[Kitten Witten]

Hello all :)

This is probably a very daft question so bear with me....If the exchange rate does not make any great improvement in next two months me and OH are keen to retain most of our savings in £s in the UK and change to NZ$ when it improves. We don't exactly have a fortune stashed away but are hoping that some of it will go towards a deposit for buying a (first ever) house in NZ one wonderful day...

I realise that we are very, very lucky in that that his lovely folks will provide a roof over our heads in Chch whilst we job search and that his friends and family in Chch don't live the high life for us to keep up with so we can live very frugally until in gainful employment and just take some with us in the hope we get jobs soon-ish and can rent somewhere.

So provided one of our banks (Halifax, HSBC and jointly with Abbey) are happy to keep current account open with an address in NZ (as some seem to not want to do this?) do we need to be aware of any restrictions on keeping money in the UK? We are very keen to make sure that we don't break any laws/flout any tax rules etc. and just want to keep our money safe until we can get a bit more for it on exchange rate if it comes to that. Do we need to ask that it is put into a current accout which earns no interest? Or is there bigger issues/more to it? Any advice appreciated as, as you can probably tell, I am going round in large circles somewhat on HMRC and other websites! Thanks :D

[James 1077]

Tax-wise you will be a non-resident in the UK so should be either taxable on interest at the non-resident rate (15%) or, more likely, will earn interest below your personal allowance so should ask your bank for a form so that interest is earned tax-free.

In New Zealand the general law is that you are taxed on your worldwide income so should pay tax on your UK interest; however there is a tax break for new residents such that you don't pay tax on "passive income" (interest, rent, dividends) for 4 years. If you take up the tax break then you don't qualify for working for families tax credits so you may need to do a quick calc to work out whether you are best off with or without the break.

As it is most UK banks allow you to have an NZ address but will keep on deducting UK tax - so you need to complete a tax return every year to get it back. The easiest way around this is to move your account to an offshore banking centre (eg Isle of Man / Jersey) where you can earn interest tax free. Most UK banks will have an offshore arm so it is easy to do. It should be noted, however, that the government guarantees in these islands are generally not as good as the UK's so if your bank went bust you could be waiting a while for your money (I would therefore use HSBC offshore from your selection but that is just my opinion!).

[norma]

When we left the UK Abbey would have let us change our address to a NZ address but we wouldn't have been able to have tax-free status on our accounts. Only a couple of banks in the UK let you have both. The HMRC helpline will be able to tell you which ones offer the tax-free status to overseas residents.

If you retain your accounts in the UK, interest will continue to be taxed at source and you will have to complete a return after the end of the tax year to reclaim any tax owed. That means you are missing out on gaining interest on your interest and it's a hassle filling in a UK tax return every year.

By opening an offshore account you will not have to pay tax at source and will not have to complete a UK tax return on this interest. You won't have to pay NZ tax on the interest either if you qualify for the four-year exemption. Like the UK, the Isle of Man investor compensation scheme now offers compensation of £50,000 per investor per account (see www.gov.im/fsc/investor/dep_comp.xml).

To find offshore accounts offering good rates take a look at the best-buy tables on Moneyfacts (see www.moneyfacts.co.uk/money/offshore/1/offshore-interest.aspx). The accounts can usually be applied for online once you have left the UK. It's usually just a matter of supplying witnessed copies of passports and NZ bank account statements and/or utility bills to verify your identity and NZ address. If you need to, open several accounts to keep each balance below the £50,000 compensation limit.

I'd also recommend that you keep one of your UK accounts open with a small balance to accept transfers from any offshore accounts if needed and for UK hols, purchases, etc.

[norma]

Sorry - I've just realised that my post repeats a lot of what James 1077 had already said!

[Kitten Witten]

Thank you both, that's all really helpful and has stopped me tying myself in knots! :)

[YouMeAndThree]

Just mentioning, in case you didn't know, it is possible to open a sterling (foreign currency) account with NZ banks too - but then that would come with NZ taxes etc.

[James 1077]

By opening an offshore account you will not have to pay tax at source and will not have to complete a UK tax return on this interest. You won't have to pay NZ tax on the interest either if you qualify for the four-year exemption. Like the UK, the Isle of Man investor compensation scheme now offers compensation of £50,000 per investor per account (see www.gov.im/fsc/investor/dep_comp.xml (http://www.gov.im/fsc/investor/dep_comp.xml)).


The only problem with the offshore compensation schemes is that the banks often have very large numbers of depositors. With tax levels exceptionally low it could take quite a long time for there to be funds available to refund you your deposit.

Not really an issue now but could have been a year ago!

[Tinman]

One more thing to do is make sure that you can access your money from overseas. When we moved we left our money in the UK with HSBC and we had to fill out a form which allowed us to transfer our money from over here. As it was a large amount. The last thing you want is to travel back to the UK to get your hands on your money.

[victoria24]

make sure you calculate the exchange rate difference between the current rate and your expected rate and compare the difference against the compounded interest if a term deposit or bond in nz during the period of time you would wait to assess the true benefit.

[Kitten Witten]

make sure you calculate the exchange rate difference between the current rate and your expected rate and compare the difference against the compounded interest if a term deposit or bond in nz during the period of time you would wait to assess the true benefit.

Thanks but that sort of makes my head hurt and I need a long lie down and a G&T (and it's only 9.15am here :laugh).

Seriously though, thanks for the advice guys - it has really helped. It really isn't a large amount of money compared to what a lot of people bring over (it's large to us though! :yes) to worry too much about interest gained on it
etc.

It's just hopefully an amount we can leave in £ (in UK or in NZ - thanks for that!) and eventually transfer at a better rate towards a deposit for that lovely Christchurch house we will one day buy (fingers crossed on so many fronts for that!!!) :)

[chocolate cake]

Just mentioning, in case you didn't know, it is possible to open a sterling (foreign currency) account with NZ banks too - but then that would come with NZ taxes etc.

Not sure if NZ taxes would be a problem, because in the in the case National Bank '....it's all part of the service..' it comes with a 0% interest rate & fees so it costs you money. Guess the other NZ banks sterling rates aren't any different.

[hosebergine]

make sure you calculate the exchange rate difference between the current rate and your expected rate and compare the difference against the compounded interest if a term deposit or bond in nz during the period of time you would wait to assess the true benefit.

Have you got a spready for this Mr V? Bring it to dinner next week if so please :-)

[Wooly_Cow]

make sure you calculate the exchange rate difference between the current rate and your expected rate and compare the difference against the compounded interest if a term deposit or bond in nz during the period of time you would wait to assess the true benefit.

Good point although the maths would probably look something like;

Compound interest of standard accounts in UK = Bugger all of nothing %
Compound interst in NZ - about 4% before tax (3% or so after tax) per year
Fluctuations of NZ$ - up and down by about 20-25% in any year (OK it's been quieter recently)

....chances of guessing which way the $ will go - about the same as UK interest rates !!!

:)

[norma]

Good point although the maths would probably look something like;

Compound interest of standard accounts in UK = Bugger all of nothing %
Compound interst in NZ - about 4% before tax (3% or so after tax) per year
Fluctuations of NZ$ - up and down by about 20-25% in any year (OK it's been quieter recently)

....chances of guessing which way the $ will go - about the same as UK interest rates !!!

:)

Don't forget to compare results with compound interest on offshore sterling account = 3% tax free (or longer if you're willing to tie it up) and the chance (hopefully) of scoring a better exchange rate when you do bring your wad over.

[nifta]

some great info in this thread! :) we're also contemplating leaving our money in the UK due to the exchange rate.

in addition to bank savings, we have some money in UK funds - is there anything to watch out for with regards to leaving our funds be for the forseeable future? (once we leave i don't think we'll be wanting to move money in or out of the funds for sometime). or is this a more complicated subject? :)

[James 1077]

Your UK funds may be subject to tax in New Zealand under a funny regime called the "Foreign Investor Fund" regime. Calculations can get very complicated to make sure you pay the least amount of tax (there are various options so you need to do 4 calcs for each fund).

The good news though is that this won't kick in for 4 years under the transitional resident regime where you aren't taxed on overseas passive income (although if you want to claim working families tax credits then you can't use the regime - so something to think about).

[nifta]

great, thanks! sounds like the 4 years will come in handy to sort out what we need to do! :)

[sophiedb]

Slightly random and kind of hypothetical question along these lines - if the point of bringing over UK funds is to buy a house, how long is it likely to be "profitable" to leave most of the money overseas and rent?

Surely at some point you're going to be paying someone else more towards their mortgage than you're going to gain by waiting for a good exchange rate??

[James 1077]

Slightly random and kind of hypothetical question along these lines - if the point of bringing over UK funds is to buy a house, how long is it likely to be "profitable" to leave most of the money overseas and rent?

Surely at some point you're going to be paying someone else more towards their mortgage than you're going to gain by waiting for a good exchange rate??

I think that most of the recent surveys over here have said that it is more profitable to rent a place than to own it at the moment. As prices start inching up it will switch again.

[Wooly_Cow]

I think that most of the recent surveys over here have said that it is more profitable to rent a place than to own it at the moment. As prices start inching up it will switch again.

That's right - I did a spreadsheet model where you can enter parameters like forecast house price rise or fall, interest rates, other rental and ownership costs and the length of time over which the model is calculated. It's not that complicated and all my own work. I'm happy to share it on the forum if the Admin guys tell me how to post a spreadsheet.

I just ran the model for our situation. Here are the results.

Cost of House: $1,000,000
Period of Model: 3 years (assumes hosue is resold at end of three years)
Investment Interest rate: 2.44% after tax
Mortgage rate: 5.29%
Increase/decrease in hosue value over period: 0% (House values will stay the same)
Council Tax: $4000 per year (included in rent)
Maintenance on house: $2000 per year (Included in rent)
Cost of buying and selling house: $37,000 (once each in the period)

Cost of buying and owning a house over period including loss of interst on capital: $128,000
Cost per week (or equivalent rent this would support): - $820 per week

Happy to run the model for other scenarios and of course make chanegs as required

[miep]

Cost of buying and selling house: $37,000 (once each in the period)



Interesting calculation. I come from a nation of renters and don't really understand the obsession of some new immigrants to buy as quickly as possible, but don't you only pay the real estate agent when you sell, not when you buy? What number do you get if you take out one instance of $37,000?

Also what amount of capital did you use for the calcs?

[James 1077]

Interesting calculation. I come from a nation of renters and don't really understand the obsession of some new immigrants to buy as quickly as possible, but don't you only pay the real estate agent when you sell, not when you buy? What number do you get if you take out one instance of $37,000?

Also what amount of capital did you use for the calcs?

Agree that the buying number shouldn't be that high - we are probably going to be paying about $2,000 all up and I am expecting the bank to pay some of that when I negotiate the mortgage!

Amount of capital shouldn't make much of a difference. Whilst the capital will bring down the monthly cost of the house, having it sitting in a high interest 3 year term deposit will also offset the cost of the rental (as interest earned can be used to pay the weekly rent). There isn't a huge spread on mortgage rates and three year bonds so it is unlikely to have much of an effect.

[chocolate cake]

Interesting calculation. I come from a nation of renters and don't really understand the obsession of some new immigrants to buy as quickly as possible, but don't you only pay the real estate agent when you sell, not when you buy? What number do you get if you take out one instance of $37,000?

Also what amount of capital did you use for the calcs?

Indeed will only pay the estate agent when you sell, and that's a choice anyway, as could always advertise privately. Buying costs would include solicitors fees.

In a nation of renters, I guess someone must own the property, unless it's local authority owned.

I'd normally look to buy, but have stopped looking for now. Houses aren't going to shoot up in the near future despite what the real estate agents might say, in relation to incomes they are still historically high and that relationship can't increase much more.

Other reason of course is the depressed UK GBP exchange rate makes it silly to consider exchanging at the mo unless you feel the new level for UK GBP to NZ$ is going to be 2.40 ish or below.

[Mamee & Co]

INteresting calculation. Am I correct then in thinking that if I rent when I first move over that there will be no porperty taxes (eg rates/council tax) to pay as this is included in the rental figure? It is just in my experience in the UK (Albeit 20years old now) was that when you rented you also paid the property tax. Have I misread your calculation or is this what happens?

Many thanks in advance

Mamee

[IanW99]

INteresting calculation. Am I correct then in thinking that if I rent when I first move over that there will be no porperty taxes (eg rates/council tax) to pay as this is included in the rental figure? It is just in my experience in the UK (Albeit 20years old now) was that when you rented you also paid the property tax. Have I misread your calculation or is this what happens?
...


As quoted...

Council Tax: $4000 per year (included in rent)

In fact it isn't council tax at all but property rates which is paid by the property owner so is included in the rent.

So yes if you are renting then you just have to pay the rental fee and no rates / council tax as well.

Ian

[incredible hulse]

The rent v buy choice is a tough one to call at the the moment, and whilst renting may seem the better value it's only really so on the basis that prices won't increase. Added to the fact that most rentals we saw weren't fit for human inhabitation at the 400 dollars per week mark we ended up buying.
It terms of 0% increase over 3 years; we sold early this year after buying 3 years ago(I would say at the bottom of the market) and made close to 15% profit so it's not as clear cut. We found from a buying perspective that good houses were still selling well and for decent money in comparison to 3 years prior

[cappuccino]

INteresting calculation. Am I correct then in thinking that if I rent when I first move over that there will be no porperty taxes (eg rates/council tax) to pay as this is included in the rental figure? It is just in my experience in the UK (Albeit 20years old now) was that when you rented you also paid the property tax. Have I misread your calculation or is this what happens?

Many thanks in advance

Mamee

And... in Wellington, we don't pay separate water rates as that is included in our council tax bill. So, as a tenant, the only utilities you would pay would be gas/electricity and telephone/broadband.

[Toonster]

OK - silly question - I had planned to change my bank (NatWest) address to my parents, and then to continue to access my account online, as I have been doing for the last few years, until the market improved enough for me to transfer the remainder of my money out (need to keep the account open anyway to pay the last couple of bills which won't be due until after we have left). Would this have any implications legally/administratively?

The maximum we are going to have in the account would be about £10,000 (which would include our last month's pay and our flat deposit when that gets returned to us), some of which is in an instant access ISA earning about £2.50 interest a month.

I hadn't even considered telling the bank our NZ address, mainly because we don't have one as yet!

[kara_m]

OK - silly question - I had planned to change my bank (NatWest) address to my parents, and then to continue to access my account online, as I have been doing for the last few years, until the market improved enough for me to transfer the remainder of my money out (need to keep the account open anyway to pay the last couple of bills which won't be due until after we have left). Would this have any implications legally/administratively?

The maximum we are going to have in the account would be about £10,000 (which would include our last month's pay and our flat deposit when that gets returned to us), some of which is in an instant access ISA earning about £2.50 interest a month.

I hadn't even considered telling the bank our NZ address, mainly because we don't have one as yet!


im in the same situation as you Toonster and was going to do the same, it will be interesting to hear if this option is possible/if anyone else has done it this way

[wellywally]

I operate my UK banks from my mum's address too. It's fine although I did mention it to nationwide and I think they made a note on my account somewhere that I was currently in NZ.
You are supposed to fill in form R85 (iirc, memory is flaky) to tell the UK IR that you have left the country. You can then open tax free offshore accounts as mentioned earlier in this thread. One thing to remember is that you are legally not supposed to open/transfer ISAs when no longer a tax resident of the UK but you can leave already open ones open (and I imagine withdrawal from them).

[norma]

From an admin perspective, if the total interest you earn on the UK bank account falls within your annual personal allowance, you would need to file a UK tax return to reclaim the tax paid on the interest.

[Wooly_Cow]

What number do you get if you take out one instance of $37,000?

Also what amount of capital did you use for the calcs?

So regarding the cost of buying and selling....what I did was make the calculations as equal as possible between buying and renting....

At the start in both cases you would have capital and no asset. So at the end of the modelled period you need to have the same...therefore for the calculation to be correct you need to factor in the full selling costs of a house.

Looked at another way, if you own a house with a certain amount of capital value in it, you actually don’t have that as an asset because it will cost you to realise that asset (think of it as a charge to take your money out of a bank)

I agree that the choice and cost of estate agents are variable but as most people would use them, it’s a fair assumption. I wanted to point out also that the cost of agents here in NZ is not inconsiderable. Of course I also assumed that someone would buy ad sell a house inside three years which is on the short side for most people. The model can be extended over 25 years if require but you then start getting into issues of NPV.

As for the capital amount, well you can work it out if you want but as this is my actual case, I’d rather not say ! :)

[doreysc]

You are supposed to fill in form R85 (iirc, memory is flaky) to tell the UK IR that you have left the country. .


R85 is the form where you declare that your income will not exceed the personal tax allowance so you get interest gross, R105 is the one you are after. This theoretically should restrict you from having some products that are only supposed to be eligible for UK residents but some bank systems are not joined up enough for it to be picked up.

[norma]

Bump.

[Starkus71]

Slightly of the subject - probably?

We've sold the house in advance of moving to NZ and are seriously considering investing the profit in Premium bonds. You can invest up to £30,000 per person and the monies are guaranteed at 100% return as it's a HMRC backed incentive, although the downside is that the account isn't an interest-earning one, although if I'm reading right on some of the other posts, would get around the tax declarations, maybe someone can tell me if this is correct (?)

[Ngeru]

Not sure if NZ taxes would be a problem, because in the in the case National Bank '....it's all part of the service..' it comes with a 0% interest rate & fees so it costs you money. Guess the other NZ banks sterling rates aren't any different.

Same with ASB you get 0% Interest on Foreign currency accounts unless it is in the mega thousands of dollars category - although we have no fees and it costs nothing to exchange money either way to pounds or dollars as long as it stays within an NZ bank account. If you were paying someone overseas by telegraphic transfer or some such then charges do apply. I guess though that they build some additional margin for themselves into the exchange rate.