What is offshore banking?
Offshore banking allows an individual to deposit money outside their country of residence. A person may choose to bank offshore for a number of reasons which we cover in this guide.
Reasons for offshore banking
The main reasons for setting up an offshore banking facility could include:
- Accessing services not provided by your local bank
- Exploiting the potentially greater political or economic stability of a robust offshore jurisdiction
- Planning your finances to maximise tax-efficiency
- Operating multiple accounts
- Transacting in different currencies.
An offshore banking facility provides you with a choice of where to place assets, investments and loans. Jurisdictions such as the Isle of Man, Gibraltar, Guernsey and Jersey are commonly perceived to be politically and economically stable and highly regulated. They can also offer opportunities that might not be available elsewhere.
An offshore facility can offer tax-planning opportunities for your investments and estate, and the possibility of allowing gross interest to be paid into your account.
To ensure that you make the best of these opportunities you should get professional independent tax planning advice. Having done this you will be well placed to examine the offshore facilities available.
Offshore banking services can provide a range of banking services according to your needs.
You can choose from a full service facility, to the simple account offering the basic requirements.
Credit and debit cards .
These are available with most offshore accounts and, where available, can be denominated in sterling, euros and US dollars to match your account.
Telephone and online banking .
These services enable you to manage your money at any time from anywhere in the world 1 .
Choice of currencies.
An offshore account can be opened in a variety of currencies, including sterling, US dollars and euros.
Offshore savings accounts are available in a selection of currencies to suit varying needs of access, return and currency choice.
This type of account offers a balance between easy access and a good return on your deposits. It can be opened with a relatively small initial sum.
A tiered interest account will pay higher interest rates the more you deposit.
This does not penalise you for moving funds in and out of the account, but usually offers slightly lower interest repayments.
Regular payments .
These accounts are designed to help you make regular deposits, and may offer reasonable flexibility in terms of the amount you deposit each month and the taking of payment holidays.
Trackers can follow the base rates of major currencies such as sterling, US dollars or the euro. These can be used to tailor your account to the currency in which you are saving.
Structured deposits .
This is a deposit account with a fixed term usually of between three and six years. The performance is typically linked to an underlying index or commodity. Structured deposits offer the reassurance that your original capital will be repaid at the end of the term, however early access to you funds may result in you getting back less than you invested.
These are similar to a fixed term savings account in that they offer a fixed return on your capital. However, you will have no access to your funds until maturity. The term generally ranges from a few months to a couple of years.
This savings service is ideal if you have a substantial sum to save and want the best return sourced and implemented for you.
The variety of offshore investments covers a wide range of investor requirements in terms of risk, activity, growth, income and currency denomination.
If you want a degree of transparency, structured notes might be the answer. Structured notes are valued against a specified index or asset so that any return can be easily measured. Their characteristics can include the following:
- A fixed term usually of between three and six years
- If the investment performs in line with certain conditions then your capital will be repaid in full on maturity
- If certain conditions are not met, only a proportion of your original capital would be repaid or none at all. This amount would correspond to the performance of the investment
- A variety of risk and return profiles. For example, they can return a fixed interest payment or be linked to assets, indices, interest rates, equities or commodities.
A trust can help maximise the benefit of funds set aside to be used later on by, for example, a family member or charity. Professional advice is essential when dealing with the regulations of setting up a trust.
Sterling investments can be made in all the investment classes listed above as well as more sophisticated instruments such as margin trades, limit orders, over the counter (OTC) trades, and dual-currency deposits.
Currencies as an investment class
If you are familiar with the level of risk associated with currency trading, then it too can offer opportunities including managed investments, structured products and currency baskets.
Managed or execution-only trades
When executing the investments you can have the trades completed for you on a managed basis, or you can set up an ‘execution-only’ facility. The latter can be more cost-effective as you are the person buying and selling assets or commodities, but it does carry a greater level of responsibility.
Loans and mortgages
Offshore loans and mortgages are available in a broad range of currencies so you can reduce exchange rate risk by matching the currency of your mortgage to that in which you are being paid.
The following mortgage types and structures can be placed offshore.
- Residential mortgage. This mortgage is designed for buying the main home in which you are going to live.
- Investment and buy-to-let. These are mortgages used to buy a second home or investment property.
- Variable rate mortgages. These include standard variable, discount and tracker mortgages.
- Fixed rate mortgage. These offer an introductory period of two to five years in which the interest charged on the mortgage is fixed.
- Interest-only mortgage. This is where you only pay the interest each month and have to make separate arrangements to repay the capital at the end of the term.
- Repayment mortgage. You pay the interest and repay the capital over the life of the mortgage.
For more detailed information about the different mortgage structures available see the guides on international mortgages and getting a mortgage quote.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.
Currency exchange services
There are special services that could be useful if you are exchanging large sums of money or making frequent exchanges.
- Spot exchange . The exchanged rate is set immediately and the transaction has to be settled quickly, usually within two days.
- Forward exchange contract. This enables you to fix an exchange rate before making the trade so that subsequent exchange rate changes cannot affect the transaction.
- Option dated forward exchange contract. This is similar to a forward exchange contract but allows you to execute the deal slightly earlier if the exchange rate suits you better.
- Currency options. These are used to help protect a deal against currency exchange rate movements.
Barclays Wealth International offers a range of financial planning services. Select one of the following options to find out more.
Call their team on +44 (0)141 352 3902†.
Request a call back .
Visit their website .
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You have sole responsibility for the management of your tax and legal affairs, including making any applicable filings and payments and complying with any applicable laws and regulations. We have not provided and will not provide you with tax or legal advice and recommend that you obtain your own independent tax and legal advice tailored to your individual circumstances.
1 Access may also be limited in some countries due to the prohibited transmission of encrypted data over telephone lines. Please contact your local embassy to check your country's legal position. Accounts will be held in individual currencies.
† Lines are open 7am to 8pm weekdays and 8am to 5pm weekends and UK bank holidays local time. Call charges may vary. Please check with your local telecoms provider. Calls may be recorded for training and security purposes.
The products and services described on this page are provided by the following companies, which are part of Barclays Wealth: Barclays Bank PLC in England and Wales, Barclays Private Clients International (Gibraltar) Limited in Gibraltar and Barclays Private Clients International Limited in the Isle of Man, Jersey and Guernsey. For further information on these companies and Barclays Wealth please read the Important Information .
Products and services on this site may not be available in certain jurisdictions. In particular, these products and services are not being offered in Japan or the United States or to US residents. For full details of exclusions and disclaimers please see the Important Information before proceeding. Each Barclays Wealth company reserves the right to make a final determination on whether or not you are eligible for any particular product or service.