You may have misconceptions, like many others do, about offshore banking and accounts. Perhaps you are under the impression you need to be of a certain level of wealth to even qualify for one of these types of accounts. If that is the case, think again. Likewise, if you think opening an offshore bank account will help you avoid tax, you’d be wrong. When you have this kind of account, you are still liable to pay tax on any interest you earn, just as you would be in the UK.
To help you understand whether or not offshore accounts are right for you, we will explain a little about them and why they should be of interest to you.
What Are Offshore Accounts?
Essentially, offshore accounts are bank savings accounts that are not located in the country where the account holder has residency. Although many banks often require an investment of between £5000 and £10000 to open an offshore account, lending to the misconception they are only for the very wealthy, others can be opened with as little a deposit as £1.
Offshore accounts are offered by many of the big, high streets, and more private banks and building societies. Generally, if you are looking to open an offshore account while living in the UK, the bank will most likely be located on the Isle of Man or one of the Channel Islands.
Is An Offshore Account Right For You?
It is worth noting that offshore accounts are not designed to suit everyone, but there are various circumstances you may find yourself in that would warrant opening an offshore account. This includes working or living mainly overseas, travel often out of the UK, or planning to move to another country when you retire.
Saving money in the currency you expect to use during retirement or that you are paid, eliminates the risks of being at a loss because of the regularly changing exchange rates.
Could You Use An Offshore To “Play” Exchange Rates?
There are many people who use offshore accounts to play with the exchange rates, hoping to boost their returns as they convert their cash into sterling while it is weak. However, this strategy can fail very dramatically if you switch to the pound from a foreign currency, such as Euros when the exchange rate is very low.
While it is true, as we previously noted, that you do not have to be extremely wealthy to own an offshore account as some can be opened with as little as £1, you need to consider the higher operating charges that many banks require for offshore account transactions. Withdrawal fees alone can often be as much as £25, which obviously makes it less appealing if you are only planning to save a small amount of money or need to access it on a regular basis.
The idea of keeping money for a rainy day abroad in the currency you need for your dream destination can be very attractive. However, as you can see from the above information, there is much more that you have to take into consideration than you may have previously thought before deciding whether an offshore account is right for you