With Autumn approaching and inflation rising, many Brits will be more likely to consider a move to where the sun is warmer and the cost of living lower.
So, apart from renting or buying a property in their chosen location, what are the five big issues they will need to understand and plan for?
Jason Porter, director of expat financial planning firm Blevins Franks, has spoken about areas that clients need to deal with before they move to a EU country from the UK.
Visas
If they are heading for the EU any visit of more than 90 days requires a visa, which they can only obtain from a UK-based Consulate of the country they are moving to.
They will need to submit an application in advance, along with additional material to confirm they have sufficient income not to be a burden on the social system of their chosen country.
Porter said: “Once they arrive, they are required to convert the visa into a residency permit, normally within 90 days of arrival.”
Medical insurance
When moving they will need to invest in a private medical insurance (PMI) policy with a minimum level of cover, from an insurer approved in the state they are moving to.
Once they arrive, Porter said it is “worthwhile investigating the local healthcare system”, as clients may be able to get access for free or on a subsidised basis. If so, they can then cancel the monthly PMI payments.
Porter added: “If they are already of UK state pension age, they can obtain form S1 from the Overseas Healthcare Service – part of the NHS.
“This will entitle them to claim reimbursement from the NHS for most of their healthcare costs after the move. If they move before state pension age, then they can apply for an S1 when they reach this age and then stop paying the PMI.”
Pensions
If clients are retiring, then it is likely their pension – private, company and/or state – will form most of the income they hope will meet living expenses.
Porter said that pension schemes in the UK are “relatively flexible compared to those in the EU”, and they can merge and transfer pensions, take a tax-free lump-sum, as well as drawdown on their pension fund without converting it to an annuity.
He added: “Europe does not have the concept of a tax-free lump sum, so if it is their preference to take this, they should do it before they leave the UK, otherwise it is likely to suffer tax in the country they move to.
“In Spain, for instance, [clients] will need to decide what they want to do – and do it – before they leave the UK. Merging a number of pension schemes or transferring them to a European scheme are now chargeable events, following a review by the Spanish tax authorities.
“In Portugal, France and Cyprus there are certain tax breaks around drawing down capital from your pension fund, but it would be too late to benefit from these if you have already converted your fund to an annuity.”
Wealth tax
This will be a new area for most UK expats – an additional annual tax based on the financial value of their wealth. It is a particular issue for those with real estate above a certain value, so if they have built up a rental portfolio over the years, they might need to establish their exposure and even think about whether they want to keep it.
In most countries where a wealth tax prevails, exposure is restricted where this tax combined with your income tax liability cannot exceed a certain percentage of your taxable income.
Porter added: “It is therefore beneficial to restrict taxable income. There are certain compliant financial products they can invest in locally which satisfy this need.”
Succession
The UK legal system is based upon common law, while most of the EU operates under civil law.
As the two systems have evolved, they have developed many differences, such as the fact there is no real concept of trusts under civil law, or freedom to decide who assets should pass to, known as forced heirship and common across Europe.
Porter said: “The EU introduced new European Succession Regulations in 2015. This means that if they own property in a member state or move there they can benefit from choosing their own succession. But this is still a very complicated area they will need to plan for.
“This is even more so if they are moving to France, where legislation has already been introduced to counter some of these benefits.”
