The necessity for offshore banking

Some expats seem to wonder if they even need to set up an offshore bank account, Jennifer Lowe explains why offshore banking arrangements should be a priority.

The trend amongst Brits to move abroad is becoming more popular, with 198,000 British citizens moving out of the UK in 2005.

Relocating to another country is a life-altering step for anyone, but faced with the prospect of handling their finances whilst they are away can seem both daunting and confusing to any expat and many believe that they can get away with using an account based in their home country, combined with a local account in the country they’re going to live in.

There’s no denying that it is possible to live with a combination of a bank account back home and one based in your foreign country of residence.
The problem with doing things this way, however, is the lack of true international reach on the part of the banks concerned. Basically, a combination of national regulations and the bank’s own limited systems means that it is highly unlikely that a ‘UK – local’ banking package will be operable wherever you are in the world.

It may be fine to do things in this way if you are going to move there and barely set foot outside it again. But for anyone who may find themselves travelling at all frequently, a properly designed international bank account is a necessity if you want to avoid a lot of tedious hassle.
Firstly, you usually won’t be able to access your account details around the world if it is a national package.

For example, walking into a bank in Dubai and attempting to transact on your British account could prove to be impossible and leave you penniless!
Offshore accounts are designed so that expatriates can pay their salaries or pensions into them, deposit money into other accounts, such as a local bank account in the country they live in and to cover any bills or expenses that they may still have in the UK.

Maintaining a UK-local banking service will also mean missing out on all the tax advantages of using an offshore account, which will accrue to you automatically through gross payment of interest.

Tony Wild, Chairman of ALB on the Isle of Man and Island Director, Lloyds TSB, said: “The advantages of having an offshore bank account are pretty clear for those who are internationally mobile. It provides a ‘tax neutral’ place to save your money while you are on the move.”Interest is paid gross so that the customer can pay tax in their country of residence without being taxed at source. However, you will still have to declare the interest gained in an offshore account when you file a UK tax return.

The most important thing to remember here is to find out what your tax status is before you move to a different country by visiting the website

In addition, the bigger offshore banks also provide a host of overseas services useful to expats – such as multi-currency capabilities, internet banking and tax advice.

Wild explained: “The most popular places for British expats to bank offshore are in the Channel Islands and the Isle of Man.
“There you will find all the usual banking facilities, but more in the way of currency diversification, staff attuned to the needs of international customers.”

There’s more information on the types of offshore bank account you can operate here.