Offshore account

An offshore account is an accounting way of saying an account located “abroad” or “overseas”. You’ve probably heard the term in the context of tax evasion, although it’s an unfortunate association. That’s because, if you’re a UK tax resident, you need to declare your offshore gains and income to HMRC. You need to file a Self Assessment tax return and pay tax on it.

But many people don’t. Often offshore accounts will be used to conceal someone’s true tax liabilities in the UK. HMRC have been trying to clamp down on the issues since 2016. 

Do you always pay tax on an offshore account?

The only exception is if you declare yourself to be a “non-domiciled” person. In this case, you also lose your UK tax-free allowances and have to pay a special charge (that starts at £30,000 per year). But be aware that this status is being abolished from April 2025.

Another special situation is when you’re a UK tax resident and run a limited company that’s based abroad, and you’re its only director and shareholder. The HMRC will likely consider your company a UK tax resident. You’ll be asked to pay UK Corporation Tax for its profits, rather than the local corporation tax wherever your offshore company is registered.

Are the accounts legal?

Yes, they are. But the way you approach your tax liabilities is where you can come into hot water. As long as all of your income, whether offshore or onshore, is declared to HMRC, you’re safe.

Here’s why people go offshore:

• If you live in a poorly regulated country, holding your funds offshore might be safer
• Convenience if they live abroad
• To protect your assets in case of financial crisis in your home country
• Higher interest rates
• You can sometimes have a more varied selection of currencies held in offshore accounts than you can in your account in the UK
• A good opportunity to reach international markets