Guernsey, Jersey or Isle of Man

Why do you want an offshore account? The charges are usually high and, if you live and work in the UK you will still pay UK tax. (Even if you work abroad you wont save tax).

The way to save tax is to live and work in a low tax country. Where your bank is located has little bearing.

This was not the question. And I am not from the UK. Thanks.

If the OP is not domiciled in the UK, he/she would be taxed on the "remittance" basis in respect of any deposit account interest - even if he/she was living in the UK.

I had always thought that income on interest earned in UK bank accounts was tax-free if you're non-resident in the UK, but someone has recently suggested otherwise. Apparently, you can offset income against your personal allowance, but any income above that amount is taxable. That's the main reason I maintain an offshore account. Does anyone know what the actual situation is?

Chris

Certainly while we were abroad from 1974 to 1977 and from 1980 to 1987 interest on offshore accounts was credited gross. However I believe that interest on UK accounts was also credited gross if you told the bank and/or filled in the right forms.

Indeed, but the reason was because you were working abroad and not because you had an offshore account. As you say, the UK and offshore accounts are treated in a similar way.

IMO the only advantages of offshore accounts are if you receive or make many foreign currency payments or if you have something to hide. The view of tax authorities is similar.

The Irish tax authorities recently probed the records of several Isle of Man banks for undisclosed accounts and prompted 400mil of voluntary payments with prosecutions pending for those who didn't own up to their account. Link here (will need pasting together)

I think (at least at the time we were overseas) the reason for going for an offshore account was just that it was *simpler* to get interest paid gross. One didn't have to do anything, it was just paid gross. Whereas with an onshore account it was paid net by default and you had to do something to get it paid gross.

Yes, I realise that you can apply to have interest paid gross on UK accounts, but I was wondering whether that interest becomes taxable for non-residents as far as the Inland Revenue are concerned if it exceeds your personal allowance.

Using an offshore account avoids that issue, but I'd be interested to know if its really necessary if you're non-resident.

Chris

If you are outside the UK for a complete tax year, the IR will not tax your income. You should consult the tax rules for the country where you live. If you move back during the year you can choose to pay the lower of UK tax and the foreign tax (if there is a "double tax agreement" with the other country). This is just my experience so don't treat this as gospel.

When I have worked abroad I have always opened an account locally. This makes sense as I received and paid many amounts in the local currency. Opening an account in the Jersey would not have made sense (unless, having watched Bergerac, I believed I could hide some money there) as charges are generally higher and interest rates are similar to UK accounts. To have interest paid gross is of no great advantage if you are a tax payer. If you complete a tax return in another country, credit will still be given for tax paid on UK bank interest.