be a lot higher for the platforms (see list below) and don’t have to always disclose fees (although this is changing).
Like I mentioned earlier, the U.K does have cheaper platforms mainly as you are not paying for the tax-efficient location and security of your assets as of in the U.K. are only presently protected FSCS is 85,000 GBP for a single person and 170,000 GBP for a couple.
But offshore, you can get some products in that are under the 1.5% and even 1.2% and even less than 1% all in to limit the fees and add a tax efficiency to the portfolio. Seek an advisor to weight up the options properly.
What about the level of protection and the quality of advice and service?
Fees to pay
If good advice and practice have been adhered to and found that 1.2%-1.5% per year including broker fees was an average amount and would be deemed acceptable for good advice in the U.K. and offshore.
U.K. Structure
The U.K does have stricture regulations, with FCA guidelines and regulations to adhere to.
That from my personal perspective is good and bad for investors. As obviously, having investor protections are a good thing to have in place they protect the investors and stop the unruly advice.
But would question two things. How much do they actually protect investors? And does it restrict investors?
As we have seen with the Woodford fund, a highly recommended fund (on Hardgraves Langsdown top 50) went bust and a lost a lot of investors a lot of money that a lot of high-quality advisors recommended.
Note, the protection only comes when and if you have had bad advice. Which, reading the done reports and seen the funds were invested in the U.K. is not the norm.
Additionally, the restrictions in the U.K. can make these harder for an individual investor that is looking for something outside the guidelines.
As they have gone in the wrong direction for me personally. Again, I am not against regulation in fact highly for it. But, will give you an example,
I had a client that had a final salary pension, he was wealthy. Having enough for him personally, for retirement and living (quite a high standard of life) and his children to be passed on through inheritance.
His finances were all well planned in trusts. Being set up more than adequately for retirement without the pension in consideration.
Client X, wanted to transfer his final salary pension and invest it. He had done all the relevant calculations and was wanting to invest as had more than enough for retirement and living set up.
I nor any advisor would take this client on. Although, client X had made all the calculations perfectly and was himself that wanted to take the pension out not an advisor suggesting it.
He struggled to find an advisor that would help as they fear the regulations as it was deemed bad advice and could, therefore, be at the peril of the regulators.
The advisors in the U.K need to be insured and be at least level 4 in CISI, CII and do at least 36 hour of training a year. This ensure that they are well qualified and keep upto date with the regulations.
Offshore
This can be a lot less regulated and gets a bad name due to a few bad advisors giving unregulated advice. But have in the last few years seen a transformation with more regulations coming into place and the level of bad advice getting a lot less mainly due to online platform that people have now made a bad advisor or company public.
From a personal view, I have found that 80% of the advisors offshore are credible and some even better than in the U.K. for expats as they have specialist knowledge.
The laws in areas such as Europe, UAE, Hong Kong, Singapore, and Malaysia are getting stricter and needing a certain level of qualifications.
Is regulation better?
Many expats and UK advisers have asked me, is regulation a good thing? I would personally be inclined to look at the adviser and the track record and recommendations they are making for you.
Rather than focus purely on regulation as regulations have taken over many funds in the U.K, Singapore, U.S, Australia. That are all well-regulated areas that have not performed due to restrictions of regulation.
Regulation on its own is not a recipe for success and would look deeper into what to look for next.
What to look for when taking advice?
- Make sure that the advice is in line with what you are looking for and is tailor-made for you, not just a generic platform and fund, make the advisor state why they have chosen this platform, and why these specific funds
- Make sure you know the fees. Make sure you’re fully aware of the fees you are paying.
- Make sure the advisor has relevant qualifications Level 4 in the U.K or Offshore Level 4 CISI, CII or other (CFA, Degree) and are looking for specialist advice for example pensions and trust they have the relevant qualification Pensions AF7 CII or CISI Level 6 pension specialist and if not background with a track record.
- For the fund selection, make sure they are reputable high creditable funds that are well rated by independent rating agencies and ideally two rating agencies.
- Make sure the company you are using will last for the duration of your investment time frame.
What to look for offshore?
A tip is to make sure all fees are disclosed offshore, they do have some entrance fees that can be 5% and on going that can be 3% so make sure these are all disclosed.
If you are going to consider the offshore route as it does have potential tax benefits, be aware of the fees and make sure you use it properly.
Locations such as the Isle of Man, are changing where a full fee discloser need to be informed. Offshore products that are expensive are below, plus I have reviewed some funds that you may know.
- Generali Vision.
- Zurich Vista
- Friends Provident Premier Advance Savings Plan
- Hansard Vantage Savings Plan
- RL360 Insurance Company Limited (RL360) Quantum
- AXA Pulsar
- Providence Life Compass Account
- Premier Trust Global New Horizon
- Metlife International Wealth Builder
- HSBC International Wealth Builder Accounts
- Canada Life Offshore Savings Account
- Liberty Life/liberty mutual for expats in South Africa.
Best offshore location
Well this depends, I have looked at a number and as long as they are safe, backed by strong governance and well regulated, and the assets are fully protected this is the prime focus, then they are good areas and there are a few of these. Some areas I have found that you are paying higher for the name of the location with no extra service protection level added. Beware of these.
Why would you invest offshore as a U.K expat?
Investing offshore with the right advice can be a feasible option for many U.K. expats as it has the option to reduce tax, add flexibility, add investor protection if done correctly.
Again it is dependent on your situation so would get advice on your personal situation, if you would like some advice on your current personal situation, we can offer you a much more personal service below on the chat in the bottom right hand corner.
For example, if you are over the nill band rate, that presently stands 325,000 GBP of U.K assets houses and investments, bank account, pensions there are ways to legally mitigate the IHT tax.
If you have a pension, you can SIPPs it and put it in an offshore justification to give more flexibility over the pension, and investment options, potentially creating greater returns.
In the U.K. you get a personal income tax for U.K residence is as followed (see below) as a U.K. expat you will pay tax on your U.K. income but not your foreign income.
If you are investing back in the U.K. as an expat you still have capital gains tax of 12,300 GBP and for trust 6150 GBP. Which stands at 20% for investments and 28% on gains from a residential property.
Dividend tax on investments (see table below for tax rate) and if self-employed back in the U.K personal income tax (see table below).
So for those that are at the higher end of the spectrum and have over £100,000, capital gains the tax can really add up.
| Band | Taxable income | Tax rate |
| Personal Allowance | Up to £12,500 | 0% |
| Basic rate | £12,501 to £50,000 | 20% |
| Higher rate | £50,001 to £150,000 | 40% |
| Additional rate | over £150,000 | 45% |
Dividend Rate
The rate that you pay is based on your tax bracket and the rate of your dividends your first 2000 GBP in dividends, is tax free.
| Band | Dividend tax rates |
| Basic rate (and non-taxpayers) | 7.5% |
| Higher rate | 32.5% |
| Additional rate (from 6 April 2013) | 38.1% |
| Additional rate (dividends paid before 6 April 2013) | 42.5% |
Conclusion
I would weigh up both options carefully and if need be see advisers both in the U.K and offshore and you will be able to compare the two offerings.
As a U.K expat, you have advantages and disadvantages to both investment options. With tax breaks coming into the offshore, and wider fund options. While in the U.K you have an overall more regulated advice.
Further reading
If you are going back to the U.K
U.K expat options
10 minute investment Guide.
Offshore Products review
