Bowman Offshore Bank Transfers Everything you need to know about offshore savings | Page 2

The ability to save in the currency in which you are paid or expect to fund your retirement, for example, removes the
risk of losing out on exchange rate fluctuations.
Some people actually use offshore accounts to ‘play’ exchange rates in a bid to boost their returns by converting the
cash back into pounds when sterling is weak (as well as deferring the tax bill on their returns – see below for more
details).
However, you could lose out if you have to change your savings back to sterling when the exchange rate is poor.
Even though some offshore accounts can be opened with £1, the high operating charges – withdrawal fees can be up
to £25 – make them less attractive to smaller savers or those needing regular access to their money.
What types of offshore account are there?
Offshore accounts are available with both variable and fixed interest rates. Variable rate accounts often come with
introductory bonuses and offer relatively easy access to your money, while those paying fixed rates generally require
you to lock away your savings for between one and five years – just the same as standard savings accounts.
How do I open an offshore account?
Opening an offshore account is much easier than it might seem, providing you meet the minimum requirements set
by the bank.
Once you’ve applied online or in-branch, you’ll need to supply ID to prove your identity just like you’d need to with
any other account. Depending on the account, you may need to take extra steps to verify your identity.
There are a number of strict checks in place to prevent offshore accounts falling foul of criminals who want to launder
money, evade tax or engage in other illegal acts. You could be asked about the nature of the transactions in your
account – or your UK bank could be asked for financial reference documents.
If your application is successful, you’ll be able to make your initial deposit and begin using the account.
What are the tax implications?
It used to be the case that standard savings accounts would pay interest only after tax had been deducted at the basic
rate of 20%, while offshore savings accounts paid interest without deducting tax. Since April 2016, both standard and
offshore savings accounts pay interest without any tax deducted.
This is due to the introduction of the new Personal Savings Allowance. Basic-rate taxpayers have no tax to pay on the
first £1,000 of interest, and higher-rate taxpayers will have no tax to pay on the first £500. But it’s important to know
that interest earned above these thresholds will still be taxable, so you can't use offshore accounts to avoid paying tax.
You are obliged to declare any savings interest earned to HM Revenue and Customs (HMRC) on a self-assessment tax
form and to pay tax on it in due course. If you don’t, you could face a big fine – plus interest on whatever you owe.
However, sophisticated savers can take advantage of the delay between earning interest and paying tax because they
can keep the extra cash in their accounts for longer, thus boosting their returns by earning more interest.
Is my money safe in an offshore account?
Savers with money in a Financial Conduct Authority (FCA) authorized bank or building society in the UK are
protected by the Financial Services Compensation Scheme (FSCS), which covers the first £85,000 (as of January
2017) held with each banking institution.
However, money held in an offshore savings account is not protected in the same way – even if a UK high street bank
operates the offshore account you choose.
Before opening an account, you should therefore check with your provider to see whether your money will be
protected by a different compensation scheme.
Banks licensed by the Guernsey Financial Services Commission, for example