Leah326

For some reason the search function doesn't work when I look at BE on my phone. If there are already threads on offshore bank accounts can someone link them to me please? Thanks!

Reason for my post is I was just wondered if its worth setting up an offshore account and are there any/ many advantages in doing so and have any of you done it? I haven't sussed out the true cost of living differences and my disposal income yet since the transfer (as I'm too new) but working on the basis of optimism and attempting to be sensible, I want to start putting some money aside towards my UK (interest only) mortgage to make a lump sum payment some time from now. Not that I imagine I will make that much of a dent in it, but a little is better than nothing.

What's the best way to do this as I know if I do have any spare money and its too easily accessible in my main account(s), it won't be spare for long, but nor do I want it to be eaten up by the tax man.

Any thoughts?

Michael

There is no advantage to setting up an offshore account since worldwide income needs to be reported via FBAB and/or FATCA. If the account or income is not reported from offshore accounts, the penalties can be very large and in rare cases, even imprisonment. In fact very few tax haven countries have tax treaties with the US so even if unearned income is taxed at a low rate in those countries, those foreign taxes paid can't be used as tax credits offsetting US taxes owed.

The US taxes long term capital gains and qualified dividends are taxed at a maximum 15% rate (20% on incomes above $400,000) so that is the best you can do. All US common stock dividends are qualified, about 50% from Europe are qualified, and only about 10% from the rest of the world are qualified. Many preferred shares from around the world pay qualified dividends.

Leah326

Thanks Michael, good to know. I'm already in UK self-assessment and have help lined up for my US returns (if I need it), so no question of not reporting, but I had read somewhere about offshore accounts / investments for expats and had no idea if there was anything to be gained by exploring that route. Seems more hassle than its worth though, particularly as I'm not talking significant amounts of money here. Cheers for the advice in any case.

robin1234

I have offshore pound sterling accounts in the Isle of Man. My reason for setting them up, years ago, was that they paid a very decent rate of interest and it was nice to have UK check and debit card and cashpoint facilities, made it easy to pay any British bills, birthday presents, and of course pay for stuff when in England without having to pay any bank fees or credit card fees.

Now, post 2008 financial crisis etc., a couple of the banks I had accounts at collapsed in spectacular disarray (Anglo Irish Bank and Bradford& Bingley) and the remaining ones no longer have accounts with attractive interest rates. It is still worth it, though, for the ease of paying stuff in UK etc...

But, you need to make judgements as to which way you think the exchange rates will move, and in general I suspect the pound might float down in relation to the dollar. Just a guess, though.

Michael mentions paying tax. Not a problem, just keep track of any interest, and report the accounts and interest on the relevant IRS and Treasury forms each year.

Pulaski

The only purpose/benefit for a US resident to have an overseas account is to hold and earn interest on non USD deposits. Until very recently payment of interest on non USD deposits was prohibited by federal regulation in the US, and consequently no banks in the US offered onshore foreign currency accounts (a few such as Citibank, HSBC, and Union Bank (of California) offer foreign currency accounts through their overseas affiliates), and even after the regulation was dropped I haven't heard of any that do, at least not yet (most probably because they don't have computer systems to support accounts in other currencies.)

celticgrid

+1 (Though my IOM accounts were set up because I lived there.)

When ordering stuff from the UK - stuff that simply is not available here - it is so much easier to be able to provide a UK debit card in Sterling. If you have regular dealings with the UK (such as a standing order for monthly life insurance premiums) then keeping the Sterling account is well worth it. Generally the "offshore" element is only necessary because of the grief opening or (in some cases) maintaining a UK high street account.

If you are concerned about exchange rates you can get a multi-currency account and move whatever funds you have between the currencies at will, if that is something you are interested in.

Again, +1. Simple and straightforward once you get the hang of it.

Leah326

Cheers folks. I still have my UK account at the moment so I'll probably just keep hold of it then and pay money off my mortgage from there once I've transferred funds home. Just seems the easiest way to do it.

Thanks

Gordon Barlow

Pulaski. Is it not possible for a US resident to walk into one of the major US banks and ask it to set up an account in a foreign currency in some foreign jurisdiction, with its subsidiary there? (I don't know; I'm just asking.) Might it be easier if there is a large sum involved? I do know there would be no tax saved on such an account; the IRS is very down on things like that!

I live in an "offshore" financial centre in the Caribbean, and there are plenty of subsidiaries of US banks registered here. Many years ago Barclays made me shift my balance to its Isle of Man branch, because I had no UK address.

Hotscot

The US banks are very very strict on any scenarios that could lead to money laundering. Especially with the penalties involved. They might all have different policies in this regard but that's a good question. If it was business hours I'd give Wells Fargo a call myself.

Pulaski

Quite possibly "yes", but I specifically said "onshore". In fact one of the primary drivers behind the growth of off-shore banking in the Caribbean was the prohibition on paying interest on non-dollar deposits on-shore in the US.

nun

If you need to pay bills in the UK just use your existing UK account. There's no advantage to having an offshore account if you are US tax resident. Remember that you will be liable for US tax on any interest you earn in the UK and must comply with FBAR and FATCA rules. You should also make sure you don't hold any UK investments like stocks and shares ISAs or UK mutual funds that will be aggressively taxed by the IRS. Also take the time to understand how the IRS will view any UK pensions you have and how to deal with them for US tax purposes. There;s usually no tax dues on them, you just need to understand the rules.