Moving to Singapore, or anywhere for that matter, is an exciting move! But, it does require a bit of getting used to. One of which is how to navigate your finances in a new country.
Singapore is one of the world’s leading financial hubs, known for its stable economy, business-friendly environment, and strategic location in Southeast Asia. As expats, it’s essential to familiarise ourselves with the following aspects of the economy:
1. Currency and Cost of Living:
Singapore’s official currency is the Singapore Dollar (SGD). The cost of living can be high, especially in terms of housing, dining, and transportation. As you plan your budget, remember to research typical prices for groceries, utilities, and other everyday expenses. Check out my recent article on Singapore’s cost of living here:
Singapore has a progressive income tax system, which means that the tax rate increases as your income rises. Fortunately, the tax rates are relatively low compared to many other countries, with no capital gains tax and no inheritance tax. Understanding your tax obligations, including filing dates and deductibles, is crucial to staying compliant and minimising liabilities. Find out more about tax here in Singapore with these articles:
Singapore boasts a sophisticated financial services sector. Expats have access to a wide range of banking and investment options. From local banks to international institutions, the choices are plentiful. Familiarise yourself with saving accounts, fixed deposits, and various investment vehicles like mutual funds, stocks, and bonds. It’s always advisable to consult a financial advisor, particularly one who understands the regulations that apply to expats. I wrote an article on this exact topics here:
The Central Provident Fund (CPF) is a government-mandated savings plan for Singaporeans and Permanent Residents, helping them save for retirement, healthcare, and housing. As an expat, you probably won’t be eligible for CPF contributions, but understanding this system can provide insight into Singapore’s approach to financial security. You can however (and do read that article above) opt into the SRS (Supplementary Retirement Scheme). This works similar to CPF but is also open to foreigners, and offers various tax benefits.
5. Insurance:
Health insurance is another critical aspect of financial literacy. Singapore has a high standard of healthcare, but medical care can be expensive without insurance. Depending on your employment package, you may have health insurance coverage included. Otherwise, be proactive in researching local insurance providers to ensure you have adequate health and life insurance. I always say that having medical insurance through work is good, but you should always have your own as a back-up. You can read more here:
– Open a Local Bank Account: This simplifies your financial transactions and may offer better exchange rates than foreign accounts.
– Create a Budget: Track your spending to get a clear picture of your financial situation in this new country.
– Educate Yourself: Attend workshops or read financial literacy materials available for expats in Singapore. The more informed you are, the better financial decisions you can make.
– Network: Join expat groups or forums. Fellow expatriates can share valuable knowledge and experiences regarding managing finances in Singapore.
Understanding Singapore’s economic landscape is vital for expats aiming to thrive financially. By familiarising yourself with the local currency, tax system, financial products, and insurance options, you’ll set yourself up for success. As always, seek professional advice when needed, and continue educating yourself on financial matters.
Many people often think that money and emotions sit in two different parts of the brain; one is logical and requires objective thinking. The other is feeling, passion and response. However, the two often cross paths, sometimes without us even knowing it; we react emotionally to financial decisions. This is known as behavioural finance, and there are many different types of behavioural finance that one will experience throughout their life. Here, I want to explore each, and point out the pitfalls & traps we can fall into.
Herd Mentality
I feel that this may be one of the most common forms of behavioural finance that I see. It is very similar to ‘FOMO’ or following the crowd. Very frequently in life do people jump on the bandwagon of a particular fad or craze. These fads are often fleeting, and don’t stick around for too long (think of Pogs, Beanie Babies or The Atkins Diet), but during that short period of time everyone was talking about them and hyping them up. Similarly, think of NFTs, Dogecoin & Tulip Mania (the last one is real, look it up) in investing. Most of these fads don’t equal long-term gains, so it’s important not to get swept up in the excitement and think about long-term investment strategies.
Recency Bias
Recency bias tempts investors with fleeting gains and overshadows the broader market view. Many investors tend to be swayed by short-term views and information, and it’s incredibly dangerous for investors to extrapolate short-term recent trends far into the future. It can tempt an investor to abandon the critical principles of diversification, to focus on whatever has been trending over the past few years. This can be particularly risky if the investor already has fell privy to herd mentality. Take a look at the MSCI Emerging Market & the S&P 500 trends below; the dominance of emerging markets from 2000 to 2010 might have led some investors to believe that this upward trend could last forever. This, however, proved to be a misconceived notion, as we can see that from 2010 onwards, this has not been the case & the S&P has overshadowed the latter.
Loss Aversion
Imagine; you’ve spent a lot of time picking and choosing what stocks you want to invest in, but a bad market downturn massively affects your position, causing your investments to take a temporary downturn. Of course, this can lead you to feeling a lot of emotional pain and strife- you may no longer feel confident in your investments, and because of all the negativity this experience has caused, you contemplate withdrawing some, if not all of your investments. This can lead to hasty decisions, potentially derailing your investment strategy. Understanding the impact of loss aversion bias is crucial in navigating market uncertainties. It’s best to avoid this by frequently reviewing your investments and portfolio, ensuring your investment choices are aligned with your long-term financial goals.
Familiarity Bias
Have you ever found yourself sticking to what you know in investing, just as you might choose a familiar path over an unknown trail? This is familiarity bias at work. It’s natural, but it might limit your investment horizons. Maybe some investors will only put their money in fixed deposits, because that is all they have ever known. Some may put their money in stocks in the same sector they work in, because they are familiar with that industry. It’s important to remember that not everything in life is going to be achieved following one path. When it comes to investments, diversification, investing for the long-term, and time in the market vs. timing the market, are key principles we must stick by.
Even the most rational minds can be swayed by emotions in decision-making. Behavioural finance is about the gap between what we should do – following our rational intentions – and what we actually do – which is often something quite different. This gap can be large and incredibly costly. No matter how rational we think we are, everyone is prone to letting emotions guide their decision-making. The cost of one behavioural mistake – such as moving our portfolio to cash at the trough of a bear market – can outweigh any other investment decision we make. Advice that helps us avoid such situations can be transformative.
Living in Singapore as an expat can come with its own set of financial challenges that are not applicable to locals. From various tax considerations, to dealing with foreign exchange rates, it’s often quite challenging for expats to ‘DIY’ their financial planning. Therefore, it’s important to find a financial planner, or advisor, that has experience with clients that also have these niche issues. Here’s a few things to look out for when you choose a financial advisor:
Their qualifications & regulations
This is not just applicable for expats, but for anyone seeking financial advice in Singapore. Financial advisors need to be licensed and regulated by the Monetary Authority of Singapore (MAS) to legally give advice, and the investments & products they are selling should be regulated by MAS, too. Even offshore investments in Singapore must follow these regulations; if they are not, you run the risk of not being legally protected should anything go wrong.
2. Their independence & ties
There are two types of advisors in Singapore- independant & tied. If someone is independent, it means that, even though they probably work for a specific firm or financial institution, they are able to recommend various investments, insurance etc. from many companies. A tied advisor can only recommend products from the financial institution or insurance company they work for. I started off my journey as a Private Wealth Manager being tied to a local firm, and I found that this limited my ability to help my clients, particularly expats. Now that I work as an IFA (independent financial advisor), I find that I am able to help expat clients a lot more, as various investments will have different tax considerations, and certain insurance products may be better for expats from certain countries, whilst others are not. It’s totally up to you whether you work with a tied or independent advisor, but I do think that planning can be limited if you are only able to have investments from one company.
3. Their experience with working with expats
Look for a financial advisor who has experience working with expats in Singapore, and who understands the unique financial considerations that come with living abroad. Many local advisors or those who solely work with locals, will not be aware of capital gains tax considerations when an expat repatriates, and a surprise tax bill can be detrimental to investment planning. Retirement planning for expats can be complicated due to factors such as differing retirement ages, pension eligibility, and social security contributions. Advisors that have little experience working with expats may not be familiar with these specific considerations and how they can impact an expat client’s retirement goals. For example, I am able to assist my clients who are British or have worked in the UK, with their retirement planning and pensions. The same goes with Australians, as we have investments that are tax-efficient in these countries, and have tax experts on-hand to advise on this portion of their financial planning. Generally, if you are an expat, it’s good to work with an advisor who will be able to understand your unique situation & goals. You can always ask the advisor what kind of clients they work with, or if they have any case studies to share on clients in similar situations as you.
4. Discuss fees and charges upfront
Generally, in Singapore, fee-based advice is not very common. Whilst this is usual in western countries, in Singapore most advisors are paid either a commission, or an on-going fee, let’s discuss the slight differences between the two:
Commissions are paid to the advisor usually upfront, either when you buy an insurance product or an investment. This cost is factored into the premiums that you are paying, along with the company the advisor works for paying a chunk, too. Because these commissions are generally upfront, you may see that the charges are very large in the first couple of years. Due to this, if you are buying a product, be it investment or insurance, that does not require a lot of transactions, you may not always get the same level of service as you did at the start.
On-going fees are usually a percentage of the advisors funds under management. They will get a % on whatever monies their clients have entrusted with them. Because these fees are on-going, there is an obligation by the advisor to give you on-going advice and service. This generally tends to lead to a synergy in yours & advisors interest, because as your money grows, so does their pay!
A couple more fees to look out for are transaction and trailer fees; these fees are normally triggered when you buy or sell out of a fund or investment, or switch your portfolio, and a % is paid to the advisor. It is key to be aware of all fees and charges and that your advisor is transparent.
This means that you could have many meetings with your advisor before they actually receive their pay, so do consider if this is the route you would like to go down.
5. Their personality
To me, this may be one of the most important points; you are going to be working with this person for a very long time, therefore it’s best to choose someone that you feel understands and listens to you. As an expat, you may have specific financial goals or concerns that you need help addressing. Make sure the financial advisor you choose communicates clearly and is responsive to your needs. If you are someone who is a novice in investing, you may not like talking about all the ‘buzz words’ of investing, and would appreciate someone communicating to you in an easy-to-understand way. On the flip-side, if you are a bit more knowledgeable and would like investments in specific areas, it’s good to find an advisor that can discuss and educate you on these topics, along with giving their professional opinion.
To conclude, many may think that there isn’t a need for talking to an advisor; they’d rather watch YouTube videos, or talk to their friends and family about finances. But a financial planner should be giving their professional, unbiased opinion. They will be able to objectively look at your goals and financial situation objectively, and construct a clear plan bespoke to you. Always remember that being an expat comes with its own unique situations, and you should look for an advisor that understands that.
I recently went away with a friend, and then my family joined me later on, and finances (money in general) came up a lot in general conversation. I was really pleased with how open the discussions were, and I realised that not many people actually have open conversations in their day-to-day lives about money. Whilst money is seen as somewhat of a taboo to talk about, and I do agree that sometimes it is inappropriate, I do think there are some conversation topics we should normalise talking about, here are the top four money topics we should normalise!
One: Saving for a rainy day.
Actually came up quite a lot on my trip, mainly because the friend I was travelling with quit her job to take a year (or more) out to travel the world. She mentioned that quite a lot of people that she met whilst travelling were shocked and confused as to how she could afford to do that. I also commented that I experience quite a lot of the time, especially in Singapore, that if somebody loses a job, they quite quickly mention that they are unable to afford living in Singapore anymore, pack their things, and leave.
I am aware that visa situations can stop people from staying in Singapore more than a month after their visa is cancelled, but a lot of these people are on a One Pass, and if you have read my previous article, you’ll know that this pass doesn’t have so many immigration issues, and basically allows people to stay in the country even without work. So why aren’t people able to stay in the country longer than one month was they look for another job? I think it’s because many people do not save and sometimes spend beyond their means, meaning that if an emergency happens, they are not able to pay for the upfront costs.
Similarly, I think a lot of people are shocked that my friend was able to go travelling for a year, because they realised that they do not set aside enough to cover a years worth of expenses. With conscious & rigid savings of your surplus each month, and planning properly ahead, you are able to set aside for a rainy day, an emergency, or even if you want to take a break from work. Remember, you should have at least 3 to 6 months of your spending as liquid cash available.
Two: Future proofing and passing on your money.
This one might sound quite morbid, and unfortunately, it is really. But my family and I recently have experienced quite a lot of deaths, and as horrible as it is to talk about, it’s better to start talking about future planning and what happens to your finances before it’s too late. For example, my dad shared with us that one of his clients recently passed away, and being UK residents, their family were hit with a huge inheritance tax bill of 40% of the entire wealth. I commented and asked why more people don’t just take out life insurance; in the UK, we can put this into a trust, which protects it from inheritance tax, and that way, even if you have 40% of your wealth in an insurance policy, that will cover the inheritance tax bill at the end of the day. This is a lot more cost-effective than trying to put your housing into a trust, which can often mean paying a lawyer annually to maintain.
He told me that he thought that was a brilliant idea, and a really good way to inheritance tax plan, but not enough people think about it or talk about it with their family, and then unfortunately it is too late. Although in Singapore, we do not have inheritance tax, any overseas assets may be liable to whatever inheritance law is applicable in that country. Moreover, even if your assets are all in Singapore, probate can take a very long time for all the assets to be distributed correctly. Planning ahead for the worst outcome means that you can ensure that your wealth is passed quickly, so the next generation, or whoever you want it to be passed down to, and also means that your family enjoy your hard work, more than a large portion, going to the tax man!
Three: The importance of investing
My friend commented that while she was on a world cruise, she had paid for the internet package on the ship, and whilst it is expensive, I do agree that access to internet in this day and age is a must. However, I was shocked to find out that many of the people on board were not paying for internet, and we are struggling day-to-day, and even asking her to use her internet package! She had commented that it’s obvious that these people aren’t managing their finances correctly, because in a four-month cruise, during that period, you would need access to your online banking, and your investments. She also said that a few of the people on board scoffed at the idea of investments. Unfortunately, I find this very common, even today.
Investing is the only way that you can beat inflation, because most savings accounts do not beat inflation, and endowment policies and savings plans, whilst they do have a guaranteed amount, these often have incredibly high charges, and also do not beat inflation. Thinking that you are going to have a comfortable retirement without doing any savings and investing planning, is quite frankly, not a reality!
What’s more, whilst I have mentioned in the past, and I still think that you should not be checking your investments every single day, it’s important to be having regular reviews with your wealth manager, at least annually, to ensure that your financial and investment goals are still on track, and you can make any adjustments to your investments if necessary. If you are at a retirement or financial freedom stage of your life, it’s also incredibly important to plan how you are going to draw down from your investments, effectively and tax efficiently.
Four: Property
I feel like property is often shrouded in mystery, what can you buy, what can’t you buy? What kind of mortgage? What taxes are applicable and what rent should you charge? My friend has recently sold a property, and I recently closed on an apartment, so the topic of property came up quite a lot on our trip, and even more so with my family afterwards. I think it’s really important that we normalise talking about property purchase more frequently, because there seems to be a lot of misinformation out there. For example, my friend was hit with a large tax bill when she sold her property and nobody, not even her accountants, informed her about this! Many people don’t think that they can apply for a mortgage if they are an expat, which is definitely not the case. Many people don’t understand the process of buying, and how to go about finding a solicitor and so on, and I think if we open up this conversation more, there will be less chance of confusion.
To be honest, I think I have many more things in terms of finances that we should normalise discussing, but seen as I’ve been talking about these four topics a lot recently, and I have been having very productive and positive conversations, I think it’s important that we all normalise certain money conversations in the right spaces. What kind of money conversations do you think we should normalise?
The need for cyber security has become paramount in today’s modern age, particularly in the fintech and financial space. Being in this industry myself, I handle sensitive client data daily, and have access to their online wealth accounts; it is therefore vital that their information stays safe and inaccessible to fraudsters. Robust security measures must be in place, and I am constantly having to upgrade and refresh my skills to keep my clients safe.
Whilst fintech has allowed for financial services to become more streamlined, convenient, and efficient, it has somewhat opened the floodgates for cyber-attacks and threats. Harvard Business Review reported a 20% increase in data breaches from 2022 to 2023, and this is set to increase further as the years progress. Not only does this mean we have to constantly upgrade our software and infrastructure, but human area can become a massive opportunity for cyber criminals. I truly believe that a two-pronged approach of new regulatory processes, along with using AI in cybersecurity is a dynamic tactic to tackle this ever-evolving problem.
Cyber security is now seeing the same level of regulation as every other type of security, which means that fintech companies in particular must adhere to stringent rules and procedures. Regulations such as the General Data Protection Regulation (GDPR) and the Payment Card Industry Data Security Standard (PCI DSS) must be followed. Whilst of course this is best practice to ensure that clients’ data is safe, it therefore adds an extra strain onto the company and its employees; this may lead to delayed admin processes, longer lead time for new business submission and therefore, a time delay in profit for the company. Time is money, and the longer it takes for profit to be made, it essentially means smaller margins for the company.
One way this can be tackled is with Artificial Intelligence. Whilst using manpower takes time and money (not to mention the risk of human error), AI systems can scan masses of data sets, analyse data, spot anomalies, and therefore detect possible cyber risks before they have even happened. This preventative method ensures that risks are managed efficiently, and before they become breaches, which means a safer system for the clients, and mitigates possible reputation risk for the company.
However, AI is not a final solution; with cybercriminals’ techniques ever evolving, it means that AI will have to do the same. Not only that, employees must keep re-training when new systems are introduced, to ensure that human error is kept to a minimum. Moreover, one must ensure that the third-party companies engaged to deliver this AI system, is also compliant, safe, and follows the stringent regulations set in place for fintech companies to adhere to.
But the buck doesn’t just stop with the company- clients and customers must also stay vigilant so that they don’t fall victim to cyber-crime. For example, being able to spot a phishing email, not clicking on unknown links, and not giving out all your banking details to someone over the phone. In order for an individual to be savvy, particularly when it comes to fintech and online financial transactions, they must be aware of risks and know when and where it is appropriate to give out their financial information. If you engage a professional for your financial planning, of course you will have to make them aware of your personal details and possibly even bank details. But do take note that they should be encrypting or password-protecting any sensitive documents that are being sent to you.
Even if you are planning your finances alone, and are using platforms for your investing, be sure to do your own due diligence; ensure that the apps you are using are regulated and have secure payment systems. Do take note that most will require you to upload some form of identification, as well as declaring your tax residency. Whilst to a layman, this may seem intrusive, this is actually a sign that the platform is doing its part to adhere to compliance and regulations. If they don’t ask of these from you, it could be a sign that the platform is not regulated.
For those that plan their investing and finances alone, cybersecurity becomes an even bigger risk, as this is normally something that a large corporation would have to ensure the safety of first, but now it is being left to the individual investor. If you are considering planning your finances yourself, having basic understanding and knowledge is incredibly important. Therefore, I often suggest that people understand four main areas before they start investing, which I will explore further in this article.
Finance 101
I have many clients and connections that I come across asking me for advice on how to get their finances in order. ‘How can we maximise what we have now, so that we can make the most of our money later?’. Of course, one of the best passive things we can do, is to invest.
Investing is the concept of allocating assets, usually money, into different financial vehicles to create a profit. The bare minimum investment should be doing is beating inflation, because over time our hard-earned money is worth less, due to the rising cost of products. Before one starts investing, it is best to have a clear strategy, and get the basics covered first. Here are a few key financial areas you should have planned for:
Build an Emergency Fund
At a glance investing may seem like an obvious choice when it comes to saving money. Why not just throw all your savings into investment if it means high returns? The answer is that investment returns are NOT guaranteed- even the safest investments come with some risk, and sometimes the lock in periods are high, or the penalty for withdrawing early is expensive. To ensure that you are not over-investing, make sure that you have an emergency savings fund that is easily accessible. That way should an emergency arise (like a large hospital bill or having to pay for car repairs), you can use your emergency money instead of jeopardising your investments.
The recommended amount you should have in your emergency fund is 3-6 months of your monthly salary. This should be a healthy buffer should the worst happen. If you already have more than that, then that’s a great time to consider investing.
2. Know How to Budget
Of course, setting aside for investment would be impossible if you didn’t know how much to set aside. That’s why organising your budget is a crucial step in your financial planning. There are many ways and methods for planning, but a good starting point would be the 50/20/30 rule:
50% of your monthly salary maximum should go on things you need to pay for: housing, bills, groceries & insurance.
30% can go on doing the things you enjoy: hobbies, drinks and travel.
20% should go into your savings: think about your long term savings and investment goals.
If you have surplus each month, you can even consider increasing this 20% to a higher proportion, and allocate more into your investment goals.
3. Be Debt-Free
Before you do any investing, you should really consider paying off your debt. Having a credit card bill is fine, but having any large or bad debt will hinder you in your long-term goals. It seems counter-productive attempting to make lots of money with investments, whilst paying off lots of debt. It may be difficult paying off student debt or large loans, but you will reap the benefits in the long run when your debt isn’t eating into your assets.
4.Set Your Investment Goals
This is arguably the most important step, defining your goals. What is the reason for investing? If you are doing it out of pure greed, then your judgment will become clouded when it comes to riskier investments and you risk losing it all. So have a long and hard think about why you want to invest. You are putting your money, that you worked hard for, somewhere that could give you high returns, or give you nothing. Therefore, it’s best to have a long think and define some clear goals for your future. Do you want to plan for your retirement? Save for a house? Pass something on to your children? Whatever it is, decide how much you would need and by when. Most investments give better returns if you have a longer-term commitment, so it’s OK to think big. If you have no clue and are just investing for the sake of it, you will quickly lose your drive and passion for making money.
These steps may seem simple, but they really are the key to an effective investment strategy. I work with clients every day to ensure that they have budgeted correctly, serviced their debt and built an emergency fund, and together we work together to work towards their financial goals. Many find that this is more complex than they first thought and will include tax planning and ensuring that their assets are protected. This is of course one of the added benefits of hiring a professional. If you feel that these services are something you would require, feel free to reach out at via my contact page!
For Brits, the most recent Spring Budget announcement was incredibly important, as it gave us some very key and drastic updates for tax and spending. Essentially, Chancellor Jeremy Hunt aimed to deliver lower taxes, encourage investment and improve public services. Although the elections may affect this announcement, it’s still very important for Brits, particularly those abroad, to be aware of. Martin at Spice Taxation (Company Registration No. 202133724G), has written a very in depth piece on the Spring Budget. It’s incredibly useful to hear the views of a professional tax expert, and Martin has been kind enough for me to share his thoughts here. Of course, I myself am not a UK Tax expert, so I often seek the help of professionals, such as Martin, to help me and my clients with their tax planning when necessary.
Below is Spice Taxation’s write up on the matter.
Our Thoughts on the Spring Budget – 6th March 2024 The Most Important Budget for Expatriates since 2010
“Over the years I have discovered that I am just not very good at predicting Budgets. Speculation is always rife about what a Chancellor might do in face of this and that economic and political situation, but mostly the actual announcements just tend to underwhelm and disappoint. Maybe I just crave excitement!
However, all that changed with Jeremy Hunt’s Budget on 6th March. It is likely to be the last Conservative Party Budget before the next General Election – an election which the Labour Party is widely expected to win. So, it remains to be seen how many of the announcements will find their way onto the Statute books if Labour does win. That aside, it really was an exciting Budget which promises a lot of change, much of it positive.
For much of the speech, it felt like a ‘normal budget’ with a plethora of announcements about regional incentives, funding initiatives, levelling up grants, subsidies and tax breaks for the arts etc. However, there was also a number of genuinely eye-catching and important announcements which are also relevant to expatriates.
First of all, Jeremy Hunt announced a further reduction in National Insurance paid by employees and the self-employed of 2%, from 6th April 2024. For employees, this will reduce from 10% to 8% and for the Self-Employed from 8% to 6%. For those returning to the UK, this will be welcome news.
Secondly, he announced the intention to introduce a new Individual Savings Account – the UK ISA, with an annual subscription allowance of GBP 5,000, in addition to the existing threshold of GBP 20,000. This new ISA would hold British-only assets – equities listed on the four recognised UK stock exchanges, UK corporate bonds and gilts and collectives. This will be good for UK resident savers.
Third, there were a few property tax announcements which came as a surprise:
o The marginal rate of Capital Gains Tax on the sale of residential property will reduce from 28% to 24% from 6th April 2024. This is intended to help stimulate the property market. The basic rate will remain at 18%. This is good for anyone selling, gifting or assigning an interest in UK residential property from that date.
o Multiple Dwellings Relief for Stamp Duty Land Tax is being abolished from 1st June 2024 – this was a relief that allowed you to take the average purchase price for SDLT purposes where at least two properties were being purchased in a single transaction.
o Furnished Holiday Letting status is to be abolished from 6th April 2025, with some anti-forestalling provisions which came into effect on 6th March 2024.
o The geographical scope of Agricultural Property Relief and Woodlands Relief (two Inheritance Tax incentives) will be limited to assets situated in the UK only from 6th April 2024 – those situated in the Crown Dependencies and the EEA will lose their IHT protected status.
Fourth, the VAT registration threshold will rise to GBP 90,000 from 6th April 2024, an increase of GBP 5,000, which will be welcome news for small businesses.
However, perhaps the biggest and most barnstorming announcement was the abolition of ‘non-dom’ status from 6th April 2025. The Conservative Party has been a staunch defender of the ‘non-domiciled regime’ over many years, so it was something of a surprise to see them adopt an avowed Labour Party policy. Stealing their thunder no doubt. It is a very major announcement that will impact many people.
In a nutshell, the Government plans to delink a person’s ‘domicile status’ from their UK tax outcomes, and move to a residence-based set of incentives. Consultation documents are yet to be published, but the main features of the new system will be to:
– Abolish the ‘remittance basis of taxation’ for UK resident ‘non-doms’.
– Replace it with an opt-in system that will allow, seemingly anyone – including, presumably, British nationals – to exempt their non-UK incomes and gains from UK tax for the first four years of UK residence, provided that they have been continuously non-resident for at least the 10 previous years.
– Exempt from tax the remittance of these non-UK income and gains to the UK, which will be hugely simplifying in the long run.
– Retain Overseas Workday Relief for qualifying individuals for the first 3 tax years of residence.
– Apply world-wide taxation for all individuals from the 5th year of residence in the UK.
– Introduce a thoughtful set of transitional reliefs for certain ‘non-doms’ who are already resident in the UK
– Switch away from a ‘domicile based’ system of Inheritance Tax to a residence-based system, whereby qualifying individuals switch to IHT on world-wide assets only after 10 years of residence.
Keep anyone who leaves the UK within IHT for 10 further years, which presumably also will apply to British Expatriates too. UK assets remain within Inheritance Tax at all times, regardless of residence.
We are missing a lot of technical detail here which should be answered by the Consultation Documents that the Government will be publishing shortly. So watch this space! However, whilst I have many more questions than answers at the moment, at first sight the main impacts appear to be the following:
a) Tax planning for relocation to the UK is likely to change quite a bit and these proposals could amount to a generous tax break for returning British expatriates.
b) They will also make Inheritance Tax planning potentially a lot simpler and not so reliant on subjective judgments about where a person is domiciled.
c) It might possibly result in an exemption from Inheritance Tax for a swathe of non-resident British expatriates who have already been non-resident for at least 10 years, which would be quite a result!
I am going out on a limb a little by saying that it appears the proposals will also apply to those we currently regard as ‘domiciled’ in the UK. However, surely that is the point – it is switch away from a tax system where a person’s domicile was the deciding factor, to a tax system where the deciding factor is driven by residence. This potentially bodes extremely well for British expatriates. If this Budget does turn out to be the Conservative Party’s fiscal swansong, it is perhaps fitting that its period of Government will be bookended by a commitment to enshrine in law a statutory test for residence in 2010 at the start, and a set of announcements that displace domicile with a new regime based on that very residence test at the end. Mastering the Statutory Residence Test is clearly going to be more and more important. Beyond this, all tax rates, thresholds and allowances for Personal Tax remain frozen, as do the rates for Corporation Tax. The dividend allowance will fall to GBP 500 from 6th April 2024 and the Capital Gains Tax Annual Exemption will fall to GBP 3,000 from the same date. Class 2 and Class 3 voluntary National Insurance Contribution rates will remain unchanged at GBP 3.45 per week and GBP 17.45 per week respectively, and the New State Pension will rise to GBP 221.20 per week (of GBP 11,502.40 per year) from 6th April 2024.”
If you would like to discuss your own circumstances in confidence or would like to be on the subscriber list for Spice Taxation’s new dedicated coverage of these breaking developments, please contact Martin at martin@spicetaxation.com or by sending a Whatsapp to +65 96650019.
I’d like to thank Martin at Spice Taxation for allowing me to share this information with my readers. I am sure that this will help many of you plan your finances in relation to UK tax.
Over the past year or so, we have seen a rise in interest rates and fixed deposits have offered quite attractive returns. Some may be inclined to put all their savings into these guaranteed bank deposits, but is this a smart decision?
I have spoken to many in the past year that are putting off investing because they find fixed deposits more favourable. They believe (which is true) that investments, such as equity and property, is uncertain. So they would rather pick the safer option of fixed deposits. Whilst I do agree it is always a good idea to have liquid cash and sufficient savings, I do believe that your excess money is better off growing elsewhere.
Cash Cannot Beat Inflation
When you put your money in a fixed deposit, you will only gain the guaranteed amount, never any more. Whilst some see this as a good thing, in periods of high inflation (like over the past couple of years), your cash is losing spending power. And inflation is a problem that will always be there; it is not something we can ignore, and historically bank deposits have not battled inflation in comparison to equities.
Lock Ups & Opportunity Costs
In order to receive the guaranteed rate of return of a fixed deposit, you quite often will have to fulfil a tenure. I will admit that these days you can find fixed deposits with quite short tenures, but this often means that inflation may have eroded your guaranteed returns, leaving you with net zero or even negative gains! This also means that you are exposed to reinvestment risks; you as an investor may not be able to reinvest the cash you receive from a matured fixed deposit at the same or better rate again. This shows that bank deposits are good for short-term situations, but have more cons over the long-term. In contrast, historically, investing in equities or bonds have proven to grow capital and protect yourself from inflation.
‘Safe’ May Not Really Be Safe
It has become more apparent recently that the chance of a bank defaulting may not be is minute as we once thought- just look at Credit Suisse, Signature Bank and SVB to name a few. This means that your ‘guaranteed return’ may not actually be guaranteed. Banks are covered by the Deposit Protection Scheme, but take note that generally these limits are not very high. This means that if you have anything more in a fixed deposit, or indeed in a bank account, and the bank folds, they are only obligated to pay you up to that limit, nothing more. To avoid this, it may be a sensible idea to spread your cash across different institutions, not leaving all your assets with one bank. Investing in portfolios can also help you diversify risk, whilst having access to possible high returns, and holding up against inflation long-term.
If anything, market volatility has proven to us that a few key financial principles, such as planning long-term and diversifying to mitigate risk, are very important guidelines to follow. Whilst fixed deposits seem attractive short-term, they expose you to reinvestment risk, and are therefore only beneficial for short-term savings. Focusing all your financial planning on one bank or indeed one savings account, means that you are not diversifying, and not only are you at risk if the bank defaults, but you are also missing out on possible higher returns you could be getting from investment. Cash may be key for every-day living, but it is definitely not king when it comes to successful, long-term planning.
Investing for Singapore Expats 