Skip to main content

Taxation, banking, and expats trying to make sense of it all

The Telegraph ran a story in 2016 detailing the limited options available to British expatriates seeking to keep their UK bank accounts open. The options are certainly few and far between when it comes to expats wanting to retain access to their UK accounts. Part of the problem stems from changing regulations.

Banks are now requiring that all bank account holders be resident in the UK. This means that a valid telephone number and address is necessary to keep the bank account open. As such, anyone who falls outside of that description is not allowed to deposit money into UK banks.

This is particularly worrisome for British citizens who have relocated abroad. The increasing globalization of banks and financial institutions has been hamstrung to a degree by this type of legislation.

UK banks reluctant to offer international services to UK clients

Many UK High Street banks have closed the door on the provision of financial services facilities to people who now reside abroad. This is true of major banks like Lloyd’s Bank, Barclays Bank, HSBC and others. While there are notable exceptions, the trend is certainly clear.

Expatriates are being forced to take their business elsewhere, and this means that offshore banks are benefiting. This has important tax implications for UK citizens abroad. Consider that the options available for offshore banking are also tightening.

Years of historically low-interest rates and increasing regulation makes it unattractive for many banks to offer international services to their clients.

For example, minimum deposits in the region of £5,000 may be required to open accounts. One of the banks that offers these types of services is Barclays, with its Barclays International division.

Sometimes, it occurs that a UK resident will require a loan while abroad. It is always a good idea to determine whether your bank in the UK will be able to accept that loan so that you can draw the money using your ATM, debit, or credit card while overseas.

Tax Implications

Many UK expats wrongly believe that they are exempt from home country taxes when they move abroad. Unfortunately, the British tax code is highly complex, and is based upon residence and domicile. If a person has verified their tax residence/domicile status, it becomes much easier to understand tax liability.

Further, all UK residents are subject to capital gains tax and/or UK income tax on all global income. People who are not residents of the UK are subject to a different set of rules. For example, nonresidents will only be charged tax on income that is derived in the UK.

The UK tax authorities have robust double taxation agreements with multiple countries around the world. If a treaty is not in place, credit relief is applicable on foreign taxes that have already been paid.

The general rule is that you are considered a nonresident if you have been present for less than 46 days. A resident is somebody who has been in the UK between 46 and 90 days in a given tax year. In this case, 4 factors must be complied with.

It gets rather complicated when a UK resident leaves the UK to live or work abroad. A statutory residence test is then conducted to determine tax liability. The tax year in question may be divided up into unique components.

The first may be the overseas component in which you will be charged UK tax as a non-resident, and the second is the UK component where your charged UK tax as a resident of the UK.

Dual residence presents additional problems for tax purposes and this is where double taxation comes into play. Since nobody wants to pay tax twice on the same earnings, it is advisable to seek expert assistance in this regard.


Growth Company Investor: free trial