Financial PlanningTaxAAM busting expat financial planning myths

Busting expat financial planning myths

Many people have misconceptions about their financial situation. Here we look at five financial planning myths:

1. “I’ve left the UK, so I don’t pay UK taxes.”

Don’t be so sure!

Firstly, not being physically present even with no intention to return doesn’t guarantee non-residency for tax purposes. Surprisingly, even if you have been overseas for 350 days in a tax year it doesn’t guarantee non-residency.

Secondly, even if you are not a tax resident, including someone who has never set foot in the UK, you are liable to income tax on UK income, capital gains tax on UK property, and inheritance tax on UK-based assets (subject to any reliefs and exemptions).

Thirdly, you might legitimately not pay tax in the UK, but be chargeable on gains and income for a period of non-residency if you are subsequently considered a ‘temporary non-resident’ upon your return.

2. “I don’t pay tax anywhere.”

Possible, but unlikely!

Becoming a fiscal nomad, cyber gypsy or perpetual traveller sounds a lot easier than it is! Exploiting the residency rules in multiple countries so that you’re not a tax resident in any, takes knowledge and stamina. Travelling ‘continuously’ or basing yourself in multiple countries and only spending a few months in each, effectively as a tourist, could make you exempt from tax residency in each country visited.

But beware, you may have to pay tax where your income or capital is situated, not where you are a tax resident. Also, from a UK perspective, returning within five years may mean you are considered a ‘temporary non-resident’ and have to pay taxes on profits realised overseas upon your return.

3. “I can choose who I pass my wealth on to.”

Well, that depends!

It all depends on the legal system of the country where you live, or where your wealth is situated, whether it be common law, civil law, religious law or customary law. Generally, only common law countries provide flexibility (including England and Wales) and to enjoy ‘testamentary freedom’ (the ability to freely choose who will inherit) requires the existence of a valid will, or sometimes multiple wills. But beware, English wills aren’t always accepted outside the UK, or may be acceptable where you live, but not where your wealth is situated.

In some instances, trusts and policy nominations (alongside unit-linked investment policies) can ensure that chosen heirs benefit, and can avoid the cost and delay of probate. Unlike wills, they can also remain confidential.

4. “My affairs are my own.”

That depends what you mean!

Your financial affairs are generally private regarding family and friends during a lifetime. Wills are confidential in lifetime too, but it is less well known that a will becomes public knowledge following death (wills for deaths in the UK from 1857 are freely available, for a mere £1.50, using form PA1S). Trusts (where applicable) and policy nominations (alongside unit-linked investment policies) maintain such privacy.

However, more than 100 countries, following a 2014 OECD initiative, now freely share financial information, annually, in bulk, with the aim of countering tax evasion. Known as the ‘Common Reporting Standards’, financial institutions based in any of the countries that have adopted the standards, provide tax authorities with information about their clients. Having wealth overseas is not illegal, but non-reporting normally is.

5. “I can do my own financial planning as an expat.”

Complexity is itself a kind of tax – financial DIY can be dangerous!

As people, and wealth, become more internationally mobile, the possibility of not getting it right becomes greater. Knowing what options are available and where, and if portable between where you are now and where you will be next (not to mention taxation, reporting and flexibility) is a highly skilled job.

For the self-advised:

  1. overconfidence is a dangerous behavioural bias. Overestimating knowledge, and underestimating risks exaggerates our perceived ability to control events.
  2. under confidence leads to a putting off until tomorrow, and
  3. the speed of change means we, just like most internet searches regarding finance, are consistently out-of-date.

Don’t assume, plan early and review regularly – Speak to an AAM Advisory Wealth Manager, contact us today .


Important information

Any reference to taxation contained in this article is based on AAM’s understanding of relevant tax law and practice which is subject to change at any time. Tax related information included in this article should not be construed as individual tax advice and you should seek independent tax advice from suitably qualified professionals in respect of your personal circumstances before taking any action.

This article is intended for general circulation and information purposes only. It may not be published, circulated, reproduced or distributed in whole or part to any other person without prior consent of AAM. This article should not be construed as an offer, solicitation of an offer, a recommendation or provision of financial advice. The information does not take into account the specific investment objectives, financial situation or particular needs of any person. Advice should be sought from a licensed financial adviser representative before making any decisions. Whilst we have taken all reasonable care to ensure that the information contained in this article is true and accurate at the time of publication, we cannot guarantee its accuracy or completeness. Any opinion or estimate contained in this article is subject to change without notice. AAM Advisory Pte Ltd is licensed by the Monetary Authority of Singapore, FA Licence no. 100032.

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