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Financial matters Expats must consider in the wake of Coronavirus (Covid-19)

Taking into consideration the rapidly ever-growing spread of our current global pandemic Coronavirus (COVID-19), you will need to evaluate your current situation as an expat. We have compiled a list of key financial questions, and areas that are vital to be thinking about.

Written by Lauren Ross on 27 March 2020

Taking into consideration the rapidly ever-growing spread of our current global pandemic Coronavirus (COVID-19), you will need to evaluate your current situation as an expat. We have compiled a list of key financial questions, and areas that are vital to be thinking about.

This can then allow you to seek specialise advice, to ensure that you do not end up making some unnecessary, and potentially expensive mistakes.

The markets are extremely volatile, and this is the perfect time to evaluate your current financial situation as a whole and to look at where overall improvements can be made. It allows you to take the time to notice if you are exposed to any potential risks, and also provides you with opportunity to check that all your current agreements are completely up to date.

UK Tax planning and residency status

Advice has been issued on tax residency rules, to British Expats that are currently stuck in the UK, due to the Coronavirus (COVID-19) pandemic. Special treatment will be given to Expats who are risking their non-residence tax status due to being stuck in the UK longer than originally planned.

HMRC have said that they understand that people have either been advised not to travel, are unable to due to border closures, or have had to self-isolate for health reasons, and that they will treat these as “exceptional circumstances”. These exceptions will also be applied to people that have been asked to return to the country by their employer, due to the COVID-19 virus. Depending on personal ties to the UK, under the Statutory Residence Test (SRT), non-residents can spend 16 to 183 days in Britain before they must start making payments for UK tax.

You should also consider using this quiet ‘lockdown’ period of time to prepare for your self-assessment tax return. This will benefit you by not only saving you money, but to also allow you to know exactly what your tax liability is likely to be. You can gain a better understanding of your tax obligations both in the UK and abroad by requesting a free introduction via the link below, and we will connect you to an Experts for Expats accredited advisor, giving you tax advice and guidance tailored specifically to you.

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Pensions and Investments

In the case of pensions and investments, it is extremely difficult during times of global crisis to ignore the sense of panic and uncertainty. The situations of markets globally is incredibly unpredictable and any decisions that you make during these times is considered risky.

It is always recommended as a sensible idea to review any underlying costs and investments, however, making important decisions under highly pressurised conditions rarely ends well. It is quite the balancing act, in that for both pensions and investments, it is all about evaluating your personal circumstances and risk tolerance with a qualified financial advisor who understands the intricacies of the expat world. This allows you to see clearly if there is anything to be con­­­­­cerned about regarding your current situation. You must never make decisions during periods of extreme economic volatility without seeking advice.

Expats that have previous transferred their pensions into a QROPS may wish to take the opportunity to evaluate their underlying investments and also the fees that surround the pension. For expats with personal pensions still in the UK, it might also be a good time to evaluate whether a QROPS would be a good option. A QROPS provides expats with a range of additional benefits over UK pensions, such as the ability to receiving an income in a different currency other than GBP and provides a wider range of underlying investments.

Caution should be exercised, however, as QROPS are not always suitable and unregulated advisors may look to take advantage of people panicking about their current situation. Our advice is to always seek independent advice from two or more sources, and you must never make a decision without knowing any tie in periods, the underlying investments and knowing the fees and charges in full.

It is important to remember that international financial advice has little to no regulation, so choosing an advisor you can trust is essential when making a financial decision. Never engage any financial advisor that applies pressure on you to make quick decisions without being able to evaluate the fee structure and tie in periods.

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Wills and estate planning

The current Coronavirus (COVID-19) pandemic really highlights just how essential it is to have a legally binding will that covers the different jurisdictions of your estate.

With the real threat of a global pandemic, the natural reaction is to consider our own mortality, but have you considered what will happen to your estate and family in the event of your death or the death of your loved ones?

For many, it will bring a feeling of urgency and lack of preparation. Even though this will be further complicated by the current UK lockdown, there are other options available. Firms will be offering telephone-based will writing services, in which they will take instructions, and offer advice, before providing the drafts and final wills via post or email. Another method of constructing a new will during the lockdown period is online will-writing services.

It is always advised that you speak to an expert if you are unsure of any part of the process, or if you want to seek guidance on what you think you should have in place. Wherever you live in the world, no matter what your age, you should always have a legally binding Will in your country of residence, as well as in your home country.

If you are a British national living abroad or a foreign national living in the UK, we can connect you with an international Wills specialist who will be able to provide you with tailored guidance, ensuring you are covered at home and abroad.

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Currency management

Current exchange rates are extremely volatile and fluctuating on a global scale. For example, in March 2020 GBP vs USD fell from $1.3USD to the £GBP, to just $1.15 within a few days before recovering slightly.

Regardless of the size of transfers, this shift will have a significant impact on how much your £GBP is worth. The extreme rates of change that we are currently experiencing can mean that within the space of a few hours, you can lose a significant amount of money. For people receiving an income from the UK (eg.  through pensions or rental income) or a lump sum from the disposal of an asset (eg. the sale of a property) these extreme currency fluctuations, put individuals at serious risk of losing vast amounts of money unnecessarily.

One way to mitigate the volatility is to avoid simply receiving money into your foreign bank account. Not only will this help you avoid using bank exchange rates, it will also help you avoid their extortionate fees. It is very unlikely that you will get a rate you want through your bank.

The main thing to consider is that when using a currency transfer specialist, they will enable you to receive and hold your money in the original currency, enabling you to exchange when the rate is right for you. If you are an expat that sends or receives money regularly in different currencies, the key to remember is that you have options, and you should evaluate them at every opportunity, but when the exchange rates are so volatile, it is imperative to do so.

The process of sending money from one country to another has massively evolved over the last two decades, and most have always turned to their bank to be met with steep fees, and less-than-favourable rates – and you simply don’t have to accept this.

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