Can I invest in the UK if I live abroad? Spoiler alert. Yes you can! In this guide we take a deep dive in to UK investment options for non residents.
Though it’s true that non residents don’t have as many options available as UK residents, that doesn’t mean there aren’t any. There are many types of investment on offer, especially if you are a UK passport holder.
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 a UK resident?
If you don’t live in the UK, you won’t usually be classed as UK resident. There are some exceptions of course.
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.
Can I claim the state pension?
Non UK residents maybe entitled to the State Pension. It usually comes down to this.
Do you have a British passport? If you do, you should be able to get the State Pension.
I’m always surprised when I run into British expats that aren’t contributing to their state pension. Sure, it won’t pay for private jets, but it is bordering on free money.
If you’re not making national insurance contributions now could be the right time to start.
Usually British expats pay Class 2 contributions, although other classes are sometimes required depending on your specific situation.
Right now class 2 contributions are around £3 per week. You need 35 years of contributions, and you can retire when you are 66. This will soon increase to 67 and don’t be surprised if this increases further in the future.
A retiree eligible for a full state pension receives £203.85 per week today, but that increases inline with inflation.
And just in case you are thinking it isn’t worth the bother, think of it this way. The average life expectancy in Britain for Females is 83 and Males 79, so as things stand the average male could expect to receive 13 years of state pension, equating to nearly £140K.
Women on average could expect to get more.
That’s a pretty good return on investment when your 30 years of contributions would probably end up being less than £6,000.
And by the way these contributions also entitle you to bereavement benefits, contribution-based employment and support allowance.
Can a non residents invest in ISAs?
If I had a pound for every time somebody asked me if they could invest in ISAs from abroad I’d be a millionaire!
The funny thing is. They only start thinking about doing it when they move abroad.
You see, it’s a well known fact that most UK residents don’t have any money in ISAs, which is a crazy situation really. Not sure whose to blame on that front, but it needs sorting out a.s.a.p.
Whilst non non residents can’t usually open an ISA account, it is sometimes possible for British expats to keep their ISAs when they move abroad.
Typically you will be prevented from adding any fresh money, but any funds you do have can remain untouched.
If you are reading this before moving overseas and have money to put to work you could think about investing in an ISA before you go.
If you are already abroad without an ISA, don’t worry, we are coming to why you may not need one later on.
Can a non UK resident invest in a UK pension?
There are three things to say here.
First, as with ISAs you can’t usually invest in a UK pension as a non resident.
Second, like with ISAs, British passport holders may be able to keep a pension they already have. Though, you usually wouldn’t be able to add money, holding and withdrawing should be possible.
Third, international SIPPs and QROPs are available to non UK residents. International SIPPs are UK based options and QROPs have the approval of HMRC.
And its worth taking a look at each of these in a bit more detail.
What is a SIPP?
To help explain the international version, its worth just mentioning the standard version of a SIPP.
Self-Invested Personal Pensions or SIPPs are a kind of investment vehicle that provide 20% tax relief.
Though you can often keep them when you move oversees from Britain, that 20% tax benefit gets removed because it is only for UK residents.
And unfortunately a SIPP without that magic tax relief isn’t really a SIPP and in practice isn’t as useful anymore. Not if you are still contributing anyway.
Because of this some British expats convert their SIPP into an international version or a QROPS the minute they leave the British Isles.
What is a QROPS?
A Qualified Recognized Overseas Pension Scheme or QROPS is like a SIPP but based outside the UK.
Up until this year QROPS were always recommended based on three key characteristics:
- You can move your UK pensions out of the UK without a hefty tax charge
- You can avoid inheritance tax
- You can avoid the life time allowance
Item three was usually the big selling point over international SIPPs. However, the lifetime allowance has now been abolished so that’s got rid of that one. In other words, unless there is some special reason specific to you to go for a QROPS you may be better with an international SIPP.
What is an international SIPP?
International SIPPs, sometimes called iSIPPs have a number of advantages over QROPS.
First, they are a UK product. Whilst QROPS are recognized by HMRC that’s about as far as the UK government has anything to do with them.
In other words, whilst there are some boxes to tick to qualify to be a QROPS, you tick your own boxes because it is a self certification system.
As we all know, while you can trust some people to self certify, there are others that you can’t.
Unfortunately, it is pretty common knowledge that expats and non residents (especially British) are often exposed to unscrupulous practices. Here are three articles worth reading if you aren’t aware of this: Telegraph Article, Bloomberg Article, FT Advisor Article.
iSIPPs were often sold as cheaper alternatives to QROPS but without the Lifetime allowance benefit. With that gone, QROPS days could be numbered.
Dare I say, an iSIPP is now a cheaper UK based version of a QROPS. All things being equal, I know which one I’d choose if I had to, but full disclosure I haven’t.
And that’s for three reasons.
- I can’t find an international provider that I trust.
- They maybe cheaper than QROPS but that doesn’t mean they are cheap. Spoiler alter: They aren’t!
- I prefer to take the DIY investing approach.
What is DIY investing?
DIY investing means you use a stock broker (investment platform) to take care of your pension yourself.
At the end of the day, iSIPPs and QROPS are really just investing with supposed tax benefits anyway.
In the past investing yourself was more difficult and certainly a lot more expensive than it is today, but that really isn’t the case nowadays.
In its simplest form, all you really need to do is open an investment account and choose a couple of exchange traded funds (ETFs).
These days you really can put together a strong investment portfolio with just a couple of ETFs.
And that’s a portfolio that is low cost, globally diversified, tax efficient and contains multiple investment assets. (You can read more about this topic here if you are new to investing).
And it’s worth bearing in mind, that HMRC is only interested in income tax on shares (not capital gains) and even then they loose that interest after five years.
In other words, British expats that leave Britain for five years or more and other non residents shouldn’t pay UK capital gains tax on shares full stop.
Not only this but if you have a British passport, you should still be eligible for the personal allowance. In turn, this means depending on your country of residence you may be able to invest pretty much tax free anyway. In fact, you may be living in a low tax country right now!
And if you are, you will almost definitely save money by taking the DIY approach to your pension. The big alternatives like iSIPPs and especially QROPS are likely to come with hefty fees.
Another massive benefit with DIY investing is you have total control over your money. This means you can decide what you invest in, and most importantly, you can access your money at anytime rather than having to wait until age 55 as with most pensions.
Should I use DIY investing for my pension?
If you don’t already have a pension you should seriously consider DIY investing. For many expats and non residents it really does make sense.
And its worth saying again. This applies even more if you live in a low tax country.
Can a non UK resident invest in UK shares?
Non residents can invest in UK shares through any investment platform that provides access to the London Stock Exchange (LSE).
And as the LSE is one of the largest stock exchanges in the world, most stock brokers will allow you to buy shares from there directly. (I don’t know anybody who knows anybody that’s found an investment platform that doesn’t let you buy shares off the LSE).
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.
It’s never been easier to invest in UK shares, no matter who you are or where you are from.
To invest in UK shares simply choose an investment platform that accepts non residents and you are off. We’ve compared a few good ones here.
And don’t worry if you are new to investing, it really is simple. All the platforms we reviewed have guidance on how to do it. It’s usually just a couple of mouse clicks.
Can I buy premium bonds?
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
Can non residents invest in buy to let?
Non residents can invest in buy to let (BTL). 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.
The headline being most people are going to get much greater investment returns with BTL vs shares but only if they use a mortgage and herein lies the main problem.
Most UK lenders don’t deal with non residents. However that doesn’t mean you don’t have options. You just need a mortgage broker that deals with expats and non residents.
If you haven’t yet found one, we’ve taken a look at three of the best here.
Tax on UK investment income
Anything to do with taxes can quickly get complicated. We’ve covered most of the basics here. However, in short, non residents don’t escape income tax, but UK passport holders are eligible for the personal allowance, so many expats and non residents will be able to earn a sufficient income without having to pay tax.
But if you do earn income in the UK, particularly from anything property related, you probably need to complete a Self Assessment Tax return.
If you’ve got plenty of time on your hands and don’t mind paperwork HMRC has all the forms you need here. Simply download complete and pop them in the post.
The next approach is to get some software to help you. Taking the best part of a day to fill paper forms becomes about half an hour when taking the app/software approach. We’ve compared some tax software packages here, but for tax returns specifically you might want to try GoSimpleTax. Right now you can try it for free here.
Alternatively, if you want to minimize the chance of errors and maximize your time, you can pay somebody to do everything for you. We’ve talked more about that here, but UK Landlord Tax would be a safe place to look. They offer a highly efficient and competitive service.
How to invest if you do not know where you will retire?
The standard advice for investors (outside the US) is invest in global stocks and your home country’s bonds.
Most non residents who know where they are going to retire can do something similar.
That is to say they can combine global stocks with a government bond fund of the country where they intend to settle. For example, a British expat who plans to retire back in Britain would choose a UK government bond fund. But how do you invest as an expat if you do not know where you will retire?
Easy! You invest in a global government bond fund. There are lots of them on the market these days.
All you need to do is choose a stock broker (we’ve compared a few open to non residents here), then choose a global bond ETF, pair it with a global equity ETF, decide how you’ll split your money between the two and then simply add money to your portfolio whenever you have it.
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.
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.
UK investment options for non residents – The bottom line
Non residents aren’t restricted from putting their money into UK assets. There are many options out there. Houses, shares, bonds and premium bonds are all available whether you live in the UK or not.
The UK house buying process moving online, along with more and more investment platforms accepting expats and non residents mean it’s never been easier to invest in the UK.