What happens to my ISA if I move abroad

Individual Savings Accounts are one of the most popular tax-efficient investment vehicles in the UK, but the rules change once you become tax resident in another country. 

Understanding what happens to your ISA when you move abroad can help you avoid unexpected taxes and make better financial planning decisions before and after your move.

Understanding ISAs

ISAs are a popular way for UK residents to invest. They offer a wide range of investment options, relatively low fees, and tax benefits.

Whilst being highly tax efficient for UK residents, the same cannot be said for residents of other countries.

Most countries tax ISAs in the same way as other similar investment accounts by looking through the structure and taxing as if it didn’t exist. With careful planning, most of the tax benefits can be retained for those resident in European countries such as France, Spain, and Portugal.

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An ISA is not itself an investment; it is a wrapper within which a wide range of savings and investment products can be held free of UK income tax and CGT.

ISAs allow individuals to hold:

• cash deposits
• certain life assurance policies
• investments in UK and overseas shares
• corporate and government bonds

These can be held directly or through collective investment schemes. They can only be operated by HMRC-approved account managers.

Investors do not pay income tax on any interest or dividends they receive from the investments held in an ISA, nor CGT on any gains made on disposal of the ISA. Income and gains arising in funds wrapped in an ISA are also tax free.

Main Types of ISA

There are several different ISAs available, ranging from simple cash accounts to stockbroker-managed funds.

The most common are:

Unit Trust and OEIC ISAs

These are very popular as they provide a broad spread of holdings for relatively small investments. ISAs may be linked to one or more funds; many managers offer an extensive choice of funds.

Corporate bond ISAs, based on unit trusts and OEICs, have also proved popular; in particular, high-yield bond funds, which invest in sub-investment-grade bonds, have attracted many income seekers.

ISAs may also be invested in UK UCITS and FCA-recognised UCITS.

Cash ISAs

The cash ISA is basically a tax-free deposit account.

A full range of instant access and fixed-term and/or fixed-rate accounts is available. A handful of providers offer terms linked to stock market index performance rather than to interest rates.

Self-select ISAs

These allow the more sophisticated investor to select their own equity and bond holdings, including collective funds.

Certain account managers restrict their choice to FTSE 100 constituents, but others allow investors to choose any eligible investment.

Managed ISAs

Some stockbrokers use ISAs as a component of large equity portfolios. The CGT freedom of ISAs means that they can be used to shelter the actively traded part of a portfolio.

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Subscription Limits

There is a maximum that can be saved, which can be in one ISA type or split across some or all ISA types.

In 2025/26, the maximum annual subscription is £20,000, although the maximum that can be saved in a Lifetime ISA is £4,000.

Investment Eligibility

The permissible list of investments is extensive; however, most ISAs are invested in cash or stocks and shares products.

All products are subject to ‘Stakeholder conditions’.

These conditions include:

• maximum charges that can be levied by product providers and advisers
• minimum investment levels
• how contributions can be made
• withdrawal timeframes

Stocks and shares ISAs have limits regarding the number of risky investments that can be held, and for cash ISAs, the interest rate paid must be at least 1% below the Bank of England base rate.

Taxation of ISAs for Expats

Cash ISAs are taxable as savings or investment income. Interest earned is taxed as if the funds were held in a deposit account. Rates vary from one country to another. In Spain, for example, these range from 19% to 28%.

No Capital Gains Tax applies; withdrawals are treated as ‘return of capital’ and not taxed.

Stocks and Shares ISAs are subject to Investment Income and Capital Gains Tax.

Any dividend or income payments will be subject to Investment Income Tax, and withdrawals may be subject to CGT, depending on the availability of personal allowances and other sources of income.

What Happens if I Return to the UK?

If you return to the UK and become UK tax resident again, you can resume contributions to your ISA, subject to the annual subscription limits in force at that time.

Investments that remained within the ISA during your time abroad will continue to benefit from their UK tax-free status once you return.

Common Mistakes Expats Make With ISAs

Many expats assume their ISA will remain tax-free everywhere, which is not always the case. Common mistakes include:

• Assuming ISA tax benefits apply internationally
  
• Continuing to hold ISAs without understanding local tax treatment
• Failing to restructure investments before becoming tax resident abroad
• Not checking whether their ISA provider allows overseas clients

Many expats on financial forums report being surprised by taxation in countries like Spain or France, where tax authorities do not recognise the ISA wrapper.

Solutions

Spain, France, and Portugal all allow investment into tax-efficient ‘Investment Bonds’.

Conditions vary by country; however, all are free of CGT and Investment Income tax.

Insurance Companies issue Investment Bonds; to qualify for the generous tax benefits, they must comply with local regulations.

In Spain, these include:

• the policy is offered by a company based in an EU country
• a fiscal representative is appointed
• fund choice is limited to those that are registered under UCITS legislation

There are literally thousands of UCITS funds available in Ireland and Luxembourg, so no shortage of options.

Tax benefits apply from day 1, making Spanish Bonds an ideal way of providing income from investments.

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Tax might be payable on income withdrawals at much lower rates than on equivalent investments. If no withdrawals are taken, no tax will be payable.

France and Portugal are a little more flexible regarding the availability of investment options. A wider variety of funds and securities can be accessed whilst retaining ‘gross roll-up’ and no CGT or Investment Income Tax.

Tax is payable on withdrawals, again at lower rates than equivalent investments, and after 8 years, a tax free allowance of Euro 4,600 applies in France and a real rate of 11.8% in Portugal.

Timing

Anyone who is in the process of becoming tax resident in Spain, Portugal, or France should consider selling their ISAs whilst they are still free of taxation.

Funds can then be reinvested in compliant insurance company investment plans.

Those who are already tax resident need to calculate the optimal time to either sell and reinvest or transfer assets ‘in specie’ to a compliant Bond. In specie simply means re-registering ownership of funds from one custodian to another. Tax advice should be taken before embarking on an in-specie transfer

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Summary

Understanding how your host country's government will treat your ISA should be a key component of your overall financial plan if you are moving abroad. While your ISA remains an extremely tax-efficient way for you to save money while still a U.K. resident, the treatment of your ISA varies widely by each foreign country and its respective laws.

With proper planning, you may be able to reposition your investments to maximise the tax benefits afforded by your new country of residency. Registering with the local authorities, finding a property, changing your driving license, and perhaps sourcing schools are just a few of the many tasks that need to be completed.

One of the most important, however, is adapting your financial planning to a new regime. Early planning is essential to make sure you are fully prepared financially for the new environment you will find yourself in. Using the services of a tax adviser and qualified financial adviser will make your life much easier. As the old saying goes, if you fail to plan, you are planning to fail.

Axis Financial Consultants specialises in providing financial advisory services to U.K. citizens living in Europe, including France, Spain, and Portugal.

If you would like to learn "what happens to my ISA when I move abroad?" or are looking to review your financial plans for the transition to your new country of residency, please contact us to receive personalised advice services based on your unique financial situation.

Frequently Asked Questions About ISAs and Moving Abroad

I am going to live outside the U.K., do I need to close my ISA?
No, you don't need to close it; however, you will not be able to make further contributions to your ISA.

Can I open another ISA and take advantage of the U.K.'s high tax free allowance (currently £20,000 per year)?
No, you cannot open another ISA while you are living outside the U.K. unless you are a Crown Employee working abroad.

How does my ISA relate to the taxes I pay abroad?
Your ISA income will likely be taxable in your foreign country. Many foreign countries will view your ISA as an investment and charge you normal capital gains tax rates, or higher, on the gains you earn on those investments.

Do I need to sell my ISAs before I move abroad?
Not necessarily, but this decision is best made with professional guidance. The decision to sell your ISA(s) before moving abroad will depend greatly upon your specific country of residency and your individual tax status.