Offshore Savings Accounts

Offshore Savings Accounts

Most offshore savings accounts are now very similar to those available on the UK mainland. Offshore accounts are simple to use and have straightforward terms and conditions. You can operate many of the accounts by internet, post and telephone even if you don’t live near the offshore branch of one of the banks.

Just like mainland accounts, there are fixed and variable rates to choose from. Instant access accounts are usually best if you think you’ll want your money in a hurry. If you’re saving up for something special, then a longer term notice account may be better. Up to 180 days is usually the longest notice period on variable rate accounts. Sometimes variable rate bonds are available for longer periods.

Variable rates can go down as well as up. Fixed rates, on the other hand, stay at the same interest rate for a pre-determined period of time, usually between three months and five years.

The main difference between offshore and mainland accounts is likely to be in the depositor protection scheme. This scheme applies should the bank or other institution you have put your savings into run into difficulties and be unable to pay back your money.
 

What is offshore banking? 

Offshore banking simply means holding an account in a country where you don’t live. Many offshore banking centres tend to be small islands or principalities with favourable tax regimes – such as the UK crown dependencies of Jersey, Guernsey, the Isle of Man and Gibraltar.

Because costs are lower to banks operating in these offshore centres, they can offer higher rates of interest than those offered by their UK-based parent companies. They also have reputations as tax havens because you may be able to pay less tax than if you held your savings in the UK (depending on your situation).

Why bank offshore?

Banking offshore offers notable advantages if you live and/or work abroad, or own property overseas.

• An offshore current or savings account can be held in a number of different currencies (mostly in sterling, US dollars or euros). This makes it easier to transfer money between the UK and abroad, or to allow you to transact in more than one currency.
• Offshore banking centres may be more secure and stable than the political or economic system of the country in which you work or live.
• Interest earned on offshore savings can be paid gross, without any tax deducted. In some cases you may be able to pay local tax on your interest, which could be lower than tax you’d have to pay in the UK or your country of residence.
• Offshore banks are staffed by specialists in international banking, who can help with your unique financial needs and the practicalities of banking across multiple jurisdictions.

Does banking offshore mean you don't pay UK tax?

Just because you bank outside of the UK, it doesn’t mean you avoid paying UK income tax on any interest you earn.

If you live and work in the UK, and receive interest from an offshore bank or savings account, you should declare it to HM Revenue & Customs on your Self Assessment tax return.

HM Revenue & Customs are very focussed on customers with offshore bank accounts in an effort to combat tax avoidance by UK taxpayers.

If you are in any way unsure about the tax situation if you have, or are considering an offshore account, you should seek independent advice from an accountant or financial adviser.

What next?

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