Expatriates often make mistakes with their finances as they move abroad - follow our financial expert's advice.
Expatriates have a lot to think about financially both before and after they move. According to Aidan Bailey of The Fry Group, there are three top mistakes expats commonly make.
1. Not being open with the tax authority – In Britain you need to inform the HMRC of your non- UK status. Fill in a form P85 before you leave, else you risk being taxed in the UK and your new country. It’s much easier to tie up loose ends before you leave
2. Making decisions post-move – It’s a different environment abroad. Expats may seek advice from tax advisors who aren’t experts in the tax laws of their home country or experienced in dealing with expats. This can lead to expats being rushed into financial decisions.
3. Importing financial mistakes – If you transfer to another tax jurisdiction or back home and you have made financial mistakes you are only taking them with you. Think before you move anywhere and get your taxes sorted beforehand.
Five steps for financial peace of mind abroad
To avoid making these mistakes Aidan suggests five key steps to ensure financial stability when you move abroad.
Many expats become “obsessed” with investment planning and where to place their money. Instead they would do better to start with these steps and go from there.
1. Look at what debt you have – work out how much you owe in total and then a payment plan so you know how much is going out each month.
2. Make a will – many expat have wills that are valid only in their home countries. For example, if you are moving to a country ruled by Sharia law your will may well not apply. If your husband dies in a Sharia country his estate will pass to his closest male next of kin. You need to make a Sharia approved will to avoid this situation.
3. Consider your insurance – research what health insurance you will need. If you already covered consider if it’s enough both for your own peace of mind and for the laws in your destination.
4. Think about property – if you have property at home, what are you going to do with it? You will have to tell the authorities if you plan on renting it or leaving it empty because the taxes on it may change (council tax will alter in the UK).
5. Don’t forget your pension – Set up a system to continue pension payments while you are abroad. If you wish to move back to the UK later in life and draw a state pension you will have to keep up National Insurance (NI) payments while you’re abroad.
Once you have followed these five steps you can look at what money you have left and invest it – or take a holiday!