UK Expats & Brexit – Planning for Financial Security

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UK Expats Brexit Planning for Financial
Security
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With around 5.5 million UK nationals living
permanently abroad, the upcoming end of the
Brexit Transition Period on 31st December 2020 is
a serious concern for almost 10 of British
citizens.   And, perhaps, with good reason
taxes are a fundamental part of life, and even
more crucial when navigating international tax
residencies and complex regimes. Many EU
countries adopt structures which are a world away
from the familiar HMRC system. For example, you
may find that income tax is a federal tax and
does not include other taxes on that same income,
which are payable to local municipalities or
provinces.   Lets explore what Brexit means
for UK nationals living overseas, and why
planning is the crucial factor in securing your
future.
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How Brexit Will Impact UK Expats
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The first point to note is that, if you are an
existing expat living legally in a European
country, and have established residency or
permanent residency status, your right to live in
that country is assured.   While other things
might change depending on your tax status, income
and living circumstances, you will be entitled to
remain resident in your host country as long as
you wish. For expats this is often the biggest
worry, and is covered by the terms of the
Withdrawal Agreement.   The Withdrawal
Agreement sets out the terms of the UKs
withdrawal from the EU and provides for a deal on
citizens rights. You will be covered by the
Withdrawal Agreement if you are a UK national
lawfully residing in another EU country by the
end of the transition period, on 31st December
2020.
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The Brexit Transition Period
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Concerns raised by British expats are coming to a
head now, as although the UK officially left the
European Union some time ago, we have been in a
period of hiatus while the terms of that
departure are negotiated. This is called the
Transition Period, during which time trade,
movements and taxation rules remain unchanged
from before the departure.   However, this
period ends on 31st December 2020. Therefore, any
changes that impact expats will come into effect
from 1st January 2021 onwards. It is worth noting
that any significant regulation changes will come
with an implementation phase, so it is improbable
that any UK nationals will suddenly experience
any sudden changes come New Years Day. For
example, rules regarding the registration of
foreign nationals resident in EU countries allow
until 30th June 2021 for this process to take
place.   That said, the time to act is now,
whilst there is still sufficient time to make
changes to your affairs, assets and investments,
particularly for options such as pensions
transfers which typically take several months to
complete.
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Expats Relocating to Europe After Brexit
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From 2021 onwards, the visa requirements and
residency eligibility for British citizens
wishing to relocate to an EU country are liable
to change, in some cases significantly. It is,
therefore, crucial to understand your tax
residency status now, to leave sufficient time to
make the appropriate registrations in advance of
the rush once the Transition Period ends, and the
cut-off date comes into play.   Many EU
countries will experience a flood of last-minute
applications, which will put a strain on the
processing systems, potentially cause delays, and
pose more uncertainty for applicants who havent
prepared well in advance. New UK citizens
claiming residency after this time will be liable
to different terms depending on the host country.
Some nations will welcome expats, provided they
meet eligibility criteria such as fulfilling a
skills shortage or investing a minimum value in
the country often through property
investment.   Other nations will switch to
similar visa application processes as are
currently offered to non-EU citizens wishing to
take up residency. The scenario will vary between
countries in different states, this could be
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• Based on a quota system depending on the targets
  set, or limits established, for the number of
  applications approved per annum.
• Dependent on your expat financial planner
  stability, with residency only offered to
  applicants who can demonstrate certified
  financial planner. Often, this is accompanied by
  the inability to access state services or social
  security benefits for a period of time.
• Assessed on the reason you wish to relocate.
  Family reunification visas are usually granted
  provided you can prove that you are moving to
  join immediate family members. Some assessments
  will look at how long you wish to live there, and
  whether you plan to work, study or retire.
•  
• Given the uncertainty about how visa systems will
  work in each EU country and that there are
  likely to be variances between member states
  relocating in advance of December 2020 is
  expected to be the most streamlined way of moving
  to the EU while free movement rules remain in
  place.

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Taxes for UK Expats in 2020
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• Taxation systems are diverse and very much
  dependent on the individual state. In most EU
  countries if you already have an established
  right to live there, youll be paying local
  taxes. This means that the end of the Transition
  Period may not have a direct impact on your
  day-to-day life.
• However, it is vital to consider your UK assets,
  as the treatment of this foreign-source income
  from a non-EU country may change dramatically.
  Consider assets and income such as
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• Pensions
• Rental income
• The sale of property
• Ownership of assets including shares, stocks,
  investments and property
• Inheritance
• Overseas savings accounts
• ISAs and Premium Bonds

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For example, existing expats will continue to
receive the UK State Pension, and the annual cost
of living increase, provided they are legally
resident in advance of the end of the Transition
Period. If you own a private pension scheme, this
might not be so simple.   Often, the most
cost-efficient option for UK nationals is to
transfer their UK private pension fund overseas.
This avoids the complication of having to claim
back tax at source through double taxation
treaties and means that you are not exposed to
the volatility of currency fluctuations impacting
your regular income. The most common options for
overseas pension transfers are Recognized
Overseas Pension Schemes (ROPS) and Self-Invested
Personal Pensions (SIPPs).   Should the UK
government proceed with rolling out hefty
taxation charges against UK pension funds
transferred overseas, you might lose as much as
25 of your pension fund, in tax liabilities
arising from the transfer.   It is, therefore,
crucial to seek expert support with identifying
the most tax-efficient treatment of your UK based
assets, as far in advance of 31st December 2020
as possible.
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Expert Tax Planning for UK Expats in Europe

• The key factor is to seek advice as quickly as
  you can.
•  
• Financial planning is the best way to
•  
• Analyze your income requirements.
• Establish key priorities from your investments,
  and
• Create a future-proof wealth management strategy
  to ensure you are prepared for all the changes
  that Brexit will bring.

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Leaving such decisions to the last minute may
prove costly in terms of not having sufficient
time to reinvest funds, not having the option of
restructuring assets in the most tax-efficient
way, or not having the requisite lead time to
select attractive transfer options.   Chase
Buchanan is an established wealth management
advisor, with local offices across Europe and our
UK Administration Centre. This enables us to
harness the power of local, on the ground
knowledge, along with a global network of
expertise and an understanding of how UK tax laws
work and may change.   Download our updated,
comprehensive expat financial planning Guide to
Brexit for a more detailed analysis of the
country-specific legislation changes and
anticipated tax rules.   Contact us for bespoke,
professional advice to ensure that you have a
complete understanding of the impact of Brexit on
expats in each EU state, and how to structure
your finances effectively to prepare for the end
of the Transition Period.
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