Know your limits: Transferring money or property overseas
Whether you’re moving abroad for good, or dividing your time between countries, it’s important to understand the implications of moving your money and assets. If you’re transferring money overseas, buying property, or gifting overseas assets to family members, there could be taxes to pay and strict conditions to comply with.
The rules vary considerably between countries and individual circumstances, so this guide is just to give you an overview before you dive deep down the regulatory rabbit hole. To establish your own liabilities, limits and legal position, always consult a professional financial adviser.
Send money overseas with CurrencyFair
Once you’re clear about the consequences of an overseas transfer, remember that you can enjoy bank beating rates and fixed, transparent fees with CurrencyFair. It’s the safe, secure way to send money from a domestic to a foreign bank account, trusted by thousands of customers around the world.
What are the limits on sending and receiving money overseas?
It’s not necessarily the limits you have to worry about when making an overseas transfer — in fact, there aren’t many — so much as the reporting requirements. However, these are usually taken care of by the financial institution, not the sender. For any large transfer, you may be asked to confirm the source of funds, the reason for the transfer, and the identity of the recipient.
Transfers to and from the United Kingdom
There is no legal limit on how much you can send overseas from the UK, but both HM Revenue and Customs (HMRC) and the Financial Conduct Authority (FCA) will monitor any substantial transaction to make sure that it complies with Anti-Money Laundering (AML) regulations. Banks, on the other hand, generally apply their own limits, typically from around £25,000.
How much can you receive in the UK from overseas? That depends. There is no limit on how much you can receive as a gift from overseas, but any gifts over £3,000 or foreign income has to be declared on your annual tax return. Overseas income is taxable if you are a UK resident. If you are not a UK resident, however, your foreign income is not taxed.
Since this gets complicated, we suggest you find out more about UK tax on foreign income from HMRC here.
Transfers to and from the European Union (EU)
As above, the limits that apply are at a bank rather than international level. Under EU law, the charges for a euro transfer between any two member countries (up to €50,000, euro only) cannot be more than the cost of a national transfer. That doesn’t apply for GBP/EUR or USD/EUR transactions, however (another reason to choose CurrencyFair’s fixed fees).
If you are resident in France, there are severe fines for failing to declare any overseas bank accounts on your annual tax return. The fine is set at €1,500 for EACH undeclared account. The same applies in Italy (fines of over €10,000 are possible).
Transfers to and from the United States (US)
Any transfer to or from the US over USD $10,000 will be reported to the Internal Revenue Service (IRS) as a precaution. Again, you will be asked to confirm the source of funds or reason for the transfer overseas. A key difference is that US citizens are taxed on worldwide income and must file an annual return with the IRS. As an American, you must also report any gift if the total value exceeds $100,000 in a tax year.
Funds won’t be taxable if you’re sending money from your account in the US to your account overseas. However, you’ll have to report assets over $50,000 held overseas to the IRS, and under the Foreign Account Tax Compliance Act (FATCA), overseas banks are obliged to report on assets held by US citizens. Beware! American citizens who do not declare foreign accounts or assets face penalties up to $50,000.
Limits on cash
Many travellers and people moving overseas are unaware that some EU countries impose a maximum limit on payments using cash between a consumer and a business. The goal is to reduce tax evasion and money laundering. For example, in Greece, you cannot make a cash payment above €500 to any business. The limit is €1,000 in France, Spain, and Italy. These limits do not always apply to cash transfers between private individuals, however, or to non-residents.
Photo by theamrit Dev
Can I transfer overseas property to someone else?
There are a number of reasons why someone living abroad might want to transfer a property (at home or abroad) to someone else:
As a gift to children or family members
As part of estate planning (to limit inheritance tax or capital gains tax)
To generate rental income from a second home
Before going a syllable further, it’s important to point out that this is a notoriously complex subject that will require the professional services of lawyers, accountants and notaries (possibly in several languages). What follows is not financial advice, so much as a broad overview of the liabilities and conditions you must confirm with an expert professional.
If you are still a UK resident, your foreign assets are treated the same as your UK assets. That means you will have to pay capital gains tax on the sale of any overseas property. You could also find yourself liable for capital gains tax to HMRC if you are a non-resident who returns to the UK within five years.
You may also be taxed in the overseas country, but you can claim relief so that you’re not taxed twice. To get relief, you’ll have to apply for a certificate of residence from HMRC.
Britons who sell homes in France are liable for 19% capital gains tax and social security contributions in France too. There are exemptions, though, depending on the value of the property, and whether or not it was a principle residence.
In Spain, you’ll be liable for capital gains tax (up to 24%) and local plusvalia tax when selling a property. Over a certain threshold (currently €700,000) there may also be wealth tax to factor in.
Will my dependents be liable for inheritance tax?
UK inheritance tax applies only to your UK assets. The current threshold is £325,000, at which a standard 40% tax rate applies. If you’re receiving property or assets from someone who lived overseas, by contrast, inheritance tax will be payable in that country.
In some cases, that could seriously impact the final value of your inheritance. Across Organisation for Economic Co-operation and Development (OECD) nations, the share of households subject to inheritance tax varies considerably:
48% of estates in Belgium
10% in Germany
4% in the UK
0.2% in the USA
Typically, spouses or civil partners are exempt, meaning that you can transfer a property without tax applying. Children usually receive generous or partial exemptions, whereas distant relatives or non-related heirs may end up paying significantly higher inheritance taxes.
As a general guideline, research by PwC shows the top rate of inheritance tax for the following countries:
To limit tax liability, one strategy employed by many homeowners overseas is to gift property to family or friends.
Can I gift property overseas?
No inheritance tax applies in the UK for a property with a value below £325,000, or for properties above this threshold provided the giver survives more than seven years. A key limitation is that you can no longer inhabit a home that you have gifted, since that would make it still part of your estate (thus liable to inheritance tax). Should you choose to gift a second home, there may be capital gains tax to pay on the appreciation of the current value vs the purchase price.
If you’re gifted property, there might be stamp duty to pay (on the value of the outstanding loan) if there is still a mortgage on the property. Otherwise, any gift taxes that may apply are typically the responsibility of the giver.
International money transfers
The rules for transferring assets are complex and vary enormously between countries. Sending money with CurrencyFair, on the other hand, is simple and transparent. Click below to find out how you can send more than 20 currencies in over 150 countries, knowing exactly how much you’ll pay for each transaction.
This information is correct as of February 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 Jason Leung
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