What to consider financially when moving abroad
Have you ever considered packing up and moving abroad? Perhaps for some, it is just a dream at this stage but for others, it is a reality and something that is actually going to happen. Whether it’s moving to a new country with work or relocating for family or lifestyle, there are many reasons why people choose to move to a completely different country. For many, this will involve a move overseas to a completely different culture with a different language and unfamiliar surroundings. If you are moving to a country that you have fallen in love with after a few holidays you may think that it is going to be simple to make the move and that it will be a cheaper cost of living but it is vital that you are aware of the costs of a move like this before you take the plunge.
If you are moving for work reasons and are planning on working for someone or even for yourself then you need to make sure that you look at the tax implications. Most countries operate a similar income tax system with tiers based on the amount of income you earn. Some charge a higher percentage whilst some may be lower. As well as income tax you need to look at other rates and taxes that are levied by the government of the country that you are looking to move to.
You will need to inform the tax department in your country of origin if you are leaving the country for a sustained period of time (not if you are going on holiday or a short term trip). You will need to fill out a form issued by the HMRC, IRS or your relevant tax department. It may be that you need to prove that you are in employment in a different country before you are entitled to any tax refunds in the country you are leaving. You will also be expected to pay any tax that you owe as moving will not make you exempt in fact the US, for example, has strong relationships with many countries which makes tax avoidance very difficult!
If you are moving as part of a relocation with work then perhaps they will be able to advise you of how you will be affected. If you are unsure of how this affects you then it is strongly advised that you get in touch with your tax department and make sure you get all of the information before you proceed.
Moving fees for both your belongings, yourself and your family
It is likely that you have moved house before to a new area within the same country. Then you will have paid for a removal company to pack your furniture and deliver it to your new house. If you are moving to a new country there will undoubtedly be shipping costs to consider and you will need to choose the level of service you want from your international moving company. In addition to this, you will have to pay for your flight tickets for the family or the ferry costs for you and the family plus your car if you are taking it. Maybe you have unusually large items that need to be shipped – jet-ski, caravan, second car…… you will be surprised at what people want to take with them.
Cost of living
From the cost of a loaf of bread to a tank of fuel, you need to look at how much it is going to cost you to live in your new home. You may have a perception that it is going to be much cheaper than what you currently spend but there are a number of factors to consider:
- How far will you have to travel? If your commute is longer you will use more fuel.
- What is your weekly supermarket budget – is everything cheaper or will there be things that cost more?
- Will you expect to eat out? Do you eat out now? Will you want to eat out more to try and keep that holiday vibe alive?
- Will you have to pay for childcare, healthcare, education – what things will you need to pay for that perhaps you don’t at home?
Will you move your investments?
If you have investments in the UK you will need to decide whether you want to keep them invested in UK accounts or whether you want to move them to an offshore alternative. It largely depends on your personal preference, the cost of investing with an offshore company and declaring the tax in the UK or the new country that you live in. If you are working and paying tax in your new country then it might be less complicated to keep it all in one place.
Currency – the cost of moving your money around
You may have had the same bank account for years and be expecting to use this bank account when you move but it is important for you to have an account in the country you are moving to. It is much easier for you to have a bank account to set up direct debits, standing orders and get paid your salary into.
Many people keep their old bank account and open up a new bank account using a transfer service to move funds between the two. Why keep your old bank account? Well unless you have been living on cash and have never had any debts like credit cards, loans, memberships etc. then you will have direct debits coming out of your account. If you are keeping a property in the UK that has a mortgage on it you will need to ensure that the mortgage can be paid easily. If you think that the bank will be unhappy keeping your account open when you are moving abroad then you could consider using a family member or friends address for correspondence.
Before you start transferring money between accounts though you need to research how much it will cost for transactions as there can often be commissions and currency conversion charges to consider.
It’s not just the initial move you need to plan for – there are all sorts of eventualities to consider when making the move abroad. From having an emergency fund for flights back to your country of origin for family reasons to having a buffer to fall back on for property or car repairs you need to make sure that you can make the move comfortably and certainly have enough money until you get your first paycheck.