Five tips to get expat finances Brexit-ready


Reviewing currency, investment, tax planning and pension options now can help secure financial security for 2021 and beyond, writes Jason Porter, director of specialist expat tax and financial planning firm Blevins Franks.

The extension deadline for the Brexit transition period has passed and it is certain that the UK will be leaving the EU in the new year.

Reassuringly – deal or no-deal – UK nationals lawfully settled in their chosen EU country before 2021 will have locked in the right to remain and enjoy uninterrupted citizens’ rights.

But there are still many unknowns.

Other than establishing residence, what steps should be taken to make the financial position as secure as possible?

Currency mix

It is common for UK expats to retain financial connections with the UK, such as property or bank accounts, with many preferring to keep their savings and investments in British pounds.

While there is comfort in the familiar, this does mean exposure to exchange rate risk.

Once expats are living in Europe and spending euros in daily life, it can become more expensive to take income in sterling.

Investment structures that offer the flexibility to invest and make withdrawals in different currencies should be explored.

UK investments 

Likewise, many expats favour British investments, such as UK corporate bonds or FTSE-listed shares.

This could especially be the case if they are still using a UK-based adviser.

If so, their financial planning may actually be better suited to a UK resident than to someone in their situation.

Note also that UK advisers may not be authorised to continue advising an EU resident after the transition period.

Diversification

Achieving higher returns in today’s difficult conditions and low interest rate climate means looking further than bank savings and fixed interest investment options.

While market movements can be unsettling, those invested for the medium- to long-term in a well-diversified portfolio are best placed to see wealth grow over time.

Amid today’s economic uncertainty, it is more important than ever to make sure the portfolio is not overweight in UK assets and is suitably diversified.

Risk can be reduced – Brexit-related or otherwise – by spreading investments across regions, asset types and market sectors to limit exposure in any one area.

Tax planning

When it comes to the taxes expats pay in their country of residency, there is no reason for anything to change post-Brexit.

Their tax treatment is determined by the relevant double tax treaty that exists independently of the EU.

There are, however, some circumstances where taxation may be affected.

For example, once the UK leaves the EU/EEA, expats selling a home in Spain or Portugal to buy a British property will no longer be eligible for capital gains tax relief.

Or if they are living in France and hold UK bonds, they may lose beneficial tax treatment once the UK leaves the EU.

An adviser can recommend more tax-efficient ways to structure investments, such as a suitable EU issued assurance-vie that can also offer additional benefits such as currency flexibility.

Pensions

The UK leaving the EU is likely to mean that a transfer to a qualifying recognised overseas pension scheme (Qrops) is no longer an option.

Jason Porter

But there are other pension transfer opportunities if a UK national is moving overseas.

This article was written for International Adviser by Jason Porter, director of specialist expat tax and financial planning firm Blevins Franks, which was recognised as the Best Adviser Firm – Europe at the 2019 Best Practice Adviser Awards, which are run in collaboration with Quilter International. 




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