A Practical Guide to ISAs for UK Expats
Individual Savings Accounts (ISAs) are a fantastic way for UK residents to grow their money tax-free.
But if you move abroad, either temporarily or permanently, what happens to your ISAs then?
This guide explains everything you need to know in plain English: how ISAs work once you become a non-UK resident, what you can and can’t do, and the common mistakes that expats make.
Whether you’re retiring in Europe, working in the Middle East, or relocating for family reasons, this article will help you make smarter financial decisions around your ISA holdings.
What is an ISA?
An Individual Savings Account (ISA) is a UK tax-efficient wrapper that allows individuals to earn interest, dividends, and capital gains without paying tax.
There are four main types:
- Cash ISA – like a tax-free savings account
- Stocks and Shares ISA – for investing in funds, shares, and bonds
- Innovative Finance ISA – peer-to-peer lending
- Lifetime ISA (LISA) – for buying a first home or retirement (only available to those under 40 when opened)
UK residents can contribute up to £20,000 per year across all types of ISAs combined.
What Happens to Your ISA When You Move Abroad?
The rules are surprisingly simple, but easy to misunderstand.
You can keep your existing ISAs
Even after leaving the UK, you don’t need to close your ISAs.
You can leave them open, and any interest, dividends, or capital growth will continue to be free from UK tax.
You can no longer pay into them
Once you’re no longer a UK tax resident, you cannot contribute to an ISA in a new tax year (unless you’re a Crown employee working abroad or their spouse/civil partner).
You must notify your ISA provider
If you become non-resident, you’re legally required to tell your ISA provider.
They’ll flag your account to prevent new contributions.
You can transfer your ISA from one provider to another
In theory, at least.
In reality, most UK providers will not allow you to open an ISA if you are a non-resident. Even if you are using it to transfer in an existing ISA.
The UK uses the Statutory Residence Test (SRT) to determine whether you are a UK resident for tax purposes. Check your status now . . .
Will You Pay Tax Overseas?
This is where things can get tricky.
Although your ISA is tax-free in the UK, most foreign tax authorities don’t recognise the ISA structure.
That means you could be taxed locally on interest, dividends, or capital gains generated inside the ISA.
So the real question is: Does the country you’re moving to tax your ISA returns?
The answer varies by country.
Some are more lenient.
Most countries, like Spain, Italy, France and the USA, treat ISAs like any other investment, taxing you on income and gains.
That’s why it’s important to get specialist expat financial advice if you are living (or moving) overseas.
Case Study: A UK Couple Moves to Spain with ISAs
Meet Mike and Claire, both in their late 50s, planning to retire to the Costa del Sol.
Between them, they have around £350,000 in ISAs, mostly in stocks and shares.
Once they became tax resident in Spain, their ISAs would lose their tax-free status, at least from Spain’s point of view.
Their UK provider continued to report zero tax payable, but under Spanish rules, they needed to declare:
Dividends from their funds and ETFs.
Interest from cash holdings.
Any realised capital gains from fund sales (including gains that had been accumulated while living in the UK).
As a result, they would face a potential annual tax bill, even though they assumed their ISAs were “tax-free forever.”
After speaking with an experienced cross-border financial adviser, Mike and Claire took several steps to adapt their investment strategy:
They realised the gains already built up within their ISAs before leaving the UK, taking advantage of their UK tax-free status while still resident.
They reinvested the proceeds into multi-asset funds held within their ISAs, choosing funds that rebalance internally and therefore do not trigger capital gains tax events under Spanish tax rules.
They decided to keep their ISAs open, in case they choose to return to the UK in the future and retain their UK tax advantages.
They also considered using a Spanish-compliant bond as a tax-efficient way to invest any additional savings going forward.
Expat ISA Pitfalls
Here are some common mistakes expats make with their ISAs:
❌ Continuing to contribute when not allowed
Once you become non-resident, you can’t make new contributions.
Doing so may result in penalties or disqualification of the account.
❌ Assuming ISAs are tax-free abroad
Many expats mistakenly think ISA income and gains are globally tax-free.
They’re not.
Always check how your new country treats ISAs.
❌ Trading inside the ISA without thinking about local tax
Some expats keep rebalancing or selling assets inside their ISA, unaware that each sale could be a taxable event overseas.
❌ Failing to report the ISA to your new tax authority
In many countries, like Spain or France, foreign investment accounts must be reported annually.
Failure to do so can lead to large fines.
❌ Ignoring estate planning implications
Some jurisdictions have forced heirship rules or do not recognise ISAs for inheritance planning purposes.
Expat ISA Rules
FAQs
Yes.
You can keep existing ISAs, but you can’t pay into them unless you’re a Crown employee.
It’s tax-free from a UK perspective.
But your new country may tax the income or gains. Always check.
Contact your provider immediately.
They may remove the invalid contributions, but you could still face tax complications.
Yes, you can withdraw funds at any time, regardless of residency.
But the tax treatment of withdrawals may vary in your new country.
Not necessarily.
Yes, you can.
Barclays estimates that over £400 billion is currently held in cash ISAs.
With inflation eroding purchasing power, much of this money is losing value in real terms.
Transferring from a cash ISA to a stocks & shares ISA could offer the potential for higher returns over the long term, though it does come with increased investment risk and market volatility.
The good news is that even as an expat, you can still transfer your existing cash ISA into a stocks & shares ISA.
Final Thoughts
If you’re a UK expat, or planning to become one, ISAs remain a useful tool, but only if you understand the rules.
They’re not “set and forget” once you move abroad.
Whether you keep them, restructure them, or transfer to alternative tax-efficient investments depends on your specific situation.
For many of my clients, it’s not about picking the “best” option, it’s about avoiding unnecessary tax and keeping things compliant.
If you’re moving abroad and want to make sure your ISAs are working for you, not against you, get in touch.
I specialise in helping British expats manage their finances across borders.
