A guide to investing as an expat

Posted on: 21st April 2022 in Investments

Investing is one of the best ways to make your money work for you and build long-term wealth. However, knowing the best options for your money can be challenging when living overseas.

In this article, we look at expat investments and how you can make the most of your money while living abroad.

A good place to start is by settings goals.

Setting goals

Having a clear understanding of your financial goals is essential. This means short-term, long-term and even medium-term goals.

The advantage of doing this is it allows you to make more informed decisions about where to invest your money.

Let’s say you are from the UK, currently living and working in Dubai, where there is no income tax. You may want to use the extra disposable income and put your money into local investments.

However, you may wish to return to the UK at some point, maybe to retire. Even if this is a long way off, it’s worth considering now and investing accordingly.

For example, by investing in a UK property, not only can you create a steady income stream, but you will also have a place to live when you return.

What are my investment options?

An Individual Savings Account (ISA) is an excellent solution for people looking to invest in the UK. 

Not only is an ISA safe and straightforward, but they are also tax efficient.

Unfortunately, ISAs are only available to UK residents. Most expats, especially those who have been abroad for an extended period, won’t be classed as UK residents.

So, if you are looking to get started, what are your options? Below are some for expats to consider.

Pensions

Like an ISA, a pension scheme is a tax-efficient way of saving and a fundamental component of your overall retirement planning strategy.

The term ‘pension’ is pretty broad. There are numerous products on the market, but the two that expats can really take advantage of are QROPS and SIPPs.

A Qualifying Recognised Overseas Pension Scheme (QROPS) is a pension wrapper. These HMRC approved schemes allow you to transfer a UK pension. This offers more flexibility and financial benefits.

There are Self-Invested Personal Pensions (SIPPs) for those who want a more hands-on approach. 

SIPPs allow you to make investment decisions yourself. Ultimately, you control where to invest your money. 

With either option, seeking independent advice from a professional is advised.

Property

Property investment has long been viewed as a secure addition to any portfolio. 

The UK property market is booming right now, and it’s showing no signs of slowing down. 

According to ONS data, the average house price in the UK is around £277,000. The figures represent a £27,000 year-on-year increase.

An investment in property has multiple benefits. It can produce a regular source of income if you rent it out. Also, you will own an asset that has the potential to increase in value over time. 

Even if you decide not to sell, you will have a place to live if you return to the UK.

Be aware that as an expat, investing in property is not as straightforward. Our guide to mortgages for expats has more information if this is an option you would like to explore.

Offshore investment bonds

An offshore investment bond is basically a life insurance policy that acts as a tax wrapper. The bond can hold numerous investment funds that are held outside of the UK.

Offshore bonds are a tax-efficient option for expats as they typically avoid capital gains tax and deferred income tax.

As long as the correct bonds are in place, the investment will remain tax-free, even if you return to the UK.

Stocks and shares

When you invest in the stock market, you are buying and selling shares in a company. You can buy individual shares in a company. However, there are other options.

For example, mutual funds are managed investment funds that expose you to different assets and classes. 

These funds can help you easily build a diverse investment portfolio, allowing you to spread and lower the risk.

Your returns are often based on the performance of the company. The better it performs, the more your share increase in value.

One thing to consider as an expat investor is currency risk. If you are living abroad but hold investments in your country of origin, exchange rates can have an impact.

Tax implications

Tax is a complex topic. It’s even more complicated as an expat where there are tax rules for multiple countries to consider.

Double taxation agreements may be in place, depending on where you are in the world. 

These exist between one country and another to ensure that you are not taxed on the same income twice. Not all countries have a double taxation agreement in place with the UK. 

You can use the government website for more information and check if one is in place between the UK and your country of residence.

If you are unsure, seeking financial advice from an expert is strongly advised when it comes to tax. It could help you avoid an unexpected tax bill later down the line.

How to get started

Expats often find themselves in unique situations. As a result, their investment and overall finance needs are equally unique.

Seeking professional advice can help ensure that you make the right decisions with your money.

At Holborn Assets, we specialise in providing financial advice to the expat market. For more than 20 years, we have worked with clients to build a better financial future.

Our expert financial advisers understand the unique challenges that expat investors face. This makes us well placed to help you make the right decisions for your money.

Our commitment to excellence has made us one of the most trusted names in the industry and won us multiple awards.

To find out how we can help you, contact us using the form below.