lthough he is famed for being a trend-setter, when David Beckham and his family left Manchester for Spain, they were following a well-trodden path.
An increasing number of Brits are moving abroad to work or retire; it is estimated that there are now around four million living overseas. A recent survey by Alliance & Leicester International predicted that by 2020 one in five "older" British people will be resident abroad.
Moving overseas is usually an exciting move but it can also be very stressful. There are hundreds of things to arrange, such as deciding on a country, finding somewhere to live, ensuring you have the necessary visas, booking a removal firm, informing utility firms and gaining a passport for your pets.
But it is also vital to plan your finances before you leave. Even if you are moving lock, stock and barrel to a new country, you should keep a UK bank account open and hang on to at least one credit card. Simon Hull, managing director of Alliance & Leicester International, points out that it can be difficult to obtain loans in certain countries if you don't have a credit history of a year or two. You can get round this by retaining a credit card - to provide you with the cash you may need in the short term.
It is also worth considering opening an offshore bank account in a location such as the Isle of Man or the Channel Islands. These are useful because they provide you with 24-hour internet banking and, in some cases, multi-currency accounts and mortgages.
If you are planning on retiring abroad early, Steve Travis, director of Wilfred T Fry, a firm that specialises in tax and financial planning advice for British expatriates, recommends making voluntary national insurance contributions - or miss out on the full state pension. "If you retire in the UK, you get an automatic credit," he says. "But if you retire abroad, you do not get any credit. Voluntary contributions cost about £300 a year."
Mr Travis adds that you should check if the country you are moving to has a double taxation treaty with the UK. This means you won't have to pay tax twice on your occupational pension. Where you live will also affect the amount of tax you pay: Mr Travis says that occupational pensions in Cyprus only face a 5 per cent tax, which is much less than in the UK.
British state pensions are paid gross and can be claimed in any country. You may, however, be liable for tax on the state pension in the country where you live. Michael Fosberry, director of professional and financial services group Smith & Williamson, warns that retirees living abroad are exposed to currency risk as pensions are paid in sterling.
Before leaving the UK, you must fill in a P85 form to qualify for non-resident income tax status. These forms are available from your local post office. To become non-resident, you need to live outside the UK for a full tax year. If you leave Britain to work abroad with a contract of employment, you are regarded as non-resident from the day following departure as long as you remain abroad for at least one full tax year.
If you are leaving Britain permanently, you are provisionally treated as non-resident from the day after you leave, but you need to show evidence that your emigration is permanent. To retain your non-resident tax status, you must not spend more than 183 days in the UK in any one tax year, or 90 days on average over the time you are a non-resident.
Once you have gained this status, you will not have to pay tax on interest earned from British bank and building society accounts - in most cases. But you do have to notify your bank or building society in writing of your new tax status.
While you may be regarded as non-resident for income tax purposes, you are viewed as temporarily non-resident for capital gains tax (CGT) purposes for up to five years after leaving the UK.
If you have recently suffered a loss on any investments, you should consider cashing them in before becoming non-resident; these losses can be offset against any tax liability on future gains indefinitely. This is only possible, however, if the losses are realised while you are liable to pay CGT as a UK resident.
You should also not cash in investments acquired before departure for five years after qualifying as a non-resident - at which point you are no longer subject to British CGT. Otherwise, any gains realised while abroad will be subject to CGT when you become a UK tax resident again.
Even if you are still abroad when you die, you may not escape the clutches of the Inland Revenue. If you are non-resident but still UK "domicile", your estate will be liable to British inheritance tax (IHT) - no matter where you live in the world.
"Domicile" connects an individual with a state and its own legal system. An individual may only have one domicile at a time under English law and cannot ever be without a domicile. Where it is will usually be decided by your father's place of birth.
It is possible to abandon a domicile of origin and acquire one of choice, although this is difficult and requires evidence of cutting ties to the former. Even if you manage to change your legal domicile from the UK, you will be liable for IHT for the following three years because you will still be "deemed domicile".
If you are renting out your property in the UK, rather than selling it, you will have to pay tax to the Revenue on any profit. The amount you pay can legitimately be reduced by offsetting certain costs, such as repairs, against your tax bill. If you don't want to pay CGT on the sale of the property, you should dispose of it before you become a British tax resident once more - or face a bill.Reuse content