07/04/12      http://tinyurl.com/OnYourSide070412

14/04/12      http://tinyurl.com/OnYourSide140412

21/04/12      http://tinyurl.com/OnYourSide210412

28/04/12     http://tinyurl.com/OnYourSide280412

If you have a question, a problem or want independent professional advice regarding your personal finances, I can be contacted at keren@holbornassets.com

Taxes

British expatriates are generally not liable for UK income tax on their earnings whilst resident in the UAE, but specific rules apply. The date from when overseas income is not taxable depends on when a person leaves the UK and how long they remain non-resident. The UK tax year runs from 6^th April to 5^th April and if someone leaves the UK part way through a tax year they may remain liable for UK income tax for the remainder of that year. This is particularly the case for anyone who intends to remain overseas for just a few years as after a period in excess of five years living overseas you become more than temporarily non-resident for tax purposes and any partial years become exempt from UK income tax. At this time there is also no liability to Capital Gains Tax.

When leaving the UK, HMRC (Her Majesty’s Revenue & Customs) form P85 should be completed. This is an application to be treated as non-resident for tax purposes.

Should a non-resident Brit receive arising income in the UK, this is subject to UK tax, although only in excess of the Personal Allowance (£8,105 for tax year 2011/12). Even if employed overseas, income could be received from savings accounts, investments or from property. Anyone who owns a property in the UK and rents it out should complete the paperwork for the HMRC Non-Resident Landlord Scheme which is basically an arrangement for taxing the UK rental income of non-resident landlords. Generally tax will be deducted at source, although it is possible to apply for gross payments with the landlord then being liable for self-assessment. This is often preferable as certain costs, such as maintenance charges, may be offset against the rental income. If a property is jointly owned, then two sets of Personal Allowances can be used in order to reduce the tax payable.

Non-residents can apply for income on savings accounts to be paid without the deduction of savings rate tax by completing HMRC form R85, but the income received is taxable. It is therefore often more practical to move savings offshore.

Anyone can spend up to 90 days in the UK per tax year without liability to UK tax. Provided a person is non-resident for tax purposes in a particular tax year there should be no liability to tax on monies earned overseas but remitted to the UK.

Pensions

UK pension legislation is complex and several areas need to be considered. To start with; state pensions. UK national insurance contributions can be paid whilst living overseas, provided that certain eligibility conditions are met. There are three classes on contributions that are relevant to non-residents, Classes 1, 2 and 3, but classes 2 and 3 are those that can be made voluntarily in order to help maintain a national insurance record, which could affect entitlement to the basic state pension and other contributory state benefits. Class 1 is usually payable when a person has been posted abroad by their employer for a specified period.

British adults have the option to pay voluntary national insurance contributions, as either Class 2 or 3 dependent on their circumstances and it is necessary to pay 52 voluntary national insurance contributions in a tax year for that year to be a qualifying year for UK state pension entitlement..

An individual will need to consider their entitlement to state pension based on their existing national insurance record in order to find out if there is any benefit in making voluntary national insurance contributions. This is simply done by sending in form BR19 to HMRC and a response is usually issued in a few weeks. Individuals wishing to make voluntary national insurance contributions whilst abroad should apply using form CF 83 which is attached to the guide Social Security Abroad (NI 38), available from the HMRC website.

In most cases only limited ongoing pension contributions can be made whilst someone is non-resident. Provided a personal pension or stakeholder scheme is already in force, an individual can continue to make contributions of up to £3,600 per annum for up to five years after their departure from the UK. With tax relief the cost of contributions would reduce to £2,880.

A UK employer can make contributions to a UK registered pension scheme for one of their employee’s who is working overseas. There must however be continuous employment and the individual must have a UK employment contract. Tax relief on such employer payments will be at the discretion of the Inspector of Taxes. In practice, it is rare for the Inspector of Taxes to deny or restrict tax relief.

Whilst non-resident it is possible to transfer existing pension benefits to other UK pension schemes, although independent advice should be sought regarding suitability.

At retirement the proceeds of UK pensions, whether state or personal, can be paid to a pensioner living overseas in accordance with the provisions of the plan. With a state pension, although this can be remitted overseas, if the individual is living outside of the EEA (European Economic Area) or in a country which does not have a reciprocal social security agreement with the UK, the amount of UK state pension they will receive each year will be frozen at the amount initially paid when it was first claimed. There are petitions to the UK Government on this subject each year, but in the current economic climate this is unlikely to change.

Offshore

British nationals may open bank accounts anywhere that they wish and whilst it is practical and indeed necessary to have a Dirham account, many will want an offshore bank account. In most cases these are subsidiaries of international banks with offices in one of the UK offshore jurisdictions such as the Channel Islands or Isle of Man. Advantages include no liability to UK tax on the interest earned whilst UK non-resident for tax purposes and the ability to time the repatriation of funds in a tax efficient manner.

Investment

For Brits living abroad, a number of investment options in the UK are available, but some are best avoided as there would be tax liabilities on growth or income. Existing Individual Savings Accounts (ISAs) can be retained, but no new funds can be contributed to these plans. Investments can be made to bonds and unit and investment trusts, but the potential tax liability means that it is generally more advantageous to use offshore investments.

There are a number of well known insurance companies who have offshore divisions and these offer a range of plans to suit most circumstances, both for regular payments and lump sums. Generally these providers offer access to several hundred funds for each plan, many managed by well known international fund managers, so suitable portfolios can be constructed in accordance with an individual’s personal attitude to risk, preferences and timescale.

A word of warning: certain salespeople are known to recommend long term savings plans but forget to mention that if such plans are encashed after returning to the UK the planholder is likely to have a significant tax charge. For most plans shorter terms will suit the majority of people, so be wary of anyone pushing a 25 year term plan as this will be in their interest, not yours.

There are investment products available offshore that have tax advantages for people returning to the UK, even if that is within five tax years of departure.

It is also possible to invest locally, but as assets in the UAE may be subject to Sharia law this may not suit all.

Protection

Many people have life assurance policies that they took out whilst resident in the UK, and provided there was no intention to move overseas when it was set up and premiums are paid from a UK bank account the plan should be valid. Critical illness plans, or those that include it may not be valid so it is worth checking this.

Once you are non-resident it is not possible to take out UK life assurance policies, but offshore providers offer a range of policies to suit most circumstances, including term assurances, whole of life plans and critical illness cover.

All residents should have suitable medical insurance to cover them whilst abroad, but many people do not realise that once they move overseas they are not eligible for free treatment by the National Health Service (NHS). Under the Health and Medicines Act 1988, health authorities may set their own charges for non-resident patients and these are reviewed annually. The only areas for which there is no fee is for people admitted to Accident & Emergency Departments, but follow up treatments and admissions may have fees. The exact rules and costs will vary between health authorities. With this in mind international medical insurance policies that include the UK are recommended.

Estate Planning

Having a will is important for financial planning, but the rules relating to inheritance in the UAE are different to those that apply in the UK. Sharia law will take precedence over assets held in the UAE and although this is not necessarily overridden by a will, a properly written Will may mean that your wishes are taken seriously into consideration. More importantly a Will allows parents to specify guardians for young children and to make arrangements for monies to be set up in trust for the children should both parents die.

UK Inheritance Tax is payable on worldwide assets for those that are UK domiciled. Domicile is a concept of general law and is used to determine the system of personal law (dealing with matters such as marriage, divorce and Wills) that should be applied to an individual who has connections with more than one jurisdiction. Domicile is distinct from nationality or residence and you can only have one operative domicile at any given time. The Inheritance Threshold for the tax year 2012/12 stands at £325,000.

Having a Will allows for assets to be distributed in accordance with the wishes of the settlor and if properly worded can also reduce the inheritance tax due. Wills should be written mainly in accordance with British law, taking into account assets held elsewhere, but these can be arranged in the UAE. Always ensure that your will is arranged by a lawyer.

Returning home

British Nationals do not have to repatriate their assets should they return to the UK and may keep them overseas for as long as they wish. Any growth or interest however, will be subject to UK tax. In an ideal world a return to the UK is planned well ahead of time, particularly if there are considerable assets offshore or overseas that may have tax liabilities upon return.

As soon as someone takes up employment in the UK again they will come to the attention of the tax man and will usually be put on a, generally less favourable, emergency tax code whilst HMRC works out whether there is any outstanding tax liability. Form P86 ‘Arrival in the UK’ should be submitted upon return.

If you have any queries on this post, want to discuss your tax situation, or any other financial planning topic, please contact me keren@holbornassets.com

An unexpected move that is likely to please and annoy customers in equal measures. It appears that overall Lloyds TSB offers a better level of service to their personal banking customers than HSBC, so it’ll be interesting to see how this pans out, assuming the merger eventually takes place.

There are numerous investment options and you can ensure that you choose the right ones for you by having an understanding of the concept of risk as applied to investments, so you can make informed decisions.

What is investment risk?

Risk is essentially uncertainty and unpredictability. Share prices fluctuate, interest rates rise and fall and whilst we can make educated guesses, there are no guarantees how markets may move in the future. Inflation is another unknown quantity, but one that you need to take into consideration when calculating the real return on investment or savings

The guidelines to remember

• The greater return you want, the more risk you have to accept
• The higher the return you want from your investments, the greater the chance of losing some or even all of your initial investment
• The longer you can wait before you needing to cash in, the more risk you can afford to take
• For short-term savings, it is sensible to avoid capital risk. The reason for the investment and the amount of accessibility will have a big impact on what types of investments are right for you
• If you are investing for the long-term you can afford to take more risk
• Investing in share-based assets has proved to be the best way for providing growth that outperforms inflation. There is still risk but, when you invest over the long term, there is more time to recover your losses should stock markets fall
• Investments need to be managed and reviewed as not doing so simply increases the risk of underperformance

 Different types of risk                                                          

• Inflation risk – the threat of rising prices eroding buying power.
• Capital risk – the possibility that you may not receive back the amount you invested.
• Share based risk – the risk the company you invest in underperforms; shares prices are dragged down in a falling market
• Currency based risk – movements in exchange rates can work both for and against you
• Manager risk – there is huge variance in the performance of managers of collective investments

 Attitude to risk

Only you can decide how much risk you are prepared to take. Some people are willing to aim for high growth and accept capital risk, whereas others are uncomfortable with losing any money, even in the short-term. Once you understand what the risks are, you can invest appropriately as the biggest risk comes from not knowing what you are doing.

How to manage your risk

You won’t be surprised if I say that you need to deal with an experienced independent adviser who understands investment risk and how to manage plans and portfolios over the long term. Most people have neither the time nor inclination to do this for themselves, but it will make a big difference to your investments.

It is my view that investors should be comfortable with the level of risk taken with their investments and to this end I will spend a significant amount of time discussing what is right for each person. After all, it is your money and you want to be able to sleep at night. I use a questionnaire to establish your view on certain issues and although there are no right and wrong answers, this can tease out how risk averse a person may be. To that we chat about what risk means, areas of investment and if any areas are of interest to you. A portfolio is then constructed that is appropriate for the individual.

Sadly, I have come across too many people who have been put into investment funds that have a far higher risk profile that they actually want and who did not realise the risk to their capital. Also of great importance is to annually review and rebalance a portfolio to ensure that you are invested appropriately as what was right two years ago, may not be right for you now.

Is the risk profile of your investments right for you? Have your investments been reviewed in the past year or so? If in doubt and you want to get some unbiased advice, please do not hesitate to get in touch.

keren@holbornassets.com

04/02/12      http://tinyurl.com/OnYourSide040212

11/02/12      http://tinyurl.com/OnYourSide110212

18/02/12      http://tinyurl.com/OnYourSide180212

25/02/12      http://tinyurl.com/OnYourSide250212

If you have a question, a problem or want independent professional advice regarding your personal finances, I can be contacted at keren@holbornassets.com

• Even if you are saving and have a number of pension and/or savings plans, have you checked to ensure that they are working as hard as they should be?
•  Do you have a number of different plans with masses of paperwork that you’d really love to simplify?
•  Have you received a projection of how much income your existing arrangements might provide for you and your family?
• Have you heard about SIPPs and QROPS and wondered what the fuss is about?

Pensions and retirement planning can be a complex issue and is frequently an emotionally difficult topic. The simple fact is that we’re all living longer and so we need to set aside more money to live on. The real value of company pension plans is diminishing and the burden falls more and more on the individual, away from both the employer and the state.

The sooner you address these issues, the better prepared you will be, so you can relax and enjoy life now. Make an appointment for a chat, free of jargon and without obligation, to plan for your financial future.

keren@holbornassets.com

CMI will close for new business with effect from 31st March 2012, but has stated that it remains committed to supporting existing customers. In practice however, we tend to see a trailing off of both service standards and performance, so anyone with an existing Clerical Medical International bond may wish to arrange a review

keren@holbornassets.com

If you have UK pensions, whether personal or linked to an employer, these plans should be reviewed to ensure that that they are managed effectively.    Some of the options available to expats will be adversely affected by legislation that is due to come into effect early April 2012, so it could be in your interest to have your plans reviewed now.

The world of pensions is full of jargon – SIPPs, QROPS, SERPS and more – and I will explain your options in clear English, with all the details you need to make a clear, informed decision. No myths, no hyped-up sales pitch, no false promises – just simple facts.

Please contact me for more details or to arrange a free consultation  keren@holbornassets.com

03/12/11      http://tinyurl.com/OnYourSide031211

10/12/11      http://tinyurl.com/OnYourSide101211

17/12/11      http://tinyurl.com/OnYourSide171211

24/12/11      http://tinyurl.com/OnYourSide241211

31/12/11       http://tinyurl.com/OnYourSide311211

If you have a question, a problem or want some professional advice regarding your personal finances, I can be contacted at keren@holbornassets.com

2011 has certainly been an interesting year in terms of the financial world. Political upheaval, natural disasters and banking issues has lead to a great deal of volatility in investment markets and I suspect there is more to come in 2012.

Whatever stock markets do, you still need to plan for your future and protect your family whilst making the most of your money. With this in mind I plan to run some seminars in 2012 to help people do just those things.

I am now taking a break until January and wish everyone a very Happy Christmas and a healthy and prosperous New Year.

Keren