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Banking for Expats in the United Kingdom

Author: Gavin Adie
Submitted: July 2013

The number of high street banking institutions in the UK has fallen since the financial crisis, but there remains significant choice on the high street catered to the needs of expatriates looking to relocate to the UK.

Wherever you're seeking to locate to, most towns in the UK are home to several banks providing expatriates considerable choice, with differing packages offering varying interest rates and international transfer fees.

Leading banks that can be found across the country include: Bank of Scotland, Barclays Bank, Co-operative Bank, Halifax, HSBC Bank PLC, Lloyds TSB, National Westminster Bank (Natwest), Nationwide Building Society, Royal Bank of Scotland, Standard Chartered Bank, Standard Life Bank.

There are also a number of regional banks, banks that offer Shariah-compliant banking services, and a growing number of businesses operating in other segments of the economy that are beginning to offer banking services, including Tesco, Sainsbury's and Marks and Spencer.

When considering where to bank, if you anticipate that you will continue to receive income from your home country while in the UK, it may be beneficial to enquire with banks in your home country that have branches or operations in the UK whether they offer free transfers between accounts. Citibank, for instance, offers such a facility to more than a dozen countries with fees only for currency conversions.

To establish a UK bank account you will have to jump through a few hoops to satisfy identification requirements UK banks must adhere to, according to UK and European law.

Persons who have already relocated to the UK and have an address (and better yet a recent utilities bill) will find the process less cumbersome, although it is possible to establish a bank account before departing to start a new life in the UK.

Although identification requirements vary among banks, most require the completion of an application form and two forms of identity, such as a passport, a letter of introduction from your current bank, an employer's reference, or a letter from a person in a position of responsibility who can vouch for you, for instance from a doctor or teacher, among other professions.

Some banks may require a recent utilities bill linking you to a residence in the UK, although a solicitor's letter confirming the completion of a rental agreement or house purchase may also be accepted.

Those without a residence in the UK, or those wishing to establish a bank account before arriving in the United Kingdom may face more stringent requirements.

Some banking institutions are more likely than others to accept an application from a foreigner who has newly relocated to the UK. The type of bank account offered to you will depend on a number of factors including the level of income that you intend to pay into the account, the balance you intend to maintain, and other factors including your credit rating.

If you're bankrupt or have a record of fraud, you will not usually be allowed to open a bank account. Also, you may be refused permission to open a current account if  you have a poor credit rating. However, if you're bankrupt or have a poor credit rating, you may be able to open a basic bank account.

Information on the types of accounts available in the UK, and options for expatriates with poor UK credit ratings, is available here: https://www.adviceguide.org.uk/wales/debt_w/debt_banking_e/getting_a_bank_account.htm#types_of_bank_account

For foreign students, the British Banking Association has published specific guidance on how to establish an account, here:  https://www.bba.org.uk/download/1805

A number of high street banks in the UK, in particular Barclays, HSBC and Lloyds TBC, have accounts catered for expatriates and non UK residents. Often these accounts, for instance in the case of HSBC, require the account holder to maintain a balance above GBP25,000, or be in receipt of a minimum paid-in annual income of GBP50,000. These accounts benefit from being free from charges on international transfers, and can house multiple currencies, being particularly beneficial to persons in receipt of income from multiple countries.

The BBA advises that a number of other UK banks, including the Bank of Scotland and Clydesdale Bank, offer a number of products for permanently non-resident clients requiring more tailored services.

Interest rates on offer vary widely between banks, and the nature of the account opened.  In the Best Banks for Expats Awards 2013, compiled by Nexus Expatriate News magazine, based on figures from Moneyfacts,  https://www.expatnetwork.com/Money/Banking-and-Savings/Best-Banks-for-Expats-Awards.cfm, Nationwide and Lloyds TSB were recognized as offering the highest rate of interest on instant-access sterling deposit bank accounts for persons newly relocating to the UK, although banks regularly change the rates attached to their accounts, so it's worth comparing what each bank is presently offering.

The Money Advice Service has devised an interest rate comparison tool, which may be viewed here:  https://compare.moneyadviceservice.org.uk/savings

Interest received by a person resident in the UK for tax purposes is subject to a 20% withholding tax.

In order to establish a tax-free savings account in the UK, known as an Individual Savings Account, you must be resident in the UK for tax purposes. Comprehensive guidance on eligibility requirements,  and general information on the incentive, can be viewed here:
https://www.hmrc.gov.uk/isa/faqs.htm#4

ISAs may be set up in banks across the UK, and maximum contributions to these accounts are capped and revised each year.  In the fiscal year 2013/14, there is a cash limit of GBP5,760, and a stocks and shares limit of GBP11,520. The total subscription limit is GBP11,520.

Persons relocating to the UK are often also offered the alternative of banking offshore, where interest is also received free from withholding tax on interest, subject to a number of conditions.

Due to the UK's proximity to Guernsey, Jersey and the Isle of Man, these are often the jurisdictions of choice. Each territory operates a depositor protection scheme, providing for compensation of up to GBP50,000 in the case of a bank default. Most high street banks in the UK have branches offshore and can provide advice in this regard. Offshore accounts generally yield higher interest rates, but fees can be higher than banking with domestic banks.

If after living in the UK and establishing a UK bank account you decide to emigrate again, or return home, you should be wary of rules in place on persons who cease to be resident in the UK as in some cases a bank may subsequently notify you that it wishes to close your account.

Interest on accounts in the UK can be received tax-free in some cases where the person is no longer tax resident in the UK, by filing form R105, although some banks do not offer the facility. The form can be found here: https://www.hmrc.gov.uk/forms/r105.pdf

 

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