Here we cover how they work, who can benefit from them and how to compare them to find the best deal for you.
They are savings accounts that can be opened by people who don’t live in the UK. They’re usually in sterling, but can be held in other currencies as well.
They’re most commonly opened by expats or by residents of jurisdictions that are considered “offshore”, such as the Channel Islands or the Isle of Man.
Offshore savings accounts work mostly like regular savings accounts – you move a sum into the account and earn interest on your savings. You can choose between fixed-term and easy-access accounts, and the longer you agree to “lock away” your money, the higher the interest rate you’re likely to get.
The main differences are the following:
In broad terms, anyone who lives abroad but wants to open a savings account in sterling. For example:
As you can imagine, keeping your money in an offshore account doesn’t mean you can just forget about taxes. Just like with a UK savings account, interest is paid gross, and you have to pay taxes on it if you earn more than your personal savings allowance (which is £1,000 a year).
Depending on where the account is based, you may also be required to pay taxes in that country. If that happens, you should be able to claim UK tax relief thanks to double taxation agreements. The UK has them with more than 100 countries and they basically prevent you from paying taxes twice on the same earnings.
Opening a savings account should normally be free, and that’s usually the case with offshore savings accounts too. However, there may be fees to pay in a few cases, particularly:
Fees and penalties vary hugely by bank and account type, so always read your terms and conditions carefully before finalising your application (yes, they’re long and wordy and may seem unattainable, but they’re actually your friends!).
While not protected by the FSCS, offshore savings accounts often come with some level of deposit protection, provided by the country in which the account is based. The Isle of Man, Jersey, Guernsey, Gibraltar and countries in the European Union all have their own deposit protection schemes.
Before applying for an account, always make sure it is covered and double-check the limits and conditions of the deposit protection offered, which may be a bit different than the standard ones provided by the FSCS.
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