Home Money Why have I been blocked from putting money in my Isa? I live abroad but still pay UK tax

Why have I been blocked from putting money in my Isa? I live abroad but still pay UK tax

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The good life: Our reader lives in picturesque Cyprus, but finds that this has implications for her savings in the UK.
  • The reader has moved to Cyprus and wants to transfer funds to a domestic Isa
  • But the building society has blocked money from entering the account.

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I am a retiree from the UK, but I live in Cyprus.

Living expenses here are lower, so I can save a small amount of what I receive each month from the state pension and my small private pension.

I have recently started paying tax in the UK as the latest state pension increase put me over the threshold.

Therefore, I would like to transfer some of my savings from my current account to my Isa to offset this. Both are UK accounts held at Nationwide, so the money does not leave the UK.

The good life: Our reader lives in picturesque Cyprus, but finds that this has implications for her savings in the UK.

The good life: Our reader lives in picturesque Cyprus, but finds that this has implications for her savings in the UK.

I haven’t put any money into the Isa for the last few years. As my income was not taxable, I felt I should not claim tax-free interest as I do not live in the UK.

When I recently tried to transfer some money from my current account to my Isa, Nationwide blocked the transaction because I don’t have a UK address.

I feel this is very unfair now that HMRC is taxing part of my income. Why can’t I transfer this money, which hasn’t left the UK, into my Isa?

Helen Kirrane from This is Money responds: When it comes to taxes, UK expats pay a high price for the benefit of a lower cost of living outside the UK.

Isas were introduced in April 1999 as a tax wrap, designed to protect UK residents from UK tax.

The reason you discovered that you can’t transfer funds to your Isa is because you can only open or pay into an Isa if you live in the UK.

Because you opened your Isa before moving abroad, the good news is that you can still keep it open and use the funds for a rainy day if you want. However, she will not be able to transfer new money to you.

I asked Nationwide and HMRC to explain their situation further.

Rejected: Nationwide blocked the transfer of funds from a customer's current account to Isa when they moved to Cyprus

Rejected: Nationwide blocked the transfer of funds from a customer's current account to Isa when they moved to Cyprus

Denied: Nationwide blocked funds transfer from customer’s current account to Isa when they moved to Cyprus

Richard Stocker, savings director at Nationwide, responds: If you opened an Isa in the UK and moved abroad, you should tell your Isa provider as soon as you are no longer resident.

The government website can help you determine your current residency status.

You won’t be able to deposit money into that account after the tax year in which you move. So, for example, if you moved abroad this month, you won’t be able to add money to your Isa from the time the new tax year starts on April 6.

Subject to any restrictions that may apply in your new country of residence, you will usually be able to keep your current Isa open.

You can transfer the Isa to another provider even if you no longer live in the UK; you simply won’t be able to deposit new money into it.

An HMRC spokesperson responds: If you open an Isa in the UK and then move abroad, you cannot put money into it after the tax year in which you move, unless you are a Crown employee working abroad, or your spouse or partner in fact.

You should inform your Isa provider as soon as you are no longer resident in the UK. However, you can keep your Isa open and still receive UK tax relief on the money and investments you have in it.

You can transfer an Isa to another provider even if you are not based in the UK. You can pay back into your Isa if you return and become a UK resident.

Helen Kirrane from This is Money responds: As you now live in Cyprus, you will not be able to pay for any new subscriptions, but you will be able to withdraw money or transfer money from one Isa to another, just as you would be entitled to in the UK. .

In your situation, transferring funds from the current account to the Isa would be considered payment for new subscriptions. This has been flagged and stopped by Nationwide to prevent you from breaching the Isa regulations.

The block will not apply if you withdraw your money or transfer existing cash to another Isa provider.

If you withdraw money from the Isa, you will be protected from any gains you made while you were in the Isa, but you will incur tax on any subsequent gains made.

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