Do You Need An Offshore Savings Account | moneyfacts.co.uk

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Derin Clark

Derin Clark

Online Reporter
Published: 05/08/2021

Now that international travel is once again opening up, those who have put plans to move abroad on hold will be starting to look at making their dream of living overseas a reality. While living abroad can be an exciting adventure, there are still some practical financial steps that need to be considered before making the move and one of these is what to do with current savings.

Some countries will expect expats to have a significant amount of savings to gain a visa, but even if the country does not require a specific amount of savings, it is still a good idea to have a savings fund to fall back on in the event of an emergency.

Although it is possible to keep money in a UK-based savings account, most expats would likely find it easier to access their money when living overseas by moving their savings to an offshore savings account. There are a lot of misconceptions surrounding offshore savings accounts, so here we’ve looked at what they are and how beneficial they are to expats.

What are offshore savings accounts?

Offshore savings accounts are accounts that are based outside the UK, but which are available to UK residents and expats. They are a good option for those living abroad as they often allow easier access to funds outside the UK and will usually enable withdrawals in various currencies. Some offshore accounts are part of familiar UK-based banks, such as HSBC, NatWest International and Skipton International, others however may be unfamiliar names to most UK consumers.

What rates are available on offshore accounts?

Although offshore accounts have a reputation of where the wealthy stash their money, rates on offshore savings accounts are similar to that on UK-based savings accounts. The top rate in our offshore savings account chart is currently 1.95% AER, which is paid on Conister Bank Limited’s 5 Year Fixed Term Deposit Account. This account requires a £5,000 minimum deposit to open and is available to expatriates and/or Isle of Man residents.

For those who want to be able to access the money in their offshore savings account, Skipton International Ltd pays the top rate on an account that is available to new customers. Its International Direct Access Account pays 0.50% AER and is available to Channel Island residents, expatriates, Gibraltar residents, Isle of Man residents and/or UK residents. It requires a £10,000 minimum deposit to open.

How do offshore savings accounts work?

Offshore savings accounts are very similar to standard savings accounts and many can be opened while in the UK by post, phone or online. The accounts will require proof of identity and proof of address to open, and savers must be aged 18 or over.

A common misconception about offshore savings accounts is that they are tax-free. Instead, money saved in an offshore savings account is taxable. For UK tax purposes, those with savings in offshore savings accounts are subject to the same personal savings allowance as UK-based savers. Information about the personal savings allowance can be found here. The main difference, however, is that offshore savers will need to declare their savings through a self-assessment form with HMRC as income. As well as this, savers may also have to pay tax in the country in which they are residing.

How is money in an offshore savings account protected?

Unlike the UK-based savings accounts in our savings charts, money saved into offshore savings accounts are not protected by the Financial Services Compensation Scheme (FSCS). There will, however, often be a comparable scheme, such as Guernsey Banking Deposit Compensation Scheme which protects up to £50,000 per person per bank or building society brand.

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