What is an offshore bank account?

An offshore bank account is based outside the UK, but is still open to UK residents or expats. These accounts may be suitable for Brits living abroad or those who frequently travel across different countries and currencies.

The main selling point is that you can choose which currency you’d like to save in. However, the rates tend to be lower than on ‘normal’ savings accounts, so for anyone resident in the UK who isn’t planning to leave anytime soon and doesn’t have frequent business dealings overseas, there’s not much incentive to open one of these accounts. If you’re unsure, find out if offshore savings accounts are worth it in our guide.

That said, if you’d like to have some cash savings in Euros or US dollars, offshore savings accounts could be worth considering. As with UK-based savings accounts, you can choose between easy access accounts and notice deals, or could put funds aside in a fixed rate bond.

How do I open an offshore account?

The methods for opening and managing savings accounts will vary depending on the provider, just like with any other savings account. The larger UK banks and building societies own some of the offshore providers, so they probably have more alternatives for account administration. Many accounts can be started online, over the phone, or by mail, so you won’t need to travel overseas to do so.

While the opening requirements will differ between providers, they will all ask for proof of identity and proof of address. Some will have additional requirements, such as asking you to prove that you can afford to keep the account funded, although these kinds of requirements are more common with offshore bank accounts for everyday use (which tend to come with large fees). You may also need to be an existing customer of the provider, with many of the best offshore savings accounts being linked products.

Some accounts are exclusively available to residents of the Isle of Man, Channel Island, and Gibraltar, while others are available to residents of the United Kingdom. You will need to comply with either a British citizenship requirement (for expat accounts) or specific residency criteria.

While most of these accounts will ask for a minimum deposit of £5,000 or £10,000, there are some that can be opened with far less. Again, whether such an account would be worth opening over a standard ‘onshore’ savings account would depend on your residency status and needs. Always compare the best offshore savings accounts with onshore equivalents as well as each other to help ensure you’re making the best possible choice.

How much tax is paid on an offshore savings account?

Offshore savings account funds are not exempt from taxes. Basic rate taxpayers can earn the first £1,000 in savings interest annually without worrying about taxes because the same personal savings allowance is applied to any savings stored in an offshore account for UK tax purposes. Anything over this will require self-assessment to be disclosed as income.

Keep in mind that you can also be required to pay taxes in the nation where you now reside. Therefore, be sure that everything is in order to avoid any issues with the authorities or paying double taxation. To make sure you’re constantly declaring and paying the correct amount of taxes, you might even want to seek professional advice. To start, you can learn more about tax treaties on the Gov.uk website.

Is an offshore savings account safe?

The UK’s Financial Services Compensation Scheme, which guarantees £85,000 of your money per banking institution regardless of what occurs, does not include offshore providers. This does not, however, imply that your money will not be secure.

Instead, there will be comparable compensation schemes, such as the Isle of Man’s Depositors’ Compensation Scheme, which protects up to £50,000 per individual depositor. Find out more in our support, and check with the provider as to whether you will be protected by an alternative scheme depending on where the bank is located.

What charges have to be paid on an offshore savings account?

It’s important to note that there may be charges to pay that you won’t normally come across with UK-based savings accounts. These can include transfer and withdrawal fees, CHAPS fees, cheque clearance charges and fees for making international payments, and even fees if you stop meeting the eligibility criteria. Every account will be different, so it’s wise to check the terms and conditions of your preferred product so you know what to expect.