Using this time to look after your financial wellbeing

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Balancing rocks: Look after your financial wellbeing

Please note that this article is over six months old. While Blevins Franks takes care to make sure that information is accurate on the date of publication, some content may change over time. You should not rely on the accuracy of legislation and tax information in this article; take professional advice for your circumstances.

With full Brexit still due in 2021, UK expatriates can benefit from using time in lockdown to review their residence, tax, pensions and estate planning.

These have been challenging times, but hopefully as the restrictions are lifted we can start to enjoy more freedoms and adjust to the ‘new normal’.  Many people will still be at home more than usual though and continue looking for positive ways to spend this time. While home improvements, baking or learning a new skill are usually top of the list, this is also a good opportunity to tend to your financial wellbeing.

With the Brexit clock still ticking, expatriates in particular can benefit from using this time to fine-tune their tax, pensions and estate planning. Here are some key considerations.

Planning for full Brexit

After an understandable break while the UK and EU prioritised public health issues, Brexit negotiations have recently resumed. While it may seem unrealistic that trade deals can be agreed before the transition period ends on 31 December, this remains the deadline. The UK government has until July to request an extension, but first needs to amend the law that prevents it – and has reiterated unwillingness to do so.

This means 2021 could still start with a no-deal Brexit. As such, it is more important than ever to make sure you are prepared from 1 January.

Even if there is a further Brexit extension, getting arrangements in place may take several months, so there is no time to waste.

Securing residence and citizens’ rights

As things stand, you need to be legally resident in your chosen EU country before the end of 2020 to come under the protection of the Withdrawal Agreement. This guarantees the right to stay and enjoy uninterrupted benefits for as long as you remain resident there. 

If you are still planning to permanently move abroad, use this time to get your affairs in order. To acquire residence after the transition period, you will almost certainly have to meet more stringent requirements than today, including demonstrating a minimum income per person. So where possible, put plans in place to relocate before 31 December 2020. 

If you are already abroad but not yet registered as resident, explore steps you can take now to secure the lawfully settled status required post-Brexit. 

Will lockdown affect your UK tax residency? 

Exploring tax-efficient opportunities

The way you structure your assets and wealth can make a significant difference to your tax bill. You need to make sure your arrangements are structured appropriately for your life abroad as well as your particular aims, circumstance, goals and risk appetite.

Are you taking advantage of tax-efficient structures available in your country of residence? Besides tax savings, these may offer additional benefits such as currency and income flexibility. 

Regardless of Brexit, it is worth reviewing your UK assets to establish how much they are costing you in tax. Now, with just a few months until the UK is set to fully leave the EU, this is even more important to prevent unnecessary taxation if rules change.

What can UK expatriates expect from Brexit?

Maximising your pensions 

With more UK pension freedom than ever, review your options with care. 

Many expatriates choose to transfer UK pensions to a Qualifying Recognised Overseas Pension Scheme (QROPS). Although you can currently transfer to EU/EEA-based QROPS tax-free, this could change after the Brexit transition ends. The UK has already brought in a 25% ‘overseas transfer charge’ for other transfers and has the means to easily extend this to EU/EEA transfers once it sheds its EU obligations. So if you are considering a QROPS, don’t risk leaving it so late that you potentially lose a quarter to UK taxes. 

QROPS can also offer advantages such as income and currency flexibility, but will not suit everyone. You may find it more beneficial, for example, to reinvest UK pension funds into locally-compliant investment arrangements, or even leave your UK pension where it is. Before making a decision, take care to review the best course of action for your particular circumstances with personalised, regulated pensions advice.

See more about reviewing UK pension options before Brexit

Spring cleaning your estate planning

Is your legacy on track to go to your chosen heirs according to your wishes and with minimal taxation? Take care to understand the succession laws and inheritance taxes in your country of residence and anywhere else you have assets and heirs. Also, make sure you review the pros and cons of using the EU succession regulation ‘Brussels IV’ to override local ‘forced heirship’ rules.

You need a strategy that achieves your wishes while making the process as straightforward and tax-efficient as possible for your heirs. And don’t forget your own needs; consider the tax implications to find the optimum solution for your wealth during your lifetime too.  

Ultimately, cross-border tax and financial planning is complex. While you can do some groundwork yourself, you will benefit from talking to a specialist adviser with in-depth knowledge of the local tax regime and its interaction with UK rules. They can help you take advantage of available tax, investment, pensions and estate planning opportunities to ensure you do what works best for you and your family, during these challenging times and beyond.  

Contact us for a financial planning review

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.