New expats tend to make their first errors when it comes to financial matters and even basic changes like setting up new bank accounts can cause problems, according to wealth managers.
‘Moving to a new country often means adapting to new laws, regulations and tax systems, as well as the cultural differences,’ said Gavin Pluck, European director of Guardian Wealth Management.
Not getting it right just doesn’t make more stress, it can also affect financial positions, he believes. ‘Getting the advice of a professional financial planner that, importantly, is regulated in the country you are going to live and which has experience of the local laws and tax rules, can save a lot of stress, inconvenience and money,’ he explained.
He found there are five basic financial mistakes that expats make involving making a will, having an overseas bank account, tax matters, life insurance and pensions.
While many expats will have written a Will in the UK, once they move abroad this may not be recognized in their new country of domicile. ‘For example, if a married man dies in a country ruled by Shariah Law, all his assets will normally be transferred to his nearest living male relative. Even if there is a UK Will in place, there is no guarantee that the wife will receive anything. Setting up a Shariah compliant Will is essential,’ said Pluck.
He advises setting up bank accounts before moving. ‘It is essential to set up bank accounts in the country in which you want to make domestic payments, such as for utilities. Not to do so could see you paying excessive and unnecessary bank charges,’ he explained.
Another common mistake people make is forgetting to inform HMRC of their non-UK status. ‘This can easily lead to an individual being sought after for tax in both the UK and their new country of residence. Form P85 is the one that needs to be completed. On another note, anyone taking gains within the first full tax year that an individual moves abroad will be taxed by HMRC. To benefit from any tax advantage from moving abroad, gains will have to be taken after the end of that tax year in April,’ said Pluck.
He also pointed out that most UK written life insurance policies may provide limited or no cover at all outside of the UK. ‘It is important that anyone working or living in a new country reviews any insurance policies they may have in place to ensure they properly cover them both for their new domicile as well as for their individual needs. Insurances to consider are: term assurance (life cover), serious accident, critical illness, private medical insurance and financial protection such as family income benefit,’ he continued.
A major financial consideration is pension contributions. He advises expats to maintain payments for pensions in the UK or set up an alternative scheme. ‘This will depend on your individual circumstances. Likewise, if you are intending to return to the UK later in life and wish to draw a state pension then maintaining national insurance contributions is essential,’ he added.