What to do with your UK Assets and Investments

When you settle in New Zealand, you may need to re-think your UK investment portfolio. There are tax issues to consider, as well as an ongoing need to build a balanced investment portfolio.

Some people do choose to keep some investments in the UK, and if you qualify for the 4-year Transitional Resident tax exemption on our overseas investment income then there may be tax advantages to doing so – but we recommend that you take specialist tax advice if you do decide to keep investments in the UK, especially if you decide to keep your investments beyond your Transitional Residence period.

While it is not exhaustive, the following list may get you thinking...

• Cash Deposits
• Your House
• Stocks, Shares, Tessas, ISAs, Unit Trusts and Term Investments
• Endowment Policies
• Premium Bonds

Cash Deposits

If you are leaving money deposited with your UK bank, make sure you let them know that you are emigrating so you can fill in the relevant forms to have interest paid tax-free. Please note that while you may not be tax resident in the UK, while you are a UK citizen you are liable to UK income tax on all income arising in the UK, including interest. You will however retain your UK Personal Tax Allowances, so this should only concern you if you have quite significant sums on deposit – in which case we suggest you seek specialist tax advice on your individual situation. 

While you are eligible for the four year tax exemption for new immigrants under New Zealand tax laws, you will not have to pay New Zealand tax on any interest you earn. However, after four years you will need to declare any interest earned in the UK and pay New Zealand tax on it. There is a double-taxation treaty in place between New Zealand and the UK which ensures that you do not pay tax twice on any income.

We have access to a number of excellent investments which can earn higher interest rates than are generally available in the UK, and can even leave your money invested in Pounds if you would prefer, so please contact us to discuss your options.

Your House

If you are selling your house in the UK when you move to New Zealand, you will need to discharge any related mortgages. This will happen automatically as part of the sales process.

If you are keeping your house in the UK when you move to New Zealand and renting it out, you need to inform your mortgage provider - this may constitute a change to the conditions of the mortgage agreement, and you may need to pay an extra charge. You will also need to arrange special landlord insurance - house and limited contents cover to cover the property whilst rented and possibly vacant for a while.

There are some tax issues you need to be aware of if you are renting out your house in the UK when you emigrate to New Zealand:

Your UK Tax Position

Before you leave the UK, you'll need to contact the HMRC to register as a Non-Resident Landlord, and to apply for approval to receive rent with no tax deducted. This allows you to get paid the rental from your property via your letting agent without paying tax on it if you qualify - and you can offset costs such as your mortgage interest payments, letting agents' commission, repairs and maintenance against any tax liability, so it is not too hard to qualify.

Once the HMRC is satisfied that you won't be liable to any tax on your rental income, or that any tax due is covered by your personal allowances, they may not send you a self-assessment tax return - you will probably only have to fill in UK tax returns in your first year in the NZ if your house is the only significant asset you are leaving behind.

UK Capital Gains Tax

You will not be liable to UK Capital Gains Tax when you sell your house as long as:

1. the house was purchased as your main home rather than as an investment

2. the house was your only home in the UK while you were living there (you can't claim CGT relief on more than one residence.)

Your New Zealand Tax Position

For your first 4 calendar years in New Zealand, you will probably qualify as a transitional tax resident. This will allow you to receive any profits from renting out your property free of New Zealand tax.

Once the 4 year period of transitional tax residence has expired, you may be liable for New Zealand tax on your rental income and NZ non-resident withholding tax on mortgage interest payments. There is some more information about non-resident withholding tax on overseas mortgage interest payments on the IRD website, or you can contact the relevant section of the IRD via email with specific queries.

We do know of people who ended up with significant tax bills as a result of this, so it really is a good idea to seek specialist tax advice if you are thinking of letting out your house in the UK, especially if you are outside the Transitional Residence period or do not qualify for Transitional Residence.

We have an article that covers what you need to know if you are renting out your house in the UK in more detail on our UK website.

Stocks, Shares, Tessas, ISAs, Unit Trusts and Term Investments

Initially you will need to advise the companies handling your investments of your change of address, then you can review what to do with these investment assets at your leisure. You will need to take into account the exchange rate, tax in the UK, tax in NZ both within and beyond your Transitional Residence period, and the investment returns on your investment vs. other investment returns. We would be happy to discuss your situation in more detail to make sure that you make the most appropriate decision.

Endowment Policies

You have three options:

1. Continue paying into your policy until maturity.
2. Stop paying and leave the policy paid up.
3. Cash in your policy.

The most appropriate course of action does depend upon your circumstances and objectives. You will need to take into account the exchange rate, tax in the UK & NZ, what type of policy you have and time to maturity and the investment returns on your policy vs other investments returns. We would be happy to discuss your situation in more detail to make sure that you make the most appropriate decision.

Premium Bonds

You can hold your premium bonds while living in New Zealand – just be sure to let them know your new address. New Zealand has a similar system, called Bonus Bonds.

For more information on UK/NZ tax issues, check our article Top 10 Tax Tips for Brits in New Zealand.

At Broadbase International we specialise in providing expert, impartial financial advice for Brits in New Zealand and Kiwis returning from the UK. Don't hesitate to contact us if you have any questions about New Zealand investments, and remember to ask for a free copy of our comprehensive New Zealand Guide.