Offshore accounts have come in for more than their fair share of criticism in recent years, as millionaire’s use of them have been called into question. However offshore accounts represent many benefits for all sorts of people. In this guide we look at what offshore accounts are and who they may suit.
Offshore accounts are accounts that are held outside of the UK; as such they benefit from certain tax advantages. Offshore accounts are no longer just for millionaires; many people can benefit from operating an offshore account.
Whilst many offshore accounts require a minimum deposit of around £5,000 to £10,000, there are some on the market that can be opened with as small amount as £1. Offshore accounts can be opened either through post, on the phone or online.
Many UK high street banks offer off shore accounts, and these are typically in the Channel Islands, the Isle of Man and Ireland.
There are numerous benefits to owning an offshore account; for a start, you can deposit a wide range of currencies into them, such as sterling, euros or dollars; and you’re able to withdraw cash and write cheques within any country in the world.
Offshore accounts also benefit from an unlimited amount of access, no matter the time of day. This can be particularly beneficial to business people, who may be travelling the world and moving through varying countries and time zones.
Additionally, for the private individual, interest is paid gross, rather than net (e.g. where the government deduct their share of your interest); however you are still required to declare any interest you earn, and not doing so can land you in hot water.
As with all bank accounts offshore accounts have disadvantages as well:
- Some of them can be quite difficult to open so be prepared with documentation.
- Look out for fees and compare - some of them can have quite high fees.
- Your money are not protected so always keep an eye on how the bank is doing and the economy in the country.
Before jumping in head first, there are a few things that you need to think about before going ahead and opening an offshore account. First and foremost, you should bear in mind the example of the Kaupthing and Landsbanki banks, which collapsed during 2008 due to Iceland’s financial crisis brought on by the credit crunch. To this end you should check out compensation rules surrounding your savings, in other words, is your money protected? This is absolutely vital if you are to avoid the nightmare situation of losing some, or all of your savings.
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Whilst offshore accounts offer many benefits you should undertake through research and ensure you know the rules of their operation prior to opening one. In addition to this, you should be aware of the varying rules and bank’s stances on compensation. Ensuring that your money is protected is of paramount importance if you choose to open an offshore account.