Why it’s time to ‘think local’ for your financial planning

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24.02.21

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.

EU-resident Britons with UK bank accounts, investments, insurance policies or a financial adviser may face restrictions with Brexit.

Now that Brexit is here, EU-resident Britons with UK bank accounts, investments, insurance policies or a UK-based financial adviser may be limited in what they can do.

In these times of widespread restrictions and lockdowns, our worlds have become a lot smaller. Whether this will have a long-term effect on your travel, lifestyle and shopping habits as restrictions lift will be a personal matter. But with Brexit now in full flow, UK nationals living in the EU have good reason to permanently ‘think local’ when it comes to financial arrangements. 

Just as UK citizens lost automatic EU freedom of movement when Brexit took effect on 1 January, many UK financial businesses lost the right to provide banking and investment services within the EU.

If you are resident in Spain, Portugal, France, Cyprus, Malta, or any other EU state but still use a UK bank account, other financial products or a UK-based financial adviser, make sure you check where you – and your money – stand.

UK financial services and Brexit 

Before Brexit, UK firms providing financial services to Britons living in the EU could legally do so through ‘passporting’ arrangements. This meant UK providers – enforced by the Financial Conduct Authority (FCA) – were committed to meet the same minimum standards and consumer protections for EU residents as other EU states. 

But now that the UK (and the FCA) are free to make their own rules, the EU has no assurance that UK firms will meet their requirements. Consequently, on 1 January, the EU withdrew passporting rights for UK firms – including banks, insurance companies, investment providers and financial advisers.

Now, some could even be breaking the law by working with EU residents.  

Does this affect all UK financial firms?

This depends on various factors, including how a company is structured and where it is based. Those with headquarters in an EU country, for example, can retain their passporting licence and continue operating as before. 

However, wholly UK-based firms who want to support EU-resident clients will likely need to restructure and form agreements with the financial regulators for each EU/EEA country they operate in. This is a highly complex, expensive and time-consuming process, so not an attractive option for all.

Negotiations on financial services are ongoing, so it is possible that the UK and EU may still reach an arrangement in this area. Some companies may be holding out for this before going through the potentially unnecessary expense of restructuring. Others have already withdrawn from EU markets. 

Some major UK banks have informed EU-based clients that they cannot provide services for them post-Brexit and closed their accounts. Other providers have kept accounts/policies open but suspended activity, or are allowing them to run until the end of their term.  

How might this affect you? 

If you hold a British bank account, insurance policy, investment or other financial product and your provider hasn’t contacted you about limited services, ask them what arrangements they have in place for your country of residence. 

If your account has not been closed, has it been frozen? In some cases, while you may be able to retain existing accounts and make withdrawals as an EU resident, you may be restricted from adding or moving funds or renewing policies. You may also be unable to apply for new services, such as term deposits, bonds, foreign currency management, loans, credit cards and mortgages. 

If you still use a UK-based financial adviser, check they have the authority to continue supporting you as an EU resident. Besides the legal implications – and whether you are protected if things go wrong – some financial institutions have stopped accepting instructions from UK-based (unregulated) providers. So if you hold EU-based investments, your planning options may be significantly limited with a UK adviser. 

Post-Brexit financial planning 

Even if the financial services issue does not affect you, there are other key benefits to thinking more local for your finances. 

Still holding on to UK savings and investments? 

Now that UK assets are no longer EU/EEA assets, they could potentially attract a higher tax bill within the EU. ISAs are also taxable in your country of residence for non-UK residents.

Own UK property?

Remember: EU residents are still in the firing line for UK stamp duty and capital gains tax.

Meanwhile, residents in Spain, Portugal, France, Cyprus or Malta can access opportunities that offer better tax-efficiency for capital alongside other potential benefits, so make sure you review your options.

What about UK pensions?

This is not so straightforward. You may be better off leaving UK pensions in the UK and drawing income as needed in your host country. However, while Brexit does not affect the ability to receive UK pension income into an EU account, it will always be paid in sterling, so the value could be adversely affected by exchange rates and conversion costs.

Explore whether it may be more beneficial for you to transfer funds out of the UK into a tax-efficient structure for your country of residence. Doing so could also unlock currency flexibility and estate planning benefits, but be sure to take specialist, regulated advice to do what’s right for you.

With Brexit bringing such a seismic shift in the landscape, it has never been more important to ensure your financial arrangements are compliant and suitable for your life abroad. A specialist, locally-based adviser is best placed to help you take advantage of suitable opportunities there and secure financial peace of mind for you and your family.

Blevins Franks is fully authorised to provide advice in Spain, Portugal, France, Cyprus and Malta. Our financial advisers live and work locally and have in-depth knowledge of the local tax and succession regimes and common issues faced by UK expatriates. Contact us to discuss how we can help you with your investments, pensions and cross-border tax and estate planning.

Arrange to speak to your local Blevins Franks adviser

Blevins Franks accepts no liability for any loss resulting from any action or inaction or omission as a result of reading this article, which is general in nature and not specific to your circumstances. 

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.

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