If you want your relocation to be a smart move economically, financial planning is important. In addition to the salary you hope to earn, you have to take into consideration the taxation and living costs in London. You also need to open necessary bank accounts and decide what to do with your possible foreign income and gains. The more you plan ahead, the fewer chances you have of making wrong decisions.
After moving to the UK, if you wish to work, you need to apply for National Insurance number. Income Tax and National Insurance are payable on you UK wages. Your employer will deduct these from your salary. Capital Gains Tax is payable on your UK gains. Check if you need to complete a tax return, called Self Assessment. It is not usually necessary unless you are self-employed, a company director, a partner in a business, earn more than £100,000 or have other income on top of your salary.
If you are not domiciled in the UK, you might not need to pay taxes on your foreign income and gains, as long as you don’t bring them to the UK. Also for the first three years as a resident you might be eligible to enjoy overseas workday relief (OWR). However, at the same time you might lose some tax deductions. If you wish to enjoy UK tax benefits to non domiciled persons, consider contacting a chartered accountant experienced with expat taxation, who can answer your questions in full detail.
UK tax year starts April 6th and ends April 5th and hence is not a calendar year. The maximum Income Tax is 45% (for tax year 2014-2015), maximum National Insurance is 12% plus 2% on earnings over £805 per week and maximum Capital Gains Tax is 28%
Income Tax (GOV.UK)
Income Tax Calculator (gocompare)
Capital Gains Tax (GOV.UK)
Self Assessment (GOV.UK)
Residence, Domicile and Remittance Basis Rules: UK Tax Liability (GOV.UK)
To live and work in England, you need to set up a local bank account. Ask your current bank if they operate in the UK or can help you with the account opening process through their affiliations. Alternatively, contact yourself the bank of your choice before the move. This will prepare you to the bank’s account opening procedure and can speed it up. The largest UK retail banks are HSBC, Barclays, Royal Bank of Scotland Group, Lloyds Banking Group and Standard Chartered.
To open a bank account, you need to show a valid identification – like passport – and a proof of UK address – like a recent utility bill or your new tenancy agreement. This is problematic if you haven’t found a place to rent before your arrival. Alternatively, you can ask your employer to write a confirmation letter stating your business address, employment and salary. If you find the account opening difficult with one bank, go to the next one. Banks’ procedures differ, and some are more accommodating than others.
After opening your account, the bank will give you a debit card, credit card (subject to credit check) and a chequebook. To pay bills, it is increasingly popular to set up direct debits or use online banking. Since it takes at least a week or two to get everything sorted, be ready to use at first your existing cards to fund your spending.
If you can enjoy overseas workday relief, you are non domiciled in the UK or want to have accounts in different currencies, consider opening an offshore account.
Overseas Account Opening (HSBC)
Moving to the UK (Barclays)
Opening a Current Account (RBS)
New to the UK (Lloyds)
Salaries in London are the highest in the UK. The average full-time, gross salary per month is £3,569. Most full-time workers get 28 days’ paid annual leave, which might include the bank holidays, depending on the employer. In 2015 there are 8 bank holidays in England.
Average Salary in London (per month)
|Managers, directors and senior officials||£5,856|
|Associate professional and technical occupations||£3,571|
|Administrative and secretarial occupations||£2,416|
|Skilled trades occupations||£2,487|
|Caring, leisure and other service occupations||£1,901|
|Sales and customer service occupations||£1,868|
|Process, plant and machine operatives||£2,508|
Though salaries in the capital are better than in the rest of the UK, the living costs are higher. London is amongst the most expensive cities in the world. How much you and your family end up spending depends on your lifestyle, size of family and the area of London where you live. The following are approximate monthly prices to give you some guidance:
Living Costs in London (monthly averages)
|Council Tax||£38 - £280|
|Groceries / person||£120|
|Eating out / person||£68|