How to manage my offshore investments if I return to the UK? 

By Antler Wealth Management 

January 2024

We’ve helped many expats review their investments prior to repatriating and one of the major conundrums is what to do with their offshore savings plans. 

Offshore savings plans are offered by life companies such as Aviva, Friends Provident International, Generali, Quilter, and Zurich. Expats typically invest in these products as an alternative to a UK pension scheme however these schemes have UK tax and other considerations which need explaining. I’ve thought about the most common questions I’ve been asked over the years and hopefully answered them in the clearest way possible!

What are the tax considerations should I return to the UK?

The policy will continue to grow gross of UK taxation however if you withdraw money, you may be subject to income tax in the UK. 

If you were to fully withdraw the entire policy the growth (your premiums minus current valuation) would be added to your UK income for the tax year and income tax charged at your marginal rate.

If you were to partially withdraw the policy, you pay tax on the chargeable amount over what’s called your ‘tax deferred allowance’.

There are also tax reliefs available on the withdrawal of offshore life funds such as time apportionment and top slicing relief if you are UK resident at the time of withdrawal.

Of course, if you are currently an expat in a low tax jurisdiction it might make sense to surrender the policy prior to returning to the UK. On the other hand, if you don’t need the funds, it could be sensible to retain the policy once you return to the UK as it can provide a tax efficient income later or in retirement.

This is a complex area of financially planning and we can help you with the calculations and provide you with planning ideas.

Any other considerations?

These policies often come with withdrawal changes so it’s very important to understand how these withdrawal charges work, how much they are when they will expire. You are likely to find you may withdraw up to a certain amount without incurring a charge. Again, we can help work with your life company to calculate these figures for you.

Are there more tax efficient options available for me when I return to the UK?

This will largely depend on your tax status and how much you earn when you return to the UK, but I would suggest that the first two ports of call would be ISAs and a UK registered pension scheme:

ISAs

A UK resident adult can invest up to £20,000 per tax year into an ISA which grows free of income or capital gains tax. As ISA is easily accessible and do not incur withdraw charges. UK resident children can have £9,000 per tax year invested on their behalf but these funds are only available to the child from their 18th birthday.

Pensions

After years away from the UK many of our clients decide to reinvest their offshore savings into a UK regulated pension scheme. They do this as they can benefit from tax relief of between 20-45% on their pension contributions (subject to conditions). Moreover, if they were a member of a UK pension scheme, they may also use previous unused pension allowances. Money within a pension not only grows free of income and capital gains tax but is also outside of your estate for IHT purposes.

There are several other tax structuring options which can also be considered.

Summary

Deciding what to do with your offshore investments depends on what your circumstances are likely to be once you return to the UK. We suggest that you engage with a specialist, such as us at least 6 months before you return to the UK.

Please feel free to contact us at antler@sjpp.co.uk if you require a free video consultation to discuss your circumstances and options.

Antler Wealth Management 

A division of St James’s Place (Singapore) Private Ltd