What is an offshore bank account?

Interested in opening an offshore bank account? You might think that this kind of account is only for super rich CEOs or shady tax-avoiding businesses, but it’s actually perfectly legal to open one as a UK citizen.

In fact, you could find that having an offshore account comes with lots of useful benefits, especially if you’re someone with family connections or business activities in other countries.

In this guide, we’ll explain what offshore banking is (and what it’s not). This includes looking at features, benefits and fees, along with the ins and outs of managing an offshore account.

Also, check out an alternative, cost-effective way to manage your money across borders – the Wise account from the money services provider Wise. It’s not an offshore bank account but offers many similar features as an international bank account does.

With the Wise account, you can spend, hold and convert money in 40+ currencies and send secure international transfers to 160+ countries for low fees* and the mid-market exchange rate. Your money is always safeguarded and you’ll also get dedicated support when sending large amount transfers.

Learn more about the Wise account 💰

Table of contents

What’s offshore banking? What’s an offshore bank account? Can you legally have an offshore bank account as a UK resident? Why would you need an offshore bank account? Features and benefits of offshore bank accounts How to deposit and withdraw money from an offshore bank account? Which countries are the best to open an offshore bank account in as a UK resident? How much does it cost to open an offshore bank account? Can you open an offshore account online for free? Move and manage your international money with Wise

What’s offshore banking?

Offshore banking relates to banking activities that take place outside of the account holder’s home country. The term usually refers to holding a bank account in a country you don’t live in.

Offshore accounts and financial services are commonly used by global businesses and multinational corporations, as well as individuals with connections to other countries.

What’s an offshore bank account?

An offshore bank is a current or savings account held in a foreign country. This kind of account lets you hold money, make and receive payments in a different currency (or even multiple currencies).

It’s also possible to open investment accounts, trust accounts and private offshore accounts in other countries.

The aim of an offshore account is to make it simpler to manage money and transactions across multiple countries and currencies. They’re often used by businesses or people who have property, work or other connections to another country.

Offshore accounts are also useful for expats, who have a UK bank account and possibly also a local bank account in the country they’ve moved to. Opening an additional offshore account can be helpful for saving, investment and managing money while living abroad.

We’ll look at some of the other benefits and uses of offshore accounts in just a moment.

Can you legally have an offshore bank account as a UK resident?

Yes, it’s perfectly legal for UK residents to hold offshore bank accounts in other countries. A common misconception of offshore accounts is that they’re linked to illicit or illegal activity, including things like avoiding tax or hiding the proceeds of crime.

But that’s exactly how an offshore bank account should not be used.

As a UK resident, you can open an offshore account but you need to make sure you declare any interest earned on your balance to HM Revenue & Customs (HMRC).¹

The same rules, allowances and penalties apply to offshore accounts as they do to ordinary current and savings accounts held in the UK. If you fail to declare the interest you earn on the account to HMRC, you could face serious consequences.

There’s also the commonly held belief that offshore accounts are only for the super rich. This isn’t strictly true.

While it is the case that offshore accounts tend to have higher fees than ordinary accounts, and that some banks require you to have a minimum income or savings amount to be eligible for an account - in most cases, anyone can open one.

Why would you need an offshore bank account?

There are lots of reasons you might want to open an offshore account in another country. Here are just a few scenarios in which it might be useful:

• For UK expats who are living and/or working abroad, or who are planning to do so in the near future. If you can’t keep your UK account and aren’t ready (or eligible) to open a local one, an offshore account can be a useful solution.
• For UK retirees living in another country or planning a move
• For people who make regular trips between countries for business, or those whose jobs require them to take on international assignments
• For freelancers or contractors who get paid in foreign currencies
• For people with assets overseas, such as property or investments
• For families spread across countries, who rely on each other for financial support (i.e. covering school fees).

Features and benefits of offshore bank accounts

Offshore bank accounts are often thought of as complex to set up and use, but most actually work in a very similar way to a regular bank account.

If you opt for a current account, you’ll usually get a debit card. Online and mobile banking also tend to come as standard.

Although it varies depending on the bank and account, other features and benefits include:²

• Hold, send and receive money in multiple currencies
• See live exchange rates and manage foreign exchange, reducing unnecessary currency conversion (and associated fees).
• Access investment advice from international banking experts (depending on the bank)
• Potential tax benefits for savings and investments in multiple currencies - although this really depends on the account, country, currency and your personal circumstances.
• The chance to keep the same bank account even if you move between countries a lot.
• Easier financial transactions for businesses, including the management and mitigation of foreign exchange risks.

There is one potential drawback to bear in mind though. As they’re held with entities outside the UK, most offshore accounts won’t offer Financial Services Compensation Scheme (FSCS) protection of up to £85,000 a person for your money. This protection is designed to safeguard your money in case the bank goes bust, and it’s what all major banks offer here in the UK.²

However, some offshore accounts have other forms of protection in place, or fall under other schemes which work similarly to the FSCS.²

How to deposit and withdraw money from an offshore bank account?

Most offshore bank accounts these days can be managed through online banking, with some having mobile banking apps too.

This means you can deposit and withdraw money electronically, by setting up a transfer. Just be aware that this will likely count as an international transfer(i.e. if you’re sending to and from a UK account) so fees may apply.

Which countries are the best to open an offshore bank account in as a UK resident?

A number of countries have become known as offshore banking hubs, with the islands of Jersey and the Isle of Man being particularly popular destinations for offshore divisions of UK banks.

Here are some of the other best countries to open offshore bank accounts:

• The Cayman Islands
• Gibraltar
• Singapore
• Switzerland
• Luxembourg
• Monaco
• Hong Kong
• Bermuda
• Belize
• Panama
• The Netherlands
• France.

📚 Read more: Best online bank accounts in the UK

How much does it cost to open an offshore bank account?

Although it depends on the bank, offshore bank accounts do tend to come with some fees. These can be higher than for ordinary current and savings accounts in the UK.

Some accounts may have a monthly maintenance fee, which may be waived if you can maintain a minimum balance.

Other fees you may encounter with offshore accounts include:

• International transfer fees
• ATM withdrawal fees
• Underfunding (failure to maintain a minimum balance) or inactivity (not using the account for a long time) fees
• Overdraft fees and interest.

Can you open an offshore account online for free?

There are certainly offshore accounts that have no monthly fees, and most can be opened online.

But you’re likely to find that these have strict eligibility requirements, such as a minimum income, savings or investments. Fees may be waived only if you can maintain a minimum balance, which in some cases is set at many thousands of pounds (or the currency equivalent).

Remember that it always pays to read the small print before opening an account. You need to make sure you can afford any fees and that the account will be cost-effective for you, as well as checking that you meet the eligibility requirements.

Move and manage your international money with Wise

Love the thought of low fees, great exchange rates and an easy way to send money worldwide? Open a Wise account online and you can start managing your money in 40+ currencies. It’s not an offshore bank account but offers many similar features as an international bank account does.

With Wise, you can send international payments worldwide to 160+ countries for low fees* and mid-market exchange rates. All transfers are secure and trackable, and when you’re sending large amounts you’ll also get dedicated support.

There’s even a Wise card you can get for a one-time cost of £7 for spending in 150+ countries. This clever card automatically converts your pounds to the local currency at a great rate, only adding a tiny, transparent conversion fee – or it’s free if you already have the currency in your Wise account.

Sign up with Wise today 💰

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And that’s it - our complete guide to offshore bank accounts. We’ve covered what they are and how they work, along with info on fees, features, benefits and how to manage this kind of account.

Importantly, we’ve also busted some myths and misconceptions about offshore banking. Rather than being linked to secretive and illicit financial activities, offshore accounts are actually perfectly legal for UK citizens and can genuinely be quite useful.

After reading this, you should be all set to compare options and decide the right kind of international money management solution for your needs.

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Sources used:

1. Gocompare - Offshore banking
2. HSBC Expat - What is offshore banking?

Sources last checked on date: 07-06-2024