In the UK, individual savings accounts keep interest and dividend income totally tax-free, but it gets a bit messier once you cross a border.
Unsure how the whole process works? We’ll be taking a look at ISAs in more detail, so you know whether your savings interest is still tax-free. We’ll also cover how the rules change if you plan on moving overseas, and whether you need to tweak your strategy before lift-off.
Why Are ISAs Tax-Free for UK Residents?
Nearly 15 million adults paid into ISA accounts in the 2023-24 tax year, which was a thirteen-year high according to HMRC’s latest Annual Savings Statistics. Those subscriptions flowed into:
- Cash ISA
- Stocks and shares ISA
- Innovative Finance ISA
- Lifetime ISA
We’re mainly seeing these new highs in people who pay into ISAs because they’re tax-free, which means every pound of interest earned stays yours. The ISA allowance for 2025-26 sits at £20,000 per adult in the same tax year, which means all taxpayers – from basic rate or higher rate to additional rate – can shelter far more than their personal savings allowance alone.
Under UK tax rules:
- Cash ISAs shield savings interest completely.
- Stocks & Shares ISAs protect dividend income and investment fund gains from income and capital gains tax.
So that double layer of tax benefits explains why ISAs are such a popular tool in many people’s long-term financial plans.
How Does the Personal Savings Allowance Fit In?
Outside an ISA, basic rate taxpayers still get a £1,000 personal savings allowance, while higher rate taxpayers have £500, and additional rate taxpayers get nothing.
If bank rates crash again, the PSA may be enough on its own. But when rates climb, interest spills past the PSA pretty quickly, so you’ll want an ISA or some other tax-efficient wrapper to keep your tax burden down.
What Happens to Your ISA When You Move Abroad?
Short answer: you keep the tax-free status in the UK, but you stop adding new money the moment you cease being a UK resident – unless you’re a Crown employee overseas or their civil partner.
Make sure you tell your provider as soon as you’ve moved. Fortunately, you can still withdraw money or switch from one cash ISA to stocks and shares if you fancy taking on more market risk.
Will Your New Country Tax the Interest?
That depends on local law and on any double-tax treaty between the UK and the country you land in. Two of the more common outcomes look like:
- Country A Taxes Worldwide Income: Your ISA keeps its UK exemption, but the new country counts the interest earned.
- Country B Exempts Foreign Savings Wrappers: Your ISA will be untouched at both ends.
Just make sure you check this out before you move, because treaties are different depending on the country.
If your new country taxes ISA growth, the levy often falls due on the dividend income or interest earned inside the wrapper – even though HMRC keeps its hands off. Filing an accurate tax return abroad stops fines later.
Is It Better to Close an ISA and Start Fresh Abroad?
Running the numbers helps a lot here. Compare:
- Remaining UK-Based: You keep the UK tax benefits and exposure, but you may face foreign tax on earnings.
- Selling Up: You free up some cash to open local accounts or investment funds, but you lose the long-term ISA shelter if you ever move back.
Remember, you cannot rebuild ISA allowance you’ve given up; the £20,000 limit resets each UK tax year only for residents. If you plan to return within a few years, keeping the wrapper is usually a better idea.
Do Cash Rates Beat ISA Rates Abroad?
UK banks still offer cash ISAs paying up to 4%, but expat savings accounts in, say, Dubai or the United States sometimes top that headline rate.
The comparison isn’t that straightforward:
- Convert back to sterling
- Factor in any withholding tax
- Consider currency swings
What looks like a nice headline rate can easily disappear once the exchange fees kick in.
Which ISA Types Survive the Move Best?
Let’s compare the four main ISAs:
Cash ISA
Pros
Simple, easy to leave untouched
Cons
Foreign inflation may erode the value
Stocks & Shares ISA
Pros
Global diversification through stocks, shares, and low-cost funds
Cons
Market volatility plus possible foreign tax on your dividends
Innovative Finance ISA
Pros
Peer-to-peer yields above cash
Cons
Limited liquidity if you need quick access
Lifetime ISA
Pros
25% UK bonus toward first property or retirement
Cons
Withdraw before age 60 for any reason other than buying a first home? That 25% penalty isn’t great
What Do Various Rate Payers Need to Know?
See what difference it makes depending on your tax rate:
Basic Rate Taxpayers
You already get £1,000 of UK savings income tax-free, so weigh whether a cash ISA’s rate actually justifies all the admin work once you move. If your new country taxes overseas interest, the ISA shelter still softens the blow compared with plain cash.
Higher Rate Taxpayers
Your PSA halves, so the ISA’s shield matters a lot more here. Just watch out for dividend cuts abroad: some jurisdictions withhold up to 35% before money reaches you.
Additional Rate Taxpayers
With zero PSA, every pound of savings interest outside an ISA or similar wrapper faces tax. Keeping your ISA alive allows you to compound your returns over a longer term.
Two-Step Checklist Before You Board the Plane
Tell Your Provider: Hand over your new address and confirm you’ll be non-resident.
Review Local Tax Advice: One session with a cross-border specialist beats years of fretting and surprise bills.
More Tips
Got a better idea of how these ISAs work now? Let’s go through a few final things:
Do You Ever Pay Capital Gains Tax on ISA Assets?
No, provided the investments stay inside the wrapper. Sell shares, switch funds, rebalance each quarter – capital gains tax never applies within the ISA walls, regardless of where you live. Move the assets out, though, and normal rates follow you around the globe.
Can You Open New ISAs While Abroad?
Only if you return and regain UK residency status, or meet that narrow Crown-employment exception we mentioned before. Until then, focus on foreign wrappers your new home does allow, and remember you’ve still got that ISA bedrock if you come back later.
Is It Worth Combining ISAs Before You Go?
Merging older, dusty ISA accounts into one provider definitely makes life easier when you’re dealing with international paperwork. Providers that offer all the main ISA – cash ISAs, stocks and shares, lifetime ISA – options under one roof just make things easier to manage.
How Upscore Can Help
Upscore’s Finance Passport helps you organise all your financial documents and makes it easy to secure a mortgage in a foreign country.
