A Guide To Offshore Banking

The vast majority of people living in the UK have a bank account in this country that we use for our everyday expenses and where our monthly earnings are deposited. However, we are all taxed on this money and many people feel they would like to be able to save money without the taxman getting his hands on it. This often can mean having an offshore bank account.

For UK residents, offshore banking relates to accounts which are run from the Channel Islands or the Isle of Man.  Often these are owned by subsidiary firms of the major banks such as HSBC and NatWest.

People may choose these types of bank accounts if they are planning to move to a European country and wish to bank using Euros. Other reasons for choosing an offshore account are greater privacy, low or no taxation and protection against local political or financial instability.

Others may opt for an expatriate account or one with deferred interest – which means the dividend is only paid out when it is closed. Some may be similar to domestic accounts, allowing a choice between fixed and variable interest.

The period of notice for a withdrawal may differ between accounts, so this may be something else to look out for.

Methods of opening an offshore account include visiting a branch, going online or applying via phone or post, in a similar way to opening an account in the UK.

Possibly the most important aspect of this type of account is understanding the tax implications. Any interest earned must be declared to Her Majesty's Revenue and Customs – large fines can be levied for not doing this.

It's also worth considering that these types of institutions are not covered by the Financial Services Compensation Scheme, which could pose problems if the bank goes bust.

You can research offshore accounts on the internet but it is important to talk to an independent financial adviser to make sure you get the best deal for your individual circumstances.

If you would like to know more about offshore banking why not ask AnswerBank Business and Finance.