An Article on “Financial Implications of Retiring To a Foreign Country” & Short Answers

An Article on “Financial Implications of Retiring To a Foreign Country” & Short Answers

Part A: Article

Introduction

Retiring abroad can seem very attractive to middle aged people for several reasons; they may have family in a different country and want to move closer to them, or they may prefer living in a different climate than the one they are living right now, or they want to live permanently at a place where they holidayed and dreamed of living. Thus, there can be various reasons associated with the decision of retiring abroad, but there are also certain financial implications involve in this process, which require proper understanding and evaluation. These financial factors may include move of pension, exchange rates, tax rates, healthcare, property inflation, savings and investments, and others (NASDAQ, 2012).

Many middle-aged workers plan to retire abroad, while dreaming of resting at beaches, or spending quiet and lazy evenings, or picturing other relaxing moments. However, if people fail to carry out a correct financial planning required to retire abroad, then they will not enjoy their relaxing dream; rather they could find themselves returning to earth with a bump (www.pkf.co.uk). Hence, researching and planning thoroughly and considering all the aspects related to financial implications of retiring abroad is vital.

Financial Aspects to Be Considered While Retiring Abroad

The most important financial implications that middle-aged people must understand and planned about are:

Taxation

When it comes to financial aspects, tax is one of the major aspects that middle aged people must consider while retiring abroad. There are several taxes that a person must understand and planned before retiring abroad. These taxes may include pension taxation, property taxation, local VAT and sales tax.

There are certain conditions which need to be satisfied by people in order to be treated as a non-resident:

At least for one complete tax year, person remain outside UK

In any one tax year, spend less than 183 days in UK

Since people left, they have spend an average of no more than 91 days per year in UK, unless they have been absent for 4 years, after which for past four years they must have spent an average of no more than 91 days (www.modernandmature.co.uk).

People will not be liable for tax on worldwide income once they are classified as a non-resident. However, people still have to pay taxes on their income from the United Kingdom like their pension, or interest on their savings held in United Kingdom, unless the Double Taxation Treaty agreement is held between the United Kingdom and the country people are retiring to (www.hmrc.gov.uk).

Pension Taxation

Generally, the pension of people is taxed in the country where they will be living, unless this pension is from the UK Government service. Filling a local tax return is normally involved, but in case of no Double Taxation Treaty between UK and the country where person is moving, pension will be taxed in United Kingdom (currently person is living ...