Simply explained, for any Brit, an offshore savings account is one that is not located in the United Kingdom.
It's easy to picture jet-setting billionaires hiding their cash in offshore banks to evade taxes, but that's not usually the case. Expats and other international workers are the most likely to use them.
Lloyds Bank International and Skipton International are only two examples of the many British banks and building societies with an international branch.
This guide takes a closer look at the best offshore savings accounts.
| Provider | Score | Details |
|---|---|---|
| 1. NatWest | ★★★★★ | Learn more |
| 2. Standard Bank | ★★★★★ | Learn more |
| 3. HSBC | ★★★★★ | Learn more |
At a Glance: Pros and Cons
In this section, we round up the drawbacks and advantages of offshore accounts.
Pros
✔️ Accept a variety of currencies.
✔️ You don't have to be a UK citizen to apply.
✔️ Can be beneficial for expats and anyone living overseas who can't find a better savings deal in their new country of residence.
Cons
❌ Minimum deposits are often greater with these accounts.
❌ Not covered by Financial Services Compensation Scheme (deposits should be safe).
❌ Interest rates can be lower compared to onshore savings accounts.
Best offshore savings accounts
Here are some of the best offshore savings accounts available:
1. NatWest — Savings Builder Account
You can open this account if you're a resident in the Channel Islands, Isle of Man or Gibraltar, but you must also be an existing NatWest International current account holder.
The account can be opened in branch or online and there is no minimum deposit requirement. However, you'll earn a higher interest rate if you pay in at least £50 each month. If you do this, you'll earn 5.25% AER on balances of up to £10,000 and 2.40% on balances over £10,000.
For each month you don't pay in £50 or more, you'll earn a lower rate. The account is an instant access account so you can access your funds at any time.
2. Standard Bank — Notice Account
Standard Bank offers a range of offshore notice accounts, so you can choose from notice periods of 36 to 396 days. The longer the notice period, the higher the rate of interest earned. You can earn a rate of 5.00% on the 396 day notice account.
Accounts can be held in USD, GBP and EUR and you'll need at least £10,000 to get started.
You can manage the account online or via the app and you can make an unlimited number of deposits.
The account is for residents of the Channel Islands, expats and/or Isle of Man residents.
3. HSBC — Fixed Rate Savings Account
To open this account, you will need to be a resident of the Channel Islands or Isle of Man. You will need to have an HSBC Expat bank account too.
You can choose from 19 different currencies, and select a term of between one month and 12 months. For USD, GBP and EUR accounts, you can also choose 18-month, two-year or three-year terms.
You must keep at least £5,000 in your account (or USD 5,000 or EUR 10,000).
When do you use an offshore bank?
You can deposit money into an offshore savings account and receive interest on it just as you would with a conventional savings account.
You can often choose to lock away funds for a set term in a fixed rate bond, or opt for an easy access account that permits regular deposits and withdrawals. Some offshore accounts might be notice accounts, requiring you to give a set amount of notice before you can access funds.
The key distinctions are as follows:
- 📖 Non-UK citizens are welcome to apply. With onshore accounts, this is often not the case.
- 📖 Minimum contributions for offshore savings accounts are often larger. Although some accounts may be opened with as little as £1, it's more common that you'll need a larger deposit of between £5,000 and £10,000.
- 📖 Your funds won't be covered under the Financial Services Compensation Scheme (FSCS). However, these accounts often provide comparable compensation schemes.
Where do most people keep their money stashed away?
The most popular destinations for British people to open offshore savings accounts are:
- Guernsey
- Jersey
- Gibraltar
- Isle of Man
- Netherlands
- France
Who can an offshore bank account help?
Offshore accounts can be suitable for:
- 📑 People living abroad whose wages or pensions are paid in British pounds. It's possible to avoid currency conversion fees and save a portion of your earnings in an offshore account.
- 📑 Expats who are always on the move or who want to settle back in the UK. There is no need to transfer your money, particularly if it's in pounds, every time you move countries.
- 📑 Citizens of a country with a tax haven, such as Jersey and the Isle of Man.
- 📑 Those living on islands or in countries like Monaco, Switzerland, or Lichtenstein.
Is it safe to store money offshore?
Before opening an account with any savings provider, you should find out what protection is in place in the event the provider went bust.
Because the UK's FSCS does not apply to accounts maintained at offshore financial institutions, your savings might not be as well protected as they would be with a UK-based bank or building society.
It might not be clear from the bank's website, but the bank's location could have a significant impact on whether or not your funds are protected in the event of bankruptcy.
There are a number of offshore jurisdictions that have their own financial compensation plans, guaranteeing some percentage of your money in the event that your account provider fails.
Some of the most common destinations for offshore savings are as follows:
- The Isle of Man Depositors' Compensation Scheme (DCS) protects deposits of up to £50,000 per person.
- The Jersey Depositor Compensation Scheme (JDCS) protects deposits of up to £50,000 per customer.
- The GBDCS in Guernsey protects deposits up to £50,000 per depositor at each participating financial institution.
- In France, the FDGR (French Deposit Guarantee Scheme) protects deposits up to €100,000.
- In Gibraltar, savings up to €100,000 are protected by the Gibraltar Deposit Guarantee Scheme (GDGS).
- The Deposit Guarantee Scheme (DGS) of the Dutch Central Bank covers deposits up to €100,000 per depositor.
However, it's important to keep in mind that the depositor protection plan in place in any given nation is only as robust as that country's economy.
The UK government, which backs the FSCS, is very unlikely to ever go bankrupt. But it's possible that smaller economies are more at risk. Because of this, several experts advise against putting money into accounts that lack complete protection from the FSCS.
You should also look at the quality of financial regulation in the country under consideration. For example, are there restrictions on who can open a bank and how it is managed? Putting your savings in a place with limited regulation might be a bad idea.
You should also research whether or not the nation where your money will be housed has a consumer complaints system. You should be able to easily and affordably seek redress in the event that anything goes wrong with your account.
Are there higher interest rates for offshore savings accounts?
Not necessarily. In fact, interest rates on offshore savings accounts can often be less competitive than onshore rates.
You should also consider if there are any fees associated with the offshore account. You might have to pay withdrawal fees, for instance. Before you commit to opening an account, it's important to carefully review the conditions.
📕 Should I report the interest I get as income?
Having an offshore savings account doesn't mean you can ignore tax obligations. Interest is paid gross in the same way as a UK savings account, and UK income tax is due if the interest earned is higher than your personal savings allowance. This is £1,000 a year for basic rate taxpayers and £500 for higher rate taxpayers.
Anything above this must be declared as income through your self-assessment tax return with HMRC. However, there can be a big delay between earning interest and paying tax on it.
Keep in mind you might also have to pay tax in the country you're living in. It can be a good idea to seek professional advice to ensure you're paying the right amount of tax, but also that you're not paying twice when you don't need to. That said, there are agreements in place between the UK and other countries to help prevent double taxation issues.
How much will I have to pay for using an offshore bank?
This will depend on the account. Many offshore savings accounts charge a range of fees so it's vital to check what these are before opening the account.
There might be fees for withdrawals (often around £25 a time) and if your balance falls below the set minimum.
The most common fees you should watch out for are as follows:
- 🎟️ Banking charges.
- 🎟️ Transaction costs.
- 🎟️ Account maintenance charges per month.
- 🎟️ Fees for having an insufficient amount in your account.
- 🎟️ CHAPS charge (may be different for different currencies).
- 🎟️ Money transfers across borders.
- 🎟️ Fees for processing a cheque.
- 🎟️ The cost of translating documents.
- 🎟️ Commissions for international deals handled by agents.
It's important to shop around to find an account with the fewest fees. Before submitting your application, make sure to read the terms and conditions in their entirety.
Offshore savings accounts explained: The Verdict
If you are an expat or a resident of an offshore jurisdiction like the Isle of Man or the Channel Islands, opening an offshore savings account might be quite useful.
However, like with any savings account, you should research the account's minimum deposit requirement, interest rate, and any associated costs before opening an account.
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