Five tips to get your finances Brexit-ready

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Signpost with Brexit and Europe in opposite directions-Get finances Brexit-ready

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Are your finances Brexit ready? Reviewing your currency, investment, tax planning and pension options now can help you secure financial security for 2021 and beyond.  

The Brexit transition period officially ends at midnight (CET) on 31 December. Reassuringly – deal or no-deal – UK nationals lawfully settled in their chosen EU country before 2021 will have locked in the right to remain and enjoy uninterrupted citizens’ rights. But there are still many unknowns.

Other than establishing your residence, what steps can you take to make your financial position as secure as possible?

1.  Review the best currency mix for you

It is common for UK expatriates to retain financial connections with the UK, such as property or bank accounts, with many preferring to keep their savings and investments in British pounds.

While there is comfort in the familiar, this does expose you to exchange rate risk. Once you are living in Europe and spending euros in your daily life, it can become more expensive to take your income in sterling. Explore investment structures that offer the flexibility to invest and make withdrawals in different currencies.

2.  Avoid overexposure to UK investments

Likewise, many expatriates favour British investments, such as UK corporate bonds or FTSE-listed shares. This could especially be the case if you are still using a UK-based adviser. If so, your financial planning may actually be better suited to a UK resident than to someone in your situation. Note also that UK advisers may not be authorised to continue advising you as an EU resident after the transition period, so check with yours.

Can a UK-based adviser continue to support you from 2021? Four things to consider

A local adviser with in-depth knowledge can help you avoid costly mistakes and take advantage of tax-efficient opportunities in your country of residency that could work more favourably for your circumstances.

3.  Diversify, diversify, diversify

Achieving higher returns in today’s difficult conditions and low interest rate climate means looking further than bank savings and fixed interest investment options. While market movements can be unsettling, those invested for the medium to long-term in a well-diversified portfolio are best placed to see their wealth grow over time. Your financial adviser should undertake an objective assessment of your risk appetite to ensure your portfolio offers the right balance of risk and return for your peace of mind.

Amidst today’s economic uncertainty, it is more important than ever to make sure your portfolio is not overweight in UK assets and is suitably diversified. You can reduce risk – Brexit-related or otherwise – by spreading investments across regions, asset types and market sectors to limit your exposure in any one area.

Will UK assets invite a bigger tax bill after Brexit?

4.  Get your tax planning in order

When it comes to the taxes you pay in your country of residency, there is no reason for anything to change post-Brexit. Your tax treatment as an expatriate is determined by the relevant double tax treaty that exists independently of the EU.

There are, however, some circumstances where taxation may be affected.

For example, once the UK leaves the EU/EEA, expatriates selling a home in Spain or Portugal to buy a British property will no longer be eligible for capital gains tax relief.

Or if you are living in France and hold UK bonds, you may lose beneficial tax treatment once the UK leaves the EU. An adviser can recommend more tax-efficient ways to structure your investments, such as a suitable EU-issued assurance-vie that can also offer additional benefits such as currency flexibility.

Wherever you live, it is a good idea to take personalised advice to establish if there are any potential implications of Brexit – and solutions – for your family’s circumstances.

5.  Review your pension options

With more UK pension freedom than ever, take time to review your options to determine which is best for your circumstances and objectives.

As things stand, Brexit should have no impact on how expatriates can access funds from UK-registered pension schemes or transfer to a Qualifying Recognised Overseas Pension Scheme (QROPS).

There has been speculation that the UK could widen the 25% ‘overseas transfer charge’ (OTC), which currently only affects EU residents who transfer UK pensions to a QROPS based outside the EU/EEA. Once outside the bloc in 2021, the UK gains freedom to tax capital within EU borders. While it has now been confirmed that EU residents can continue to transfer tax-free post-Brexit, there remains the chance that the UK government could extend the OTC to EU QROPS further down the line.

Transferring can shelter pension funds from future changes to UK rules and provide flexible currency options to protect your income from fluctuating exchange rates. However, it is not a one-size-fits-all solution. As with any pension decision, it is crucial to seek personalised, regulated advice to establish the right approach for you.

In any case, it is important to regularly review your financial arrangements. Regardless of Brexit, your circumstances and objectives can change over time, so what is right for you now may not be suitable in years to come.

Get in touch with your local Blevins Franks financial adviser, who can keep you informed of developments that affect you and your family. They can explain the cross-border implications and help you plan if and when you need to take action so you can continue enjoying your chosen lifestyle abroad.

Contact us for personalised advice

All advice received from any Blevins Franks firm is personalised and provided in writing. This document, however, should not be construed as providing any personalised taxation and/or investment advice.

Tax rates, scope and reliefs may change. Any statements concerning taxation are based upon our understanding of current taxation laws and practices which are subject to change. Tax information has been summarised; individuals should seek personalised advice.

Tax rates, scope and reliefs may change. Any statements concerning taxation are based upon our understanding of current taxation laws and practices which are subject to change. Tax information has been summarised; individuals should seek personalised advice.