7 things to know before living and working abroad
Whether you’re thinking about living and working overseas on a whim or by necessity, you’re not alone. Right now, an estimated 4.5 million Britons are considering moving abroad, hoping for a better quality of life, lower cost of living, travel opportunities and career advancement in that order. If that sounds high, bear in mind that 5.5 million British citizens already live overseas, with the majority relocating to English-speaking countries such as Australia (1.2m), the United States (716,000), and Canada (530,000), or closer-to-home favourites such as Spain (300,000), Ireland (290,000), and France (175,000).
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Americans are chasing the dream overseas too. Some 8.7m Americans live abroad, chiefly in Mexico, Canada, the United Kingdom (UK), Germany and Australia. As the Association of American Residents Abroad (AAR) points out, if the overseas American citizen community was a state, it would rank 12th in terms of population.
The numbers don’t lie, but the promise of a better future is far from certain. Here’s our expat advice on living your best life overseas.
Key things to consider before moving abroad
For some, the lure of life abroad is just a case of itchy feet that a few months in warm sand can solve. For others, a sense of professional and personal inertia makes a fixed-term sabbatical overseas more enticing. Others find themselves living overseas for family or romantic reasons. Whatever the cause, expat life takes a variety of forms:
Overseas posting for a multinational company for a short-term period (months rather than years).
Taking a skill on the road as a digital nomad, usually in one of the cheapest countries to live in.
A few months or season as a working holiday, from a ski resort to Outback cattle station.
Sharing the financial year between two or more countries for tax reasons.
Part-time or full residency as an investor or property owner.
Each route faces its own obstacles, but all expats should be aware of the following challenges.
You’ll need more than a tourist visa
You might be able to breeze into the United States or Schengen area on vacation, but if your ticket is for months rather than weeks, entry clearance is by no means guaranteed. Expect to be quizzed on evidence of funds to support yourself, sufficient travel insurance, and proof that you’re returning to your country of residence. And beware in particular of overstaying your visa, which could get you banned, fined and deported from Schengen, or banned for up to 10 years from the United States. If you want to work abroad, you’ll have to apply for the appropriate residence and work permits in your home country. Few countries allow you to switch from a tourist to working visa without leaving.
Expat doesn’t mean tax free
Moving overseas does give you the opportunity to cash in, so to speak, on a much lower tax regime. That’s legal, and if you’re relocating to the Bahamas, Bermuda, Monaco or UAE you can genuinely live the tax-free life. Other countries offer generous tax breaks if you’re a high net worth investor through the Golden Visa programme. However, you’ll need to plan carefully if you’re spending all or part of the year overseas. As a rule of thumb when it comes to paying taxes abroad, you are tax resident wherever you spend 183 days or more of the tax year. If you’re still classed as tax resident in the UK, for example, your overseas income is subject to income tax. For US citizens, you have to file a return wherever you are in the world.
Before you go
Know what your tax residency status is at home and abroad.
Confirm where you have to report your annual income.
Understand the tax implications of moving money between countries (such as savings and pensions).
Maintaining healthcare, pensions and insurance
UK citizens who are accustomed to free healthcare at the point of delivery could be in for a rude awakening overseas. For example, a relatively unremarkable appendectomy in medical terms could turn into a life-changing event in financial terms ($30,000+) if it happened in the United States. In Europe, Switzerland is also notable for its high emergency healthcare costs.
Carrying your own private medical insurance is a wise move for the first few months at least but can get expensive in the long term. Once you are a resident, you should be eligible to join the country’s healthcare system.
Feeding your pension
Pensions might not be a priority when you first move overseas, but if months become years, you could miss out on eligibility for your full pension if you fall short in qualifying years. Your options are to contribute to your adopted country’s system, supplement through a private pension or portable retirement planning fund, or make use of any reciprocal agreements to transfer funds upon retirement. Many overseas retirees will find themselves with an assortment of smaller pensions from several countries. That also opens up the risk of pension income being taxed twice, as well as overpaying when it comes to currency exchange fees.
As for life insurance, it’s going to get expensive. Expats are high risk, so you’ll have to find a specialist overseas life insurance provider. You might be excluded altogether if you’re living in certain countries or engaging in certain professional activities. The alternative, however, is to risk leaving your dependents stranded in a foreign country without adequate resources to maintain their lifestyle.
Prepare for the culture shock
Expatica counts five stages of culture shock, from the initial honeymoon phase abroad to the point where the country you left becomes unfamiliar and difficult to adapt to again if you return. Look at how manageable and challenging you find life at home and ask yourself if life abroad will solve or exacerbate those challenges. What’s the trade off between a lower cost of living and a foreign language, or a nicer climate but harsher working culture? Expat depression is real, and it’s important not to confuse your perception of a place as a tourist with the reality as a resident. Learning the local language might be an ordeal, but it will clearly help overcome a significant barrier where integration is concerned.
Stay on top of rule changes
When rules or circumstances change in a country, the wellbeing of temporary, foreign residents is rarely a priority. Brexit brought an abrupt end to working abroad for many UK nationals in the European Union and forced a large number or EU citizens in the UK to rethink their plans. Likewise, emergency Covid measures left families cut adrift overseas, causing them to overstay visas, run out of funds, or struggle to qualify for adequate healthcare. Wherever you are, it’s a good idea to connect with your local expat or digital nomad network, so that you’re the first to know if tax exemptions change, new visas are introduced, or entry requirements are radically overhauled.
Calculate the cost of living
As an overseas worker, you’ll be relying on your fighting fund instead of credit lines. In fact, it may be impossible to qualify for credit at all. Factor in the cost of air tickets, health insurance, rental deposits, buying a car, and waiting for a month or more for salaries to be paid. Estimates of how much you should have saved before committing to the move range from USD $5,000 to $8,000 per person to as much as nine months’ living expenses if you’re moving with the family and want to maintain the same quality of life.
What if I have to go back?
Events at home or in your host country can force a change of plans. A contract might come to an end, a work permit renewal might be refused, or a family member might require medical treatment or long-term care at home. There could be as many things to consider when you’re leaving a country to return home as there were when you left.
If you’ve severed ties, as in closing bank accounts, informing HM Revenue and Customs (HMRC), and shipping all your belongings overseas, it can be a lot harder to start again in the UK than if you’d kept accounts dormant, put items into storage, and used a family member’s address for correspondence.
Should you need to apply for a loan or mortgage, or even provide references to a landlord or employer, your lack of credit history for years spent abroad can count against you. Re-integrating into a country with a high cost of living compared to a lower cost expat destination can also strain finances.
That’s why it’s important to limit the cost of currency exchange, whether you’re heading overseas or returning home. Low exchange rates and high fees can quickly impact your savings, so it’s always a good idea to shop around and find a specialist money transfer service such as CurrencyFair who can beat the banks on rates and fees.
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This information is correct as of January 2023 This information is not to be relied on in making a decision with regard to an investment. We strongly recommend that you obtain independent financial advice before making any form of investment or significant financial transaction. This article is purely for general information purposes. Photo by Peggy Anke on Unsplash
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