Money moves

The most lucrative places for expats

Many Brits dream of escaping the rain and relocating to a warmer climate. For years, British expats have favoured options like Australia and Spain – British expats in Spain outnumber those in any other EU country by at least two to one, according to the Office for National Statistics.

The low tax rates of the Middle East have also been a significant draw, but experts now say that the winds could be blowing in another direction entirely.

Soaring pay and living standards in countries once seen as the poorest in the world are drawing in skilled foreigners in greater numbers.

Analysis carried out for The Daily Telegraph by Access Financial, the expat advice firm, reveals that a Briton moving to India would have more disposable income after taxes and living costs than a similarly skilled worker elsewhere.

Kevin Austin of Access Financial said: “When you factor in pay and the cost of living, many of the more obvious destinations for expats, such as New York, are much less attractive.

“The East and south-east Asian destinations of Singapore, Malaysia, Hong Kong and China offer that attractive combination of low taxes and cost of living.”

Where to move to?

Access Financial’s analysis takes into account the expected salary, tax and estimated living costs.

The firm used living cost data from Numbeo and salary data from a poll commissioned last year by HSBC. They then factored in tax and any relevant social security.

According to the company’s analysis, expats living in Mumbai, India, would have the most disposable income. This is due to the much higher expected salary on offer and the cheap living costs.

A skilled contractor could expect a salary of £167,104, would pay tax worth £56,556 and have living costs of £7,129, leaving £103,419.

Mr Austin said: “The Indian financial centre of Mumbai emerges as one of the most attractive destinations for expats.”

Next on the list is Shanghai, China, where the contractor would command a salary slightly lower than in India but still much higher than elsewhere. Living costs are higher than India, but a lower rate of tax leaves £90,649 in disposable income.

The highest-scoring European country is Switzerland, with a good salary and low tax rates resulting in a disposable income of £88,014.

This compares favourably with the UK, where high tax rates and the cost of living in London reduce a £82,558 salary to £26,759 in disposable income.

Mr Austin pointed out that the combination of high living costs and high taxes meant former expat hotspots do not rate as highly. The contractor in Spain, for example, would command a salary far lower than their Indian counterpart. Despite lower tax, their disposable income would be £31,850. In Sydney, Australia, a salary of £102,845 makes £46,531.41 in disposable income.

And despite its reputation for rock-bottom tax and luxury living, the UAE is only fourth on the list, thanks to its comparatively lower salaries.

Simon Parfitt, of expat advice firm Pyrmont Wealth Management, said lots of expats were shunning Dubai due to living costs and the recent introduction of VAT. He said: “The social costs in the Middle East are very high. Restaurants are considerably more expensive, particularly for beer and wine.”

Think ahead

When planning a move abroad it’s easy to focus on the requirements for your destination, but don’t forget tax obligations at home.

The first step, according to Experts for Expats, the advice site, is to tell HM Revenue & Customs that you plan to leave. Failure to do so could result in you paying taxes from which you should be exempt.

There are also further forms to fill in if you will still be receiving money from sources in the UK, including savings interest or dividends on investments. If this income exceeds a certain level, then you could be liable to pay tax on it.

Also be aware that any income from rental payments is likely to be taxable, and any sale of British property could incur capital gains tax.

British expats will also have to be wary of falling into the trap of misunderstanding the rules over domicile. Your overseas income could still be liable for UK tax if you are deemed to be a UK tax resident.

Simply living abroad does not exclude you from this category and there is a bewildering set of rules, taking into account the days you spend in Britain each year and any connections you have.

Mr Parfitt said many expats failed to consider inheritance tax (IHT). A domiciled taxpayer would be liable for IHT on their global assets.

Retaining a home in Britain could mean you are liable. Mr Parfitt cited the case of a client who owned a London home worth £4m and who was facing an IHT bill of £1.6m.

He said people in this scenario could sell the home or take out a universal life insurance policy. These can be costly – £700,000 in this case – but could be significantly lower than the tax bill.

Departing expats similarly need to check that their existing life and health insurance policies cover them while abroad. Some countries, such as the Netherlands, require people to take out private health insurance.

‘East and south-east Asian destinations offer low taxes and a low cost of living.’