Wealth Check: Expatriate comes home to a tricky financial position
Nicola Farnhill is returning to the UK with hopes of building a business after 10 years living in Spain. Our experts pass on some useful advice...
Saturday 31 August 2013
Nicola Farnhill currently lives in Alicante, Spain, but is looking to move home in the next six to 12 months, and is keen to get her finances in order before she repatriates back to the UK.
The 42-year old has lived abroad for 10 years and loves the Spanish lifestyle, but feels it's time to return so she can focus on building her new business.
Nicola is in the process of setting up a business which will involve her working as both a life coach and counsellor. She is also just about to finish four months of studies which will lead to her being a fully-qualified strategic interventionist. The course, which Nicola is studying long-distance with the Tony Robbins and Cloe Madanes training centre, based in California, cost her £2,500.
“I'm now gradually getting my own coaching business up and running,” says Nicola. “While I'm not earning a huge salary from this at the moment, this kind of work can eventually be pretty highly paid – up to £150,000.”
Alongside this, Nicola has a part-time job working as a dog groomer.
“For some time now I've been earning between €12,000 (£10,254) and €16,000 a year running my own business,” she says. “This has just been sold.”
Nicola lives on her own in a two-bedroom house in Torrevieja, and pays around €300 a month in rent and as she has had to contend with the faltering euro, she no longer has any savings.
Equally, Nicola is in the fortunate position of having no debts to worry about. When she returns to the UK, Nicola hopes to move to Brighton.
Nicola's main focus at the moment is building her business.
“I've got ideas about setting up workshops for women, such as increasing confidence and beating addiction,” she says. “Eventually, I'd like to be able to run these both at home and abroad. I have plans to travel to both Europe and the States – as coaching is very big in the US.”
Nicola is not paying into a pension at present, but does have around £27,000 in a government pension from a previous job. This is now frozen. At present, Nicola does not have any protection policies in place.
Our panel of independent financial advisers agree that Nicola is in quite a tricky financial position as while she has no debts, she also has no savings or assets – apart from the sale of the dog-grooming business. They urge her to plan very carefully as she is about to embark on two significant life changes by relocating back to the UK and launching a new business. They agree that the key will be to try and build an asset base at the same time as building the business and avoiding incurring debts. In addition, they point out that while saving for the short term should be her immediate priority, she can't afford to put off saving for retirement.
Build an emergency fund
James Robson from Plutus Wealth Management urges Nicola to build an emergency fund.
“Generally, this should be equivalent to three months' outgoings, but Nicola may need to put aside as much as six months' outgoings, as there can be a considerable lag between invoices and payments when starting a business,” he warns. “The sale of the dog-grooming business could provide a kick-start to these savings.”
Scott Gallacher from Rowley Turton recommends Nicola puts this money into a cash individual savings account (Isa) as all returns are tax-free.
“Once she's built an emergency fund, she can then think about adding to her savings to build the sizeable deposit that will be required to buy a property in Brighton,” he says.
As and when Nicola is in a position to think about longer-term savings, Danny Cox from Hargreaves Lansdown suggests she consider a stocks-and-shares Isa.
Consider renting before attempting to buy
Mr Gallacher warns Nicola that she may find it hard to get a mortgage given her current situation.
“Her ability to get a home loan will depend on how much she receives from the sale of the business,” he says. “As she is also starting a new business, I doubt she will be in a position to get a mortgage on a UK property until she has completed at least her first year. Renting would definitely seem a much more realistic option at the moment.”
Mr Robson adds that when Nicola does come to buy she will need to secure a minimum of 10 per cent of the purchase price, and will then have to add on legal fees, stamp duty and surveying costs.
Seek tax advice
As Nicola's plans include living and working in various countries, Mr Cox recommends she consults a tax specialist to establish her best options for tax residency and to minimise the tax she pays.
He adds that Nicola also needs to consider whether she sets up as a self-employed sole trader or as a limited company.
“With expectations of her earnings (profits) being around £150,000, trading as a limited company is more tax efficient,” he says.
Moving her money home
When it comes to moving her money home, Nicola needs to plan carefully to ensure she gets a good service and competitive rates.
Her two main options are a bank or non-bank foreign-exchange specialist; the latter almost always works out cheaper overall. An online site can help Nicola find the best deal on international payments.
“Nicola should watch out for currency companies who boast of 0 per cent commission or 'fee-free transfers' as the hidden fee is always going to be the mark-up added to the real rate of exchange,” warns Daniel Abrahams from currency comparison site MyCurrencyTransfer.com. “She should also only transact with a specialist authorised by the Financial Conduct Authority.”
Build a pension fund
While saving into a pension may not feel like a priority for Nicola, this is something she can't ignore.
“As she's been living in Spain for a number of years, she may have an incomplete national insurance record,” warns Mr Robson. “This can have an impact on the level of state provision, so she should request a state pension forecast immediately.”
She can do this by visiting Gov.uk/state-pension-statement.
“As the Government pension is a guaranteed, index-linked pension, this can – and should – be left until retirement age,” says Mr Cox. “In terms of other pension savings, once Nicola returns to the UK, she should consider a private pension such as a stakeholder or low-cost Sipp (self-invested personal pension).”
Review protection policies
Upon her return, Nicola should consider insuring her financial situation against illness or injury, according to Mr Cox.
“In the short term, an accident and sickness insurance policy is a good option to consider,” he says. “In the longer term, once her earnings from her new business are clearer, an income protection policy is a better solution.”
Subject to affordability, Mr Gallacher adds that Nicola should also consider critical illness cover.
In addition, she should look into the need for public liability or similar insurances in a business capacity.
Simon Read: Frozen in time - the expat British pensioners who deserve a better deal
Bargain Hunter: From The Outsider to 1984, catch a cut-price classic, read it in the rye
Donald MacInnes: My wasted hours in the retail deserts of Dixons-Carphone
Energy switching app Voltz allows users to switch with just a few taps
Money Insider: Smart alternatives to the pensioner bond
- 1 The truth about 'girl things': Three cheers for Heather Watson's honesty
- 2 Man who held up 'hire me' sign at Waterloo station returns a year later with 'I'm hiring' sign
- 4 Tennis fan suing Australian Open organisers for 'failing to shade spectators' during Murray match
- 5 Men behaving badly: Urinating while standing, 'manspreading' and the gendering of selfishness
British Muslim leaders outraged after Eric Pickles says followers of Islam should 'prove their identity'
UK terror fears: My jihadist son returned from Syria mentally scarred – now he is being ignored
Nigel Farage: NHS might have to be replaced by private health insurance
Billy Crystal: 'Stop shoving gay sex scenes in my face'
'We would evict Queen from Buckingham Palace and allocate her council house,' say Greens
French court convicts three over homophobic tweets, in case hailed as a 'significant victory' by LGBT rights campaigners
iJobs Money & Business
Negotiable: Recruitment Genius: A Tax Assistant is required to join a leading ...
£16000 - £25000 per annum: Recruitment Genius: This is an exciting opportunity...
£45000 - £47000 per annum + bonus + benefits: Ashdown Group: Java Developer / ...
£35000 - £38000 per annum + Benefits: Ashdown Group: Marketing Manager - Marke...
Day In a Page
Hibernate during winter and make your living during the summer at this busy guesthouse with panoramic sea views, in the village of Lynton
A four-bedroom penthouse next to the Tate with direct views of St Paul's from two floors of luxurious living space
A four-bedroom detached home surrounded by spacious gardens and woodland, close to New Pudsey
An 18th-century, three-bedroom home near Langstone Harbour built from ships beams with vaulted ceilings and wood burning stoves
A five-bedroom semi-detached home with a mix of period and modern features in a popular and convenient location
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
A three-bedroom villa with self-contained flat, minutes from Lake Windermere
A deceptively spacious, beautifully presented Georgian home with 3000sq ft of living space and five reception rooms
A five-bedroom Victorian home with four receptions, superb gardens and paddock in Pembury
An eight-bedroom house on the south side of the The Green with cinema, wine cellars and summer house
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
Four exclusive apartments in a Grade II-listed former medical school with 2,275 sq ft of living space and 18ft ceilings
A five-bedroom terraced house on the popular Peterborough Estate, ideally located for both Eel Brook Common and South Park
A state-of-the-art farm-building conversion on the former Cliveden Estate, with 11,420sq ft of internal space, cinema and wine cellar
A three-bedroom, 15th-century cottage with original features in the picturesque village of Sissinghurst
A six-bedroom terraced house with large south-facing roof terrace, cinema room and wine cellar
A new seven-bedroom home built in Queen Anne-style with swimming pool and parkland views in Mortimer
A listed, four-bedroom farmhouse in the rural hamlet of Rushall with detached barn, four acres of gardens and paddocks
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village