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UK Investment advice for South Africans returning home |
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Financial services- Investments – Existing UK investments
Many South African have taken the opportunity to invest into UK investments during their time abroad.
Whilst this investment may be the most suitable whilst resident in the UK, returning home can change the suitability of a particular vehicle. It is imperative that South Africans returning home review their portfolio’s to ensure there ongoing suitability as an investment option.
Below are some common questions we receive, for specific advice please e-mail us.
I have invested into an ISA or PEP will it still be tax free?
Do I have to cash in all my UK investments and send the money back to South Africa?
Can I still keep my UK savings accounts?
Do I have to tell the SA tax authorities about my UK savings?
What should I do with my UK pensions?
Should I invest offshore?
Why should I bring my money back to SA?
What about paying money off my bond in SA?
I have a savings endowment in the UK what’s best to do with it?
What’s the best way of sending money back home?
Can I keep my UK bank accounts?
Do I have to pay tax when I transfer my money to South Africa?
Will I still pay tax in the UK in the future?
How can I claim back any excess tax that I have paid?
If I contribute to a UK pension, can I take it off my tax in South Africa?
Is it worth my while to keep contributing to my South African Retirement annuity?
Will I get taxed in South Africa on the interest earned in the UK?
I have invested into an ISA or PEP will it still be tax free?
Investors into UK PEP’s and ISA’s are able to keep them but are not able to add to them.
The main advantage of a PEP or ISA is that the UK government grants them a tax free status however the South African revenue Service does not. For returning South Africans they will be South African residents for tax purposes and therefore taxed on their world wide assets. In layman’s terms this means that although tax free in the UK; they will be taxed in the South Africa. This means they become a much less attractive investment and investors should explore other options.
Do I have to cash in all my UK investments and send the money back to South Africa?
It is fine to keep UK investments, the suitability of them should be re-examined if you are retuning to South Africa from a tax, growth and structure prospective.
All investments must be declared to the South African Revenue Service.
Can I still keep my UK savings accounts?
There is no reason that UK savings accounts cannot be kept. The purpose of keeping them should be examined, if it's simply for keeping some savings in a ‘hard currency’ there may well be better options. If however it is a small amount of money for holidays etc, then it can be the ideal vehicle to keep funds in.
Do I have to tell the SA tax authorities about my UK savings?
Yes, unfortunately you do. The South African Revenue Service has reciprocal agreements in place with the UK to share information. It is imperative to remember that tax is levied on world wide assets and full disclosure is a requirement of law.
What should I do with my UK pensions?
The pension culture in the UK is much more prevalent and many returning South Africans find they have at least one pension, be it a company or personal arrangement.
Whilst generic pension advice is dangerous without a full investigation of the individual circumstance it is well worth undertaking a review of your options and considering the feasibility of self invested personal pensions (SIPP).
Should I invest offshore?
For South Africans coming home, offshore investments can be an attractive proposition but they should be approached by caution. They offer some attractive investment options; however they can be an expensive option. Some of the older more traditional investments, which tie the investor into set terms, high upfront commissions and early withdrawal penalties, should be avoided.
Why should I bring my money back to SA?
There are a number of reasons that may mean it is a wise option to bring all your funds or part of them back to South Africa: -
- Instead of borrowing – even bonds attract a high interest rate in South Africa, credit cards, car loans and personal loans are generally higher. Therefore, it often makes little sense to pay a heavy monthly payment to service a debt whilst you have capital in the bank.
- Interest rates can be a lot lower abroad than in South Africa.
- Inflation – investing your money in a country with lower inflation is often reflected by the interest rate you receive, this can mean your interest rate is not enough to ensure your money keeps pace with inflation.
What about paying money off my bond in SA?
Paying off debt is always a good idea if the money is not earmarked for another use. Sourcing an investment option that will obtain a higher return (after tax) than what interest you are paying on a bond will certainly necessitate taking a degree of risk with your capital.
I have a savings endowment in the UK what’s best to do with it?
Endowment type savings plans can be fairly restrictive in what you are able to do with them. Often they tie the investor in for a set term and not fulfilling this term can result in penalties. Early surrender nearly always means a loss of capital against the investment worth and even what amount has been paid in.
However affordability does come into it and should be considered, a monthly investment of 100 GBP may be affordable whilst working in the UK but on your return to South Africa remitting R1400 to the UK for an investment each month may simply not be an option.
Each endowment must be looked at in detail and a professional financial advisor will be able to provide you with specific advice.
What’s the best way of sending money back home?
Generally speaking banks charge a higher fee and provide a worse ‘spread’ than a specialist currency company. It is worth shopping around and ensuring you get the best rate and lowest charges. Often there are currency companies that do not levy a set fee per transaction.
Can I keep my UK bank accounts?
UK bank accounts can be kept but they must be declared on South African tax returns.
Do I have to pay tax when I transfer my money to South Africa?
No. Transfer do not attract a taxation, tax is only levied on income and capital gains events, a transfer would not fall under either category.
Will I still pay tax in the UK in the future?
It is possible that you may still be liable for tax in UK if you hold assets there. This could include rental properties as an example.
There is a double taxation agreement in place with South Africa that means you will not pay the ‘same tax twice’.
How can I claim back any excess tax that I have paid?
On leaving the UK there is a good chance that you are due a tax rebate. You can apply for this either using a tax specialist or by applying directly to the Inland Revenue yourself.
Often a simple phone call to the Inland Revenue will point you in the right direction and experience shows them to be very helpful with any enquiry.
If I contribute to a UK pension, can I take it off my tax in South Africa?
No, the South African Income Tax Act prescribes that only contributions to a registered retirement annuity in South Africa could qualify as a deduction to your taxable income.
Is it worth my while to keep contributing to my South African Retirement annuity?
That would depend on your long term objective and the type of retirement annuity. If your objective is to work in the UK and to return to South Africa in the near future to continue your life in South Africa, it will be worth your while to continue your retirement savings in South Africa. If you are going to live in the UK for a period longer than 2 years, you need to establish if your retirement annuity supplier allows you to stop paying and continue at a later stage. If you leave South Africa for a longer period then 5 years, the ceasing of contributions to your Retirement annuity need to be discussed with your financial advisor.
Will I get taxed in South Africa on the interest earned in the UK?
Once you have returned to South Africa you will be taxed on your world wide income and this includes interest. However your UK bank or building society can issue you with a form that will establish that they have no need to deduct tax off your savings in the UK.
Therefore gross interest can be received on UK savings but the tax will be due in South Africa.
For specific financial advice please contact the contributor, Incompass Financial Services
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