When moving overseas to live as an expat, UK people will generally encounter a range of common issues; from locating a place to live, to getting their children into school.
With a seemingly never-ending list of urgent things to do, it’s easy to lose sight of your finances.
Some key areas that should not be overlooked include:
- Telling HM Revenue & Customs when you started your non-residence period – for the purposes of UK income tax, this will ensure you aren’t taxed in the UK for income earned overseas;
- Understanding the date you become UK non-resident and the limits for visiting to maintain your UK non-residence status;
- You may not have access to tax relief on contributions for a UK pension at the same level as when you were UK-resident, though you might still be able to make some form of contribution;
- Will local pension benefits keep track of your retirement goals?
- If you decide to rent out your UK property, you will need to report the income. If you sell your UK home, you may still incur some form of capital gains tax (CGT);
- Insurance is a key way of managing existing and new risks: an existing life insurance policy may be affected by your change of country; you may also need health insurance;
- Even if you have a will and power of attorney, they may not have the same validity in your new country – seeking advice is important.
Meet the Woods
Rowan and Jasmine Wood moved to Hong Kong after Rowan’s employer offered him a promotion to a senior role with an Asian remit.
They brought their two daughters with them: Holly (13) and Hazel (10).
Their first two months in the territory were crazily busy: Rowan started work and had to travel to mainland China and Singapore on a weekly basis; they had to find a home which involved viewing numerous properties; once decided, there was the lease and rental arrangements, not to mention moving in, to arrange.
Rowan and Jasmine had to open bank accounts – no longer an easy task with increasing banking security regulations – and the children’s schooling needs had to be addressed before the start of the new term.
Pension limitations
When Rowan signed his contract, he was surprised to find that his company only offered limited pension benefits.
The HR department explained that Hong Kong’s mandatory pension scheme (MPF) applies to everyone working in the territory – but for him was capped at HK$1,500 (£145, $191, €168) per month.
While he could contribute more himself, there would be no tax benefit and limited investment choices, so he may be better off making his own arrangements.
In addition, living in a lower-tax country than the UK meant he would have more income available to save or invest. He would need to seek advice as to how best to establish a savings scheme for his future.
UK tax form
He also realised that, with his UK-based assets set to remain untouched for some years, he needed to ensure they wouldn’t incur unforeseen taxes in the future.
Rowan had been fretting about his tax status for some time; and, on a rare quiet evening, he logged onto the internet and searched for HMRC’s website.
He was relieved to find that he was not subject to UK income tax, but that he needed to start the clock on his non-resident status for this to take effect.
This was done by downloading, filling out and submitting the P85 form on the site.
Rowan took some time to read the fine print about how long he could spend visiting and working in the UK, noting that after 91 days in a year he could well become eligible to pay UK income tax on top of his Hong Kong income tax.
What about property?
In the scramble to leave the UK, the Woods had rented out their family home, turning the marketing and administration of the property to an estate agent.
A colleague in the Hong Kong office alerted him to the non-resident landlord scheme: this would prevent his rental agent from withholding income tax on the net income they administrated for him.
If the rental arrangement made a profit for him, however, he would need to fill out an income tax return.
Protecting the family
With his demanding travel schedule and the family’s increased distance from the UK, Rowan became concerned about looking after them if he predeceased them.
He realised he didn’t know whether his existing life policy was still valid, or whether it was sufficient to cover his family’s needs in this new environment. He also didn’t know whether his will was still valid – or the truth behind stories he’d heard that his children could become wards of the state should he and Jasmine perish together.
Rowan’s company health scheme proved to be generous, covering the whole family for a range of eventualities from eye tests to hospital stays, but the prospect of active holidays in exotic places meant that he wanted to access additional cover to ensure they could be airlifted out should any one of his brood experience a serious illness or accident in a developing country.
It was time to seek professional advice – with tax, pension, insurance and estate planning all subject to new and confusing possibilities, he knew it would be wise to seek the help of experts.
The savings of time and effort, not to mention the peace of mind, would make it worth his while and enable him to enjoy his exciting new home with his family without worry.
James Sutton is director of The Fry Group Hong Kong; a tax, wealth and estate planning firm specialising in advising UK expats. The firm was recognised as the Best Adviser Firm in Hong Kong 2018 in the International Adviser Best Practice Adviser Awards, run in partnership with Old Mutual International.
