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Offshore Accounts
Offshore savings accounts have two key uses tax planning and or the ability to save money in a foreign currency. Most UK banks and many building societies offer offshore accounts based mainly in the Channel Islands the Isle of Man. Under the European Union Savings Directive EUSD you may receive interest gross provided you have agreed with the offshore account institution that it may release details of your accounts to the taxman. The EUSD is a measure designed by the EU to prevent residents of member states from operating secret bank accounts and hiding their savings offshore. Interest on funds in offshore savings accounts is thus paid gross before tax but you do have to declare it as income on your tax return. However with a deferred interest offshore account the interest is only paid when you close your account. Some offshore accounts providers will allow you to defer all or part of the interest. Using a deferred account allows you to decide when you are going to pay the tax on your interest - this may be a useful tax planning tool if for example you are a higher rate taxpayer now but likely to become a lower rate taxpayer in the future. You may be saving funds other than pounds Sterling; if for example you have a second home abroad or are overseas on business regularly you may find it useful to have dollar or euro savings and be able to withdraw cash or write cheques in those currencies. Although the Financial Services Compensation Scheme does not cover offshore accounts some banks and building societies say they will cover any liabilities of their offshore operations - if youre thinking of opening an offshore account its worth checking what the bank or building societys policy is on this. ©Moneyextra.com Moneyextra.com recommends you take independent financial advice before acting on any article 2009-02-17 00:00:00 © Moneyextra.com