Don't turn your overseas dream into a nightmare

Growing numbers of people in Britain plan to move abroad, but the financial implications need to be looked at thoroughly. Chiara Cavaglieri reports

Almost half of the UK working population is considering moving overseas to escape the recession, according to a new survey. Research by foreign exchange specialists Travelex has found that 45 per cent of working adults want to relocate, looking for a better quality of life and better job prospects overseas.

More than half of Brits would consider moving abroad if they were made redundant, and for 27 per cent of the UK working population, the new highest tax band of 50 per cent for those earning more than £150,000 has sent them fleeing for countries with lower tax levels.

A life in the sun is enough of an incentive for many people, but does it add up to big savings? Australia has always been a firm favourite for expats and is currently the number one emigration hot spot with 42 per cent making it their top choice. Other favourites included the US, New Zealand, Canada and Spain. Michael, 34, a banker earning more than £150,000, lives in south London but is contemplating a permanent move to Australia to avoid the 50 per cent tax rate. "Jobs are still available in Australia," he says. "I have experience of living there and the standard of living is very different. You've got the sunshine and houses are cheaper. It starts to become quite a compelling argument." If he does decide to take the plunge, Michael wants to return to either Sydney or Melbourne and plans to rent his UK home until property prices have picked up. "There's so much research to do before making that jump. I would recommend getting everything lined up before you go and decide where you want to live and work," he adds.

And on a purely tax basis, there are some favourable alternatives for the UK's top earners as well as the rest of us. In Australia, those who earn more than $180,000 (£88,681) are taxed at 45 per cent; in Canada earnings over $126,264 (£70,772) are taxed at only 29 per cent, and in the US workers pay just 35 per cent on earnings over a huge $372,950 (£238,395).

But transferring assets, arranging a mortgage, applying for visas, obligatory medical costs and flights will cost thousands of pounds, so in-depth research is vital if you're planning a big move.

With the exchange rate against the pound in a sorry state, it may make more financial sense to leave money in the UK and only take what is needed for day-to-day expenditure. Then, at a later date, more appealing exchange rates can be fixed using a forward contract. Specialist currency brokers are more likely to secure the best rates and tend to have lower transfer charges than banks. "It's important to understand how exposed the value of your money is if you're going to make regular payments abroad. You could protect against fluctuating exchange rates by taking a one-year, forward contract which fixes the rate," says Tony Wilson, UK director of Travelex. Set up a bank account abroad as early as possible and send a test payment to the new bank before transferring large sums of money, preferably before you leave the UK.

But there are often other unexpected costs to take into account such as banking and healthcare. In some countries, including Australia, it is standard to pay for a bank account, which may be an issue for those used to free banking here in the UK. Medical and health insurance can be another sticking point as in many countries expats will need to buy local insurance to cover for medical costs.

Pensions are another consideration. "In general, it should be relatively straightforward to transfer your UK pension, as long as the pension regime is broadly similar," says Simon Webster, managing director of chartered financial planners Facts & Figures. As long as the pension scheme is recognised by HM Revenue and Customs as a qualifying recognised overseas pension scheme, the transfer can be processed in the same way that it would be in the UK.

There may even be benefits to transferring a pension to another country. In Australia, for example, there is no tax payable on the income drawn from a pension fund. And you can take up to 100 per cent as a lump sum without having to buy an annuity. But the situation varies from one country to the next. Britons who have already reached the state pension age will continue to receive payments, but if moving to a Commonwealth country such as Australia, Canada and South Africa, instead of increasing in line with inflation the pension will be frozen at the level reached when they left the UK. Expats claiming for winter fuel allowance in the UK are still entitled to the benefit when they move, as long as they are moving to a European Economic Area country.

How much time a retiree spends abroad will also have a big impact; those who spend more than 183 days at any one time, or 91 days a year over four years in Britain, will have to pay UK taxes. "If you're retiring and thinking about buying property you would do well to understand the tax implications. If you're living in both countries you need to find what will alter your tax status," says Christopher Wicks, director of advisers N-Trust . Retirees moving abroad should also check whether their current pension scheme will pay into an overseas bank account and whether their annuity company will transfer money overseas free of charge.

And then there's the question of coming back. In South Africa, for example, there are exchange controls on those leaving the country: anyone emigrating may face difficulties taking all their money with them should they decide to return to the UK. Other factors for returning Brits will be exchange rates and the fact that the cost of living and the property market could be considerably different upon their return. There is the risk, experts warn, that the cost of returning to the UK could make it almost impossible to do so.

Independent Partners; request a free guide on NISAs from Hargreaves Lansdown

Suggested Topics
The cartoon produced by Bruce MacKinnon for the Halifax Chronicle-Herald on Thursday, showing the bronze soldiers of the war memorial in Ottawa welcoming Corporal Cirillo into their midst
Funds raised from the sale of poppies help the members of the armed forces with financial difficulties
voicesLindsey German: The best way of protecting soldiers is to stop sending them into disastrous conflicts
Nigel Farage has backed DJ Mike Read's new Ukip song
voicesNigel Farage: Where is the Left’s outrage over the sexual abuse of girls in the North of England?
One bedroom terraced house for sale, Richmond Avenue, Islington, London N1. On with Winkworths for £275,000.
The Edge and his wife, Morleigh Steinberg, at the Academy Awards in 2014
peopleGuitarist faces protests over plan to build mansions in Malibu
peopleFox presenter gives her less than favourable view of women in politics
Mario Balotelli has been accused of 'threateningly' telling a woman to stop photographing his Ferrari
peoplePolice investigate claim Balotelli acted 'threateningly' towards a woman photographing his Ferrari
Arts and Entertainment
Paul Anderson plays Arthur Shelby in Peaky Blinders series two
tvReview: Arthur Shelby Jr seems to be losing his mind as his younger brother lets him run riot in London
Life and Style
The Zinger Double Down King, which is a bun-less burger released in Korea
food + drinkKFC unveils breadless meat beast
Arts and Entertainment
A shared vision: Cerys Matthews has been familiarising herself with Dylan Thomas’s material, for a revealing radio programme
arts + entsA singer, her uncle and a special relationship with Dylan Thomas
In other news ... Jon Snow performed at last year's Newsroom's Got Talent charity event
Life and Style
Text messaging changes as a relationship evolves
The comedian, 42, made the controversial comment following the athlete’s sentencing to five years for the culpable homicide of Reeva Steenkamp on Tuesday
peopleComedian's quip about Reeva Steenkamp was less than well received at music magazine awards
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    SQL Developer with T-SQL, Watford, Hertfordshire - £350 - £360

    £350 - £360 per day: Ashdown Group: SQL Developer with T-SQL, Watford, Hertfor...

    Chief Financial Officer

    120-150k: Accountancy Action: We are looking for an experienced CFO from a min...

    IT Systems Business Analyst - Watford - £28k + bonus + benefits

    £24000 - £28000 per annum + bonus & benefits: Ashdown Group: IT Business Syste...

    Trainee Recruitment Consultant - Birmingham - Real Staffing

    £18000 - £23000 per annum + Commission: SThree: The SThree group is a world le...

    Day In a Page

    Wilko Johnson, now the bad news: musician splits with manager after police investigate assault claims

    Wilko Johnson, now the bad news

    Former Dr Feelgood splits with manager after police investigate assault claims
    Mark Udall: The Democrat Senator with a fight on his hands ahead of the US midterm elections

    Mark Udall: The Democrat Senator with a fight on his hands

    The Senator for Colorado is for gay rights, for abortion rights – and in the Republicans’ sights as they threaten to take control of the Senate next month
    New discoveries show more contact between far-flung prehistoric humans than had been thought

    New discoveries show more contact between far-flung prehistoric humans than had been thought

    Evidence found of contact between Easter Islanders and South America
    Cerys Matthews reveals how her uncle taped 150 interviews for a biography of Dylan Thomas

    Cerys Matthews on Dylan Thomas

    The singer reveals how her uncle taped 150 interviews for a biography of the famous Welsh poet
    The Battle of the Five Armies: Air New Zealand releases new Hobbit-inspired in-flight video

    Air New Zealand's wizard in-flight video

    The airline has released a new Hobbit-inspired clip dubbed "The most epic safety video ever made"
    11 best sonic skincare brushes

    11 best sonic skincare brushes

    Forget the flannel - take skincare to the next level by using your favourite cleanser with a sonic facial brush
    How could three tourists have been battered within an inch of their lives by a burglar in a plush London hotel?

    A crime that reveals London's dark heart

    How could three tourists have been battered within an inch of their lives by a burglar in a plush London hotel?
    Meet 'Porridge' and 'Vampire': Chinese state TV is offering advice for citizens picking a Western moniker

    Lost in translation: Western monikers

    Chinese state TV is offering advice for citizens picking a Western moniker. Simon Usborne, who met a 'Porridge' and a 'Vampire' while in China, can see the problem
    Handy hacks that make life easier: New book reveals how to rid your inbox of spam, protect your passwords and amplify your iPhone

    Handy hacks that make life easier

    New book reveals how to rid your email inbox of spam, protect your passwords and amplify your iPhone with a loo-roll
    KidZania lets children try their hands at being a firefighter, doctor or factory worker for the day

    KidZania: It's a small world

    The new 'educational entertainment experience' in London's Shepherd's Bush will allow children to try out the jobs that are usually undertaken by adults, including firefighter, doctor or factory worker
    Renée Zellweger's real crime has been to age in an industry that prizes women's youth over humanity

    'Renée Zellweger's real crime was to age'

    The actress's altered appearance raised eyebrows at Elle's Women in Hollywood awards on Monday
    From Cinderella to The Jungle Book, Disney plans live-action remakes of animated classics

    Disney plans live-action remakes of animated classics

    From Cinderella to The Jungle Book, Patrick Grafton-Green wonders if they can ever recapture the old magic
    Thousands of teenagers to visit battlefields of the First World War in new Government scheme

    Pupils to visit First World War battlefields

    A new Government scheme aims to bring the the horrors of the conflict to life over the next five years
    The 10 best smartphone accessories

    Make the most of your mobile: 10 best smartphone accessories

    Try these add-ons for everything from secret charging to making sure you never lose your keys again
    Mario Balotelli substituted at half-time against Real Madrid: Was this shirt swapping the real reason?

    Liverpool v Real Madrid

    Mario Balotelli substituted at half-time. Was shirt swapping the real reason?