What is an offshore savings account?

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An offshore savings account lets you save your money overseas, but they are not the tax haven you might think. Here is how they work.
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This article is designed to offer you impartial guidance as to your options and what they might mean, but the decision on which product to take out is yours.

Offshore savings accounts can be beneficial for those who work overseas or who travel regularly. This guide runs through all you need to know. 

What is an offshore savings account?

An offshore savings account is a savings account held in a different country to the one in which you live - in this case, one outside the UK.

Offshore savings accounts can be used to hold different currencies, making them useful if you regularly transfer money overseas or if you get paid in a currency other than sterling.

Although they are often associated with issues such as tax evasion, in reality, they are more likely to be used by expats and people working overseas. 

Make the most of your tax-free ISA.

Can you get an offshore account if you live in the UK?

Yes, but only a small number are available for UK residents to open.

To open most offshore savings accounts you need to live in the country you are trying to open an account in; for example, be a resident of the Isle of Man.

Should you get an offshore account?

This will depend on your situation. If you plan to work abroad, or you are hoping to retire or live overseas, an offshore account is likely to be of benefit. 

If not, it is unlikely to be worth it - unless you can find an offshore savings account that offers a much higher interest rate compared to UK-based accounts.

You have a much larger choice of savings accounts available for you to open in the UK.

You can compare UK-based savings accounts here.

How do you open an offshore account?

This will depend on the account you choose, but many of the UK high street banks and building societies have an offshore arm which can make the process much easier. You won’t need to travel to the country you’re opening the account in and instead, you can usually open the account online, over the phone or even by post. 

When you open your offshore account, you will need to provide proof of ID and proof of address. Some banks may also ask you to explain:

  • Why you want to open it

  • Where your money has come from; e.g. inheritance, selling a home, income etc

  • If you plan to make any large deposits over the next 12 months, and the reason for them

How do you manage offshore savings?

You can make withdrawals online by transferring your money to your bank account in the UK.

You can also transfer money from your UK bank account into your offshore savings account when you want to top up your savings.

Do you pay tax on offshore savings?

Yes – saving in an offshore savings account is not tax-free. In terms of UK tax, you will still benefit from the Personal Savings Allowance. But anything above this must be declared to HMRC and you must pay any income tax due.

You can do that by completing a self-assessment form at the end of the tax year. 

However, depending on when you open an account and when the tax year ends, you may benefit from a delay between earning interest and having to pay tax on it. This delay could enable you to earn a small amount of extra interest on your savings. 

Depending on where your offshore account is based, you may also have to pay overseas tax on top.

Is your money safe overseas?

There is usually a financial compensation scheme to protect your savings up to a set value.

Make sure you choose an offshore savings account that uses one of the following schemes:

  • IDCS - Isle of Man Depositors' Compensation Scheme, up to £50,000 a person

  • GBDCS - Guernsey Bank Deposit Compensation Scheme, up to £50,000 a person

  • JDCS - Jersey Depositor Compensation Scheme, up to £50,000 a person

  • GDGS - Gibraltar Deposit Guarantee Scheme, up to €100,000 a person

  • FGDR - French Deposit Guarantee Scheme*, up to €100,000 a person

  • DDGS - Dutch Central Bank's Deposit Guarantee Scheme, up to €100,000 a person

* Fonds de Garantie des Dépôts et de Résolution.

Here is more information on each protection scheme

Maximise the value of your savings by hunting down the best rates available.