77% are Not Preparing their Expat Finances Properly!
The recruitment consultants at Maxim Recruitment are experts in finding UK expats quantity surveying & construction jobs, not offering financial advice, so we contacted Lloyds TSB International to hear their suggestions on some of the key financial issues to consider when working overseas.
One of the main reasons for working abroad is to take advantage of the tax and income perks. However, according to Lloyds TSB International research, the majority of UK expats are failing to plan their financial strategy before they go, and by implication are wasting some of their hard earned money.
If the following summary is of interest, we recommend that you contact them (details below) or any other qualified financial adviser to confirm the information given & to get detailed advice.
Lots of UK people work abroad during their careers
A survey of more than 1,500 working Brits has found almost a third (32%) have been employed outside the UK at some point in their career, working an average of just over a year overseas.
For British workers spending at least a month abroad, Europe is the most likely destination with more than half of all respondents working there. 20% headed further afield to Asia, and nearly one in five has worked abroad in North America, Canada and the Middle East.
30% of respondents who took a job overseas for more than a month did it to experience a new culture with nearly a quarter of those seeing it as an opportunity to enhance their career. On the flip side, 25% made the move because it was necessary for the role.
It is not a completely straightforward process moving your life abroad. One hurdle includes working within a different language even if you don’t have to speak it, diverse working practices or cultures and missing things they took for granted, such as a local pub or television show.
More importantly, nearly 20% of respondents found managing their finances difficult while in a foreign country – for example opening a bank account, organising a mortgage, and keeping track of finances at home. This isn’t that surprising though when you consider 77% took no action to get their finances in order before heading abroad.
Bank accounts that operate across borders
The process of opening a foreign bank account is complicated. International bank account options could be something to consider to help this. These accounts can be set up prior to departure and allow the employee to seamlessly bank in different currencies without conversion fees, as well as obtain the credit needed to establish themselves and their family.
Beneficial accounts include those that offer the option to have multiple currency accounts so that money can be transferred seamlessly at a low transfer rate. This facility allows for employees who jet set between different countries to have immediate access to local funds.
International Credit cards and Loans
Using local accounts and credit cards abroad can be complicated and costly when paying conversion fees. Without locally established credit in the new country, many expats are only able to obtain a limited amount of credit. To make life easier, having a credit card that is accepted worldwide is helpful.
When considering a loan, expats should choose one that offers a competitive interest rate, a suitable repayment period and won’t charge for early repayments.
For example if a UK Senior Quantity Surveyor or Project Manager or other construction professional secured a good job in Dubai, they may be paid in dollars while in Dubai. Opening an International account for this salary makes good sense. However, also having a local UAE Dihrams bank account makes sense for day to day use so that he could simply transfer money into this account as required for day to day spending.
A second International account in the UK could be set up in UK Sterling to handle the UK end of finances where banking over the internet is used to transfer as required. Whilst travelling and working overseas an offshore savings account is a logical step to maintain flexibility.
Take an oversear mortgage rather than just rent?
As of July 2009, some people argue that there are some housing bargains to be picked up, although time will tell depending on the housing market in the country you are going to! If you are considering the choice between renting & buying, an international mortgage service can help with securing finance and make buying a property to live in, or an investment property (including buy-to-let) or a holiday home in another country as simple as possible.
Look for a financial institution that can lend in a range of currencies and countries, offers a free pre-approved advance credit service, no early repayment penalties and has a re-mortgage/equity release option By combining an international mortgage with a company that also offers international accounts, foreign exchange rates can be avoided
Opening an International account pre-departure
IInternational accounts offer easy access to money while abroad. Debit cards can be used in many outlets, just as in the UK. You can also have a foreign salary paid into the international account. If employees still have commitments in the UK (i.e. properties, life insurance, loans etc) they can arrange international payments with internet and phone banking. UK local banks usually need instructions in person or in writing.
Setting up a local bank account upon arrival
Salary can be paid into a local bank account — but be aware that opening a local bank account in a foreign country can be a long process. It generally requires a local address, a social security number, identity documents and knowledge of the local language to deal with bank staff and fill in forms. It is often not wise to rely on all these formalities being completed before your first pay cheque is due.
What about tax?*
Maxim Recruitment asked Lloyds TSB International for their thoughts:
(*The following information is based on our understanding of current law and tax authority practice and may be liable to change, which could be with retrospective effect. This information is for general information purposes only. No liability can be accepted for the effect of any subsequent legislation of change of official practice. If you require tax advice you should consult your own professional advisers, and not rely on the information contained here. The greatest care has been taken to ensure accuracy but the Bank cannot take responsibility for omissions or errors. Tax levels or relief are those currently applicable and may change. The value of any tax relief depends on the individual circumstances of the investor/customer.’)
Will employees have to pay tax in their home country while working abroad?
Not always. It depends on whether you're still considered to be resident in your home country for tax purposes. It also depends on the current rules in force, and to some extent your interpretation of them.
If you are a UK resident working abroad, these are some of the points the tax authorities will consider when determining your residency for tax purposes as of July 2009:
- Does your employment abroad last at least an entire tax year?
- Do you spend less than 183 days in the UK in any tax year?
- Do you average less than 91 days a tax year over a maximum of 4 consecutive years?
Determining your residency can be complex. Make sure you discuss this with a tax advisor.
IIt is the case that you are likely to still need to fill in a UK tax return while you're working abroad, and pay UK tax on income earned in the UK — for example, from renting out your house while you're away.
Will I have to pay tax in the country I'm working in?
Depends on the country — you'll need to pay tax on any salary you earn or income from other sources within that country. If you end up paying tax on the same income in 2 different countries, you may be able to claim for tax relief — this depends on whether the countries have a tax treaty.
Maxim Recruitment hope the themes developed above offer some food for thought regarding getting the most income from your hard work. We’d certainly like you to be earning as much as possible within the prevailing rules A good job, a good salary and some sensible financial & tax management will give you the best yield.
IIf you are now ready to find out what salary and package levels your skills and experience will command internationally, please send us an up to date CV in Word format via www.maximrecruitment.co.uk
IIf you want further details on financial & tax planning, please contact:
Lloyds TSB International
Tel: 0800 876 6555 / 020 7451 6212, quoting MX002
About Lloyds TSB International:
Lloyds TSB International is a part of Lloyds TSB International Retail Banking and it offers a range of financial products – from savings and current accounts, to mortgages and private banking – to customers who work or live abroad and want the security and familiarity of a British bank. International Retail Banking has 340,000 customers worldwide, served by 2700 employees based in 30 countries around the globe, including London, South Africa, Hong Kong and the USA.