Offshore Savings Guide

Broadly speaking, an offshore savings account is a savings account that is run by a bank based in a country other than that in which the saver is resident.


Who would best suit an offshore savings account?
There is a wide range of people that may find an offshore savings account particularly beneficial; among these could be the following:

  • Expatriates
  • Those that are paid their salary in a foreign currency
  • UK residents who are interested in the potential benefits of investing their savings abroad.


Who offers offshore savings accounts?
It is widely the case that many UK banks and building societies have an offshore arm that could allow you to open an offshore savings account. 


As with all other types of bank account, offshore savings accounts from different providers can vary greatly in terms of interest rates and features offered. Therefore, it is strongly advised that you carefully compare several different offshore savings accounts with your own circumstances in mind to ensure that you get the best possible deal. 


What are the different types of offshore savings accounts?
There are a range of different types of offshore savings accounts on the market, including the following:

 

  • Fixed term deposit
    This would involve you depositing a certain amount into your offshore savings account for a certain period.  With such accounts, withdrawals are not generally permitted.  It is widely the case that such accounts tend to offer favourable interest rates.
  • Euro accounts or US Dollar accounts
    These types of accounts would allow you to make transactions in the foreign currency of your account.  Such accounts tend to be most beneficial for those who get paid in the foreign currency of the account, or for those planning to move to a country in which this is the currency.
  • Accounts with a deferred interest option
    An offshore savings account with a deferred interest option would give you the opportunity to choose when you would receive interest on your savings, which could be helpful if you would like to plan around your tax liabilities.  You may be able to choose to receive interest upon closing your account, or to choose to defer all or part of the interest payments to a time convenient to you.
  • Expatriate accounts
    These offshore savings accounts are specifically designed to meet the needs of those who live in a country other than the one in which you are a citizen.


Tax liabilities
If you open an offshore savings account, you will most likely be required to pay income tax on any interest earned with this savings account.  If you are caught using an offshore savings account as a vehicle for tax evasion, you will be required to pay HM Revenue & Customs the amount of tax you owe with interest as well as a fine.


However, there tends to be a delay between the earning of interest on an offshore savings account and the requirement to pay tax on it.  In some cases, the delay could be up to 20 months. This means that you may have the opportunity to earn slightly more interest on your savings during this period.


Advantages and disadvantages of an offshore savings account
If you are thinking of opening an offshore savings account, you would be best advised to thoroughly consider the potential advantages and disadvantages of this method of saving, particularly with regards to your personal circumstances. For many people, an offshore savings account could present the following advantages and disadvantages:


Advantages

  • The potential to earn more interest, as it is paid on ‘gross’ balances unlike UK savings accounts which pay interest on ‘net’ balances
  • The delay in paying income tax could allow you to earn slightly more interest
  • Gives you the opportunity to save in foreign currencies
  • Accounts with interest deferral options offer the convenience of being able to choose when you would receive interest.


Disadvantages

  • Many offshore savings accounts have expensive running costs and could charge for withdrawals
  • You may be required to make a large deposit
  • Your deposit would not be protected by the UK Financial Services Compensation Scheme, but most countries tend to offer something similar
  • You may be taxed twice, though with over 100 taxation agreements existing between the UK and other countries, this is highly unlikely.
Many offshore savings accounts have expensive running costs and could charge for withdrawals
ProviderAccountGross Rate AERTermCurrencyMore Info
   More Info >

* GROSS RATE – The contractual rate of interest payable before deduction of income tax at the rate specified by law.

** AER RATE – AER stands for Annual Equivalent Rate and is the notional rate which illustrates the gross rate as if it was paid and compounded once each year. As every advertisement for a savings product will contain an AER you can compare more easily what return you can expect from your savings over time.

Cash ISA Selection
ProviderPlan NameDeposit TakerISA OptionTermMaximum Potential ReturnMore Info
Kick Out Deposit PlanInvestec Bank plcyesUp to
6 years

4%

per annum

More Info >
Capital protected deposit plan with the potential to mature after years 3, 4, 5 and 6. If the plan matures early it will return 4% times the number of years the plan has been in force. Also available for Cash ISA and ISA transfer.
Important Information: Structured deposits offer you the potential to earn higher returns than you would with a regular savings account. Your returns are based on the performance of an index or commodity. If the investment does not perform well you may receive no income or capital growth, but you can be confident that your capital will be repaid. You have no access to your deposit during the term of the account, typically 3 to 6 years but your original capital will be repaid in full at the end of the term. In the event that the deposit taker is unable to repay your initial investment and any returns stated you may be entitled to compensation from the Financial Services Compensation Scheme (FSCS) depending on your individual circumstances.