Friday 14th June 2024

Can I open an ISA even though I’m not from the UK?

Mouthy Money Your Questions Answered panelist, Sean Cockburn, answers a reader’s question on opening an ISA if you aren’t from the UK and the pros and cons when it comes to taxes.

couple ISA

Q I’m from Italy, currently living in the UK, and I’ve invested some of my savings using a European investment platform. It doesn’t offer an ISA, but is it worth switching my investments to an ISA for the tax benefit? If I did this and then returned to the EU what would that mean for the investment?

A An ISA is a savings account with tax benefits that is available to individuals who are resident in the UK.

Savings can be held as cash or invested in stocks and shares with any income received (i.e. dividends or interest) and capital gain on the sale of shares exempt from UK taxation. For standard ISAs, there is an annual limit of £20,000 that can be put away each financial year into these accounts.

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For smaller amounts, the benefit will be limited and will depend on an individual’s circumstances as income or gains may well be covered by their income tax or capital gains tax exemptions in any case.

It might be that you can leave your investments in Italy and not have to pay UK tax on the income – for example, if you only receive dividend income and this, together with any UK dividends, is less than £2,000 per annum, you would not have to pay any extra tax.

However, foreign income in excess of this amount will require the completion of an annual self-assessment tax return which may be an unwelcome administrative burden.

If you were to move back to Italy, you would obviously no longer be a resident in the UK, so while you could continue to hold an ISA, you would not be able to make any further contributions to it.

You’d also need to think about the fact that the Italian Revenue Agency is unlikely to allow the same tax-free status on your investments.

Sean is a Director in Mazars Private Client tax advisory team providing advice on a wide range of tax issues. Sean works with families, entrepreneurs, trustees and other stakeholders to ensure their tax affairs are structured in a way that meets their objectives.

Photo Credits: Pexels

Rebecca Goodman

Award-winning freelance journalist with a decade of experience working for online and print publications in the consumer sector.

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