I’m moving abroad in a few months, and have most of my savings in Isas, both in cash and investment funds. When I move, what will happen to my existing Isas, and will I be able to keep contributing? I’m particularly keen to open and contribute to a Lifetime Isa if possible to get the 25pc government bonus.
NO, via email
When you move abroad, you will no longer be a tax resident in the UK.
While those who move abroad can retain access to their Isas, they cannot open new Isa accounts or contribute new money to existing Isas, according to Patrick Wooddisse of law firm TLT.
Transferring Isa funds from one account to another is also prohibited. Therefore, opening and contributing to a Lifetime Isa will not be an option.
However, you will be able to manage and change your existing investments via your Isa platform, just not add any new money or switch Isa provider.
You therefore need to decide whether it is best to keep your savings and investments in the UK, or move them overseas. The best course of action is largely dependent on whether you plan to return to the UK.
Jonothan McColgan of adviser firm Combined Financial Strategies said: “If you do want to come back, exchange rate swings pose a major risk, so keeping a financial foothold in the UK would be really important.
“Equally, if you plan to stay abroad for good, exchange rates pose a risk if you keep your savings in the UK. If you intend to fully move away, you should consider moving your financial affairs entirely over there.”
Additionally, just because investment growth, dividends and savings interest earned in an Isa are tax-free in the UK does not mean it will be viewed in the same way overseas.
Mr Wooddisse said: “For instance, if you moved to the USA, you may find that a stocks and shares Isa needs to be declared in your annual tax return, even if you haven’t touched it, and that any gains made are likely to be taxed annually at punitively high rates.”
You should therefore look at the tax agreements the UK has with the country you are moving to, and ensure you are fully aware of how your Isa holdings would be treated if you were to keep them. It could be worth seeking specialist financial advice.
Bear in mind that if you move your savings and investments overseas, the type and range of account options is likely to be substantially different, and there may not be like-for-like options. Investments will likely need to be sold out of and moved abroad in cash.
What if I'm going abroad temporarily?
Whether or not you can pay into an Isa during your time abroad depends on where you sit residence-wise.
If you can satisfy a list of questions that confirms you are still UK tax resident while you are abroad, you will still be able to contribute to your Isa, according to Tina Riches, national tax partner at Smith and Williamson, the accountancy firm.
If you spend at least 183 days in the UK in one tax year you are considered resident and can therefore save into your Isa. If not, as someone leaving the UK to go travelling, you must answer further questions.
If you have been a UK tax resident for at least one out of the past three tax years but have spent fewer than 16 days in the country during the current tax year you will not be considered a UK tax resident.
The next tests refer to your UK home and employment status. If you spend 30 days or more (tested over a 91-day period) in a permanent UK address, you would be classed as a UK resident and can still pay into your Isa.
What constitutes a UK "home" is not set in stone, said Ms Riches.
It could be a permanent address in a property you own or a room you usually stay in at your parents' house when you stay there.
If you don't fulfill this criteria, but have worked 75pc of the past 12 months in the UK with at least one working day in the tax year you are due to travel, you could still be a resident.
If your status is deemed inconclusive following the questions above, you will need to satisfy a "tie test".
The number of ties you need, which refer to family, accommodation and work ties to the UK, depends on how many days you spend in the UK each year.
However, Ms Riches said this is easily avoidable for travellers who want to remain UK resident.
She said: "Most people don't tend to go travelling for the entire tax year - from April to April.
"If you travel either side, say for an academic year, you are likely to still be considered tax resident throughout and can easily satisfy the ties test."
If you do unusually decide to travel for a period spanning an entire tax-year, without having 16 days in the UK in that year or meeting the tie test it is up to you to alert your Isa provider about your change in circumstances.
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