Derin Clark

Derin Clark

Online Reporter
Published: 13/02/2019

At a glance

  • Offshore current accounts are aimed at expats and UK residents who want to bank in a different currency.
  • The features offered are usually the same, but there may be a fee and higher deposit requirements.
  • An offshore account does not make it possible to avoid paying tax.
  • While money held in an offshore account won’t be protected by the Financial Services Compensation Scheme, it should still be covered by a scheme from the jurisdiction where it is based.

Offshore accounts explained

Offshore banking facilities are offered by many of the largest UK banks and building societies. These banks are separate companies that operate in the crown dependencies of the Channel Islands, Gibraltar or the Isle of Man.

An offshore bank account will usually have all the facilities and features of an onshore current account, such as an overdraft and a debit card.

However, you should be aware that some accounts:

  • charge a fee
  • may require a larger deposit than an onshore account
  • require that you earn a minimum amount.

Tax

Importantly, it is not possible to avoid paying tax by banking offshore.

As with standard savings accounts, interest earned on offshore accounts is paid without any tax deducted. While the Personal Savings Allowance means basic-rate taxpayers have no tax to pay on the first £1,000 of interest, and higher-rate taxpayers will have no tax to pay on the first £500, interest earned above these thresholds will still be taxable, whether it’s from an offshore account or not.

You must declare any savings interest earned to HM Revenue and Customs (HMRC) on a self-assessment tax form and pay tax on it in due course. If you don’t, HMRC are likely to come calling with a considerable fine.

Moneyfacts tip

Moneyfacts tip Derin Clark

Where savvy savers may benefit is by taking advantage of the delay between earning interest and having to pay any tax owed. All the time the interest is held gross in your account, it is earning even more interest on the extra interest!

Will my funds be protected?

Importantly, current account funds kept offshore don't fall under the UK Financial Services Compensation Scheme, even if your bank is a subsidiary of a UK bank or building society. Depending on where the bank is licenced, you might be protected by a scheme from that jurisdiction.

Moneyfacts tip

Moneyfacts tip Derin Clark

Find out where an offshore bank is registered, and its relevant compensation scheme, in our depositor protection scheme guide.

Disclaimer: This information is intended solely to provide guidance and is not financial advice. Moneyfacts will not be liable for any loss arising from your use or reliance on this information. If you are in any doubt, Moneyfacts recommends you obtain independent financial advice.

person hiking at sunset

At a glance

  • Offshore current accounts are aimed at expats and UK residents who want to bank in a different currency.
  • The features offered are usually the same, but there may be a fee and higher deposit requirements.
  • An offshore account does not make it possible to avoid paying tax.
  • While money held in an offshore account won’t be protected by the Financial Services Compensation Scheme, it should still be covered by a scheme from the jurisdiction where it is based.

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