UK Investment Options for Non Residents

In this guide we take a deep dive in to some of the most popular UK investment options for non residents and answer some common questions related to pensions and investments.

Let’s get into it.

Can I invest in the UK if I live abroad?

If you live abroad you should be able to invest in the UK. In some cases a British passport may make things easier. But this isn’t a requirement for many types of investment.

In fact, most UK investments are open to non residents. It’s the usual investment channels that may be closed.

As an example, you can’t usually invest in shares using a UK investment platform, but that’s a platform issue rather than an investment issue.

There are plenty of investment platforms open to expats and non residents that let you invest in UK shares if you want to.

Am I classed as non resident?

For most people this is clear. If you don’t live in the UK, you won’t usually be classed as UK resident.

There are some exceptions of course, but these typically apply to unusual situations. Essentially, people who spend part of their time in the UK and part of their time elsewhere.

This could apply to an expat in the year they leave or return to the UK. It could also apply to other nationalities in the year they move to the UK. The easiest way to find out your status if you are unsure is by taking the HMRC statuary resident test.

And don’t worry, it’s not a formal exam. You just answer a few simple questions anonymously and HMRC will give you an answer. You can do it online here. It doesn’t take long.

But just to be clear, if you’ve never lived in the UK or have lived overseas for years then you will almost definitely be classed as non resident.

Can a non residents invest in ISAs?

Here’s the number one question we get asked at British Expat Money. And here’s the answer straight from HMRC:

Non UK residents cannot normally open an ISA. Expats may be able to keep their ISA, but they cannot add any more funds to it or open a new one, as long as they are not resident in the UK. We cannot advise you with regards what to do with your existing ISA. You may need to speak to an financial adviser.

In practice you should be able to contribute to an ISA in the year you move abroad ie before you are officially classed as non resident but the minute the new tax year begins and you are classed as non resident your chance of adding more money ceases to exist.

But don’t worry. Non residents have plenty of options instead.

What are my main investment options?

In practice you have the same options available no matter where you live. However, there are some options that suit overseas investment more and vice versa.

Here’s a list:

• Offshore bonds
• Structured notes
• Pensions
• Stocks
• Bonds
• REITS
• Investment funds
• Money Market funds
• Savings accounts
• Property
• Cryptocurrency

And its worth going into each of these in a bit more detail?

What are offshore bonds?

Not to confused with bonds, which we’ll be coming to shortly. An offshore bond is a tax efficient wrapper that can contain various types of investment assets. Most commonly stocks, shares and funds.

They are usually based in places with favourable tax regimes such as Ireland, Luxembourg, The Channel Islands and the Isle of Man. Locating them here, essentially means your investment portfolio is wrapped in a life insurance policy which has both legal and tax advantages.

The key disadvantages are high fees and being invested in risky things you don’t understand. Both of which can severely undermine any tax savings you garner.

So I’m sure it goes without saying that you should usually seek good financial advice that you trust before pulling the trigger with these. You need to know the costs. You need to know what you are invested in and why it is right for you.

Credit Suisse explain things in more detail here if you are interested.

What are structured notes?

I’m not sure why structured notes are often touted as good options for those of us who live overseas but they are.

But from my point of view they break the first rule of investment ie only invest in things you fully understand.

Here’s how Credit Suisse describe structured notes:

Structured products are investment solutions that combine one or more underlying assets (e.g. shares, bonds, stock indexes) with a derivative component. They can be used to bank on different market scenarios. That way, you can earn a positive return even when the markets trend sideways.

And that’s one of the simplest explanations I can find by the way.

I’m pretty sure for most people who invest, its that last sentence that clinches it. The idea that you can earn a positive return even when markets trend sideways.

But for me, that’s warning number 2. ie if it sounds too good to be true……..

I have no doubt, that in some situations, these could be suitable for some people. However, for most people most of the time, they won’t be.

If this is something that has been recommended to you by a financial advisor you trust then it may be worth a look but do ensure your own research.

Here’s a couple of interesting takes from Investopedia & The U.S. Securities and Exchange Commission (SEC)

Can a non UK resident have a UK pension?

Non residents with British passports do have some options for UK pensions.

If you already had a UK pension then moved overseas, you maybe able to keep that pension. Not only that, but in many cases, you can still contribute tax free for a period of time and should be able to withdraw from it in retirement.

In some cases, the fees and taxes associated with this, can make it beneficial to take your pension with you via a Recognized Overseas Pension Scheme (ROPS). Up until recently these were named QROPS (Qualified Recognized Overseas Pensions Scheme).

Another alternative is an international SIPP (self invested personal pension). This is something along the same lines as a ROPS (Recognized Overseas Pension Scheme) but domiciled in the UK.

Shifting pensions about can have issues. Not all ROPS / international SIPP providers are equal. The benefits with these may not be worth it when costs are taken into account so make sure you seek financial advice.

And remember, both of these are for UK residents that have UK pensions that then move abroad. If you don’t already have an existing UK pension they aren’t going to be suitable for you.

There’s one final pension option worth mentioning and that’s the State Pension. This is open to non residents with UK passports. You can contribute and claim your pension from abroad.

We’ve gone into a lot more detail on pensions here.

Can non residents invest in UK shares?

Anybody anywhere can buy UK shares as long as they have an investment account with access to the London Stock Exchange (LSE).

And as the LSE is one of the largest stock exchanges in the world, most, if not all, investment platforms do give you access to the London market.

You can also invest in UK funds through the LSE. Some types are restricted but ETFs and investment trusts should be available no matter your location.

Having said that, typical reasons for investing in UK shares such as familiarity with the companies, currency fluctuations and tax considerations don’t usually make sense for most overseas investors.

Unless, you really know what you are doing, the consensus is clear: be as diversified as you can be. In other words, don’t focus on UK shares.

Investment author and former hedge fund manager Lars Kroijer puts it best when he says:

You should absolutely diversify, and a global equity index tracker is the most diversified investment, in terms of equities, that you can possibly get your hands on.

And by the way, he is talking specifically to UK residents when he says this. I’m pretty sure he’d be saying the same thing to non residents (with bells on).

What investment fund options are there?

As touched on above, you can invest in UK funds from abroad.

Whilst some investment platforms do give you access to other types, the easiest to access from overseas are exchange traded funds (ETFs) and investment trusts.

An ETF (Exchange traded fund) is a basket of stocks that trades on an exchange. And note, though it can follow an index, this basket doesn’t nessecarily have to follow one.

An investment trust is a public limited company (PLC) traded on the London Stock Exchange, but these companies also hold a basket of stocks.

Whilst on the face of it, they offer pretty similar propositions, there are some key differences.

ETFs are often used for following indices, so they are more likely to be a passive investment. Investment trusts are usually run by an investment manager and so don’t follow an index.

Though not always the case, in general, this has cost and tax implications. In other words, ETFs are usually cheaper and more tax efficient.

Can I use money market funds to grow my wealth?

When you look under the hood, Money Market Funds (MMFs) invest in high quality, low risk, short term debt securities which usually pay dividends in line with short term interest rates.

And in practice they give the investor something very similar to a savings account but with a few key benefits for non residents.

1. Higher interest rates than a savings account
2. Don’t have to lock your money away
3. Everybody has access including non residents

The key downside is they aren’t savings accounts. This means there are some slight risks that you don’t have with a real savings account, but at the same time they are considered to be safer than other common investment assets such as stocks, bonds and property.

We’ve gone into a lot more detail on MMFs here.

Why invest in bonds from overseas?

When you buy a bond, you loan money to a company or government.

This loan is for a fixed period of time. It can be months, years or decades but somewhere in the future there will be an agreed repayment date. At which point you’ll get all your money back.

To compensate you for your trouble, you’ll receive interest payments along the way. Usually every six months and this is the key way that you make money through bonds.

The majority of investment portfolios contain at least some bond allocation.

Bonds is a big topic. We’ve written indepth about it here. The key is, bonds are considered safer than stocks and shares but usually provide lower returns. You keep them in your investment portfolio to add diversification and stability.

And like, with money market funds, short term high quality bonds can offer a compelling alternative to a savings account, particularly for non residents who often don’t have access to decent savings.

Talking of savings………

Can a non resident open a UK based savings account?

We’ve already covered two alternatives that can be used instead of savings: money market funds and bonds. The advantages these have is usually higher rates of return and easy access to your money.

However, they are not savings accounts so there’s some risk (although small) that you don’t get with real cash in a bank.

Whilst, non residents can’t usually open accounts with traditional bank accounts, you do have some options:

• Offshore bank accounts
• Neobanks
• Investment Platforms

The UK’s big high street banks have offshore divisions, usually located in the Channel Islands, that are open to non residents. The biggest downside with these is you usually have to open an account with the bank first and the account requirements can be pretty stringent. As an example, with HSBC you need a salary of at least £100K (or currency equivalent) or maintain a £50K minimum balance.

These offshore offerings also tend to come with slightly higher fees than you’d usually expect to pay and aren’t famous for their customer service. But then again, it could be worth it for the ‘real’ thing.

The biggest alternatives are the Neobanks, which the consensus suggests will give you something cheaper with (according to TrustPilot) much better service. And whilst not banks per say, they are Electronic Money Institutions (EMI) which means they are regulated by the Financial Conduct Authority FCA. The FCA explain what EMIs are here, but my take on it goes a little something like this.

EMIs are online banks without banking licenses, but that doesn’t mean your money isn’t safe. It is protected because it is kept separately at a real bank so if your EMI runs in to difficulty, you money will be still be safe.

Another option, open to all, no matter where in the world they are is using investment platforms. You can either invest in bonds or money market funds as discussed above, or simply leave you cash on the platform to accrue interest.

Most of them give you something pretty similar to savings accounts. I’ve never heard of anybody whose heard of anybody losing their money in that way, but again, there’s an ever so small risk which you don’t get with real cash in a real bank.

You can read more on this here.

Can I buy premium bonds from outside the UK?

Another type of investment that doesn’t always come instantly to mind is premium bonds. Because these are UK government products many people believe non residents can’t invest. However, that’s not the case.

You can buy premium bonds from abroad. When savings accounts and government bonds are paying high interest rates premium bonds don’t always look very attractive.

However when the opposite is true, they become an excellent option. You can read more about them here, but here’s a quick summary of why you might want to consider them:

• As near as practically possible to risk free as backed by the British Government
• Can invest with as little as £25
• Open to expats and other non residents
• Reasonable rate of return (with average luck)!
• Possibility of very high returns (with a big win)!
• A safe place to store cash

Property investment aka BTL

Unlike in many countries, there are currently no legal restrictions placed on non residents when they purchase UK property.

The key difference when buying from overseas is likely to be costs. In short, non residents pay more tax in the form of stamp duty. An additional 2% to be exact. (We’ve gone into a lot more detail about paying stamp duty from overseas here).

But that’s a small hurdle in my book, if you are in it for the long term. Many overseas residents buy holiday homes and investment property aka buy to let.

In fact, with online property portals like Rightmove and Zoopla, and the whole industry moving online means it’s never been easier.

We’ve gone in to a lot more detail about buy to let here and we’ve compared it to investing in shares here but here’s the short version.

Whilst there’s a good chance you’ll get higher investment returns with BTL than pretty much all other common alternatives it will come at a cost.

For most people, most of the time, its only going to work really well as an investment if you use a mortgage, let out your property and put the work in.

Otherwise you may as well just stick your money in shares. Historically its around 9% for shares vs 4% for property. You need the rental income, the work and the leverage from a mortgage to get the big returns.

When I say work, I don’t mean hands on. You can more or less outsource the day to day running of things to a letting agent, but you’ll still have things to do. Trust me, even fully managed city center apartments let to professionals have decisions to make, forms to fill out and the occasional emergency to deal with.

And whilst mortgages are considered to be just about the safest form of debt out there, that doesn’t mean they are risk free. Many people have got into trouble in recent times so it always pays to speak to a professional. (Some UK mortgage brokers do deal with non residents).

What are REITs?

REIT stands for Real Estate Investment Trust. Real Estate Investment Trusts (REITs) are designed to enable investors to pool their money in portfolios of income generating property.

REITs let you invest in commercial and residential property. When you buy a share of a REIT you get access to small slices of a basket of properties. You also get a proportional interest in all the income that these properties generate.

Think about it like this. You get access to the property market without having to buy property. You can invest in UK, US, some other country or even global real estate in one fund without the hassle of being a ‘real’ landlord.

On paper, its perfect. You get all the benefits of being a landlord without any of the drawbacks. But if only life were that simple.

We’ve gone into a lot more detail about this here, but the headline is this:

Funds that invest in all kinds of businesses are usually a better option than a dedicated property fund. You get the benefits of a property fund and more.

If you want the benefits property investing provides you are usually better with the real thing.

That said, some people will have a reason to invest in REITs. The best way for most is going to be through ETFs. For UK property in particular. We have two.

We’ve gone into a lot more detail on this here if you are interested, but here’s a quick summary of them.

UK REIT ETF	Benchmark	Designed to	Advantages	Disadvantages
IUKP	FTSE EPRA/NAREIT	Track the performance of real estate companies and REITs listed on the London Stock Exchange.	Much bigger fund with longer track record. Less complicated. Can invest commission free.	In theory behaves less like real property. More volatile.
UKRE	MSCI UK IMI Liquid Real Estate Index	Achieve a risk/return profile similar to direct real estate indexes using liquid instruments.	In theory behaves more like real property. Adds inflation protection. Less volatile.	Smaller fund with shorter track record. More complicated. Can’t invest commission free right now.

Cryptocurrency

Whilst many people out there dismiss cryptocurrency as something akin to Tulip Mania, the fact that it has been knocking about since 2009 suggests it might just be here to stay.

In 2024 some of the biggest fund providers in the business released Bitcoin ETFs and highly respected financial services companies like Morning Star started to write about adding Bitcoin to your investment portfolio.

The consensus seems to be keeping things manageable.

Morning Star suggest limiting your exposure to cryptocurrency to 5% of your portfolio and only investing money you don’t need for at least 10 years.

But even 5% maybe on the high end. A report by the highly respected CFA Institute assessed the impact of Bitcoin on a traditional stock and bond portfolio. Based on the period between January 2014 and September 2020 allocating just 2.5% of your money to Bitcoin would have increased your returns by nearly 24%.

The key being, though seemingly unlikely now, an unproven investment asset like cryptocurrency still has the potential to go to zero so investing what you wouldn’t mind loosing seems like the best way forward. The risk of loosing 2.5% for a potential 24% gain seems worth it. Amounts much above that might not be.

Its not that long ago that Bitcoin lost 82%, Ether lost 90% and other currencies lost more. Whilst they may bounce back next time around, equally, they may not.

Some pretty big guns expect a reckoning one day in the not too distant future.

If you do decide to invest in Bitcoin or other cryptocurrencies, its a lot easier than it used to be. Most investment platforms provide some kind of access these days.

Tax on UK investment income

Anything to do with taxes can quickly get complicated. We’ve covered most of the basics here in a lot more detail.

However in summary there are two areas where non residents will likely pay tax. Either from UK income or property.

Any income earned in the UK is subject to income tax and that includes rental income. In addition, capital gains tax applies when selling property that’s increased in value.

Any UK passport holders are eligible for the personal allowance. Currently this is £3K for capital gains and just over £12.5K for income tax. For example, in practice a couple could earn £25K rental income tax free annually.

Where can I get financial help?

If you want general free advice it’s always a good idea to start with the Money Advice Service.

We often refer back to them on this site. Basically, it’s a free government backed website full of information on everything finance related.

Money Helper is a reasonable alternative which again is backed by the UK government.

The DIY approach works for most people, most of the time, but it’s not for everyone and certainly not all of the time.

If you think you could do with speaking to a financial advisor you might want to read this where we’ve covered how you can find one.