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What is an offshore savings account?
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.
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.
What is an offshore savings account?
It is a savings account based in a country outside the UK.
Can you get one if you live in the UK?
Yes, but there are only a small number 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 one?
No, unless you can find an offshore savings account which 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.
What if you live or work overseas?
You should be able to open an offshore savings account in the country you are in, but make sure you are getting a better rate than you can find in the UK.
How do you open one?
You will have to apply and transfer your money across online, unless you can travel to the country you would like to open an account in.
When you start the online application form for your offshore savings account you need 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 why
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.
You will need to declare any interest you make to HMRC and pay any tax due.
You can do that by completing a tax assessment form at the end of the tax year.
Are offshore savings accounts tax efficient?
No, although tax may be deducted from your interest at the source, you still need to declare any interest you make from an offshore savings account to HMRC and pay any tax due.
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:
* Fonds de Garantie des Dépôts et de Résolution.
Maximise the value of your savings by hunting down the best rates available.