Home » United Kingdom » How To Open A Bank Account In The UK – A Guide For Expats

How To Open A Bank Account In The UK – A Guide For Expats

When it comes to opening a bank account it’s a straightforward process and much easier than it used to be.

As with British expats moving overseas, the easiest way to open a UK bank account is to do so in the expat’s own country as the process is easy and safe. It also means there’s one fewer task to complete when the expat lands in the UK.It should also be appreciated that some major world banks also have a presence in the UK, and for US expats they should take a close look at the offerings from the Bank of America and Citibank, for example, who provide bank accounts with overdrafts and low transaction fees or free banking.

For those who choose to open a bank account in the UK once they arrive, then they need to ensure they take the correct forms of identification – after first making an appointment to open an account with their chosen bank account provider.

Expats will also need proof of their address and a valid form of ID. Some expats applying for a UK bank account might also need to provide their contract of employment as well as a HM Revenue & Customs P2 ‘PAYE Coding Notice’.

Expats working in the UK for an employer should know that PAYE stands for ‘Pay As You Earn’, since everyone pays income tax at source via their employer directly to HMRC rather than completing an annual tax return. This means that all employees have their HMRC identification and this could be invaluable since it proves that the person applying for a bank account is not just a valid employee but also a taxpayer. Some banks may also require that the expat provides a National Insurance (NI) number.

There are some very obvious benefits for having a UK bank account rather than an international account for expats; these include not having to deposit any money for the account to become active.

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It’s also important to appreciate that there are two types of banks in the UK; there’s the standard bank account, which most expats will already be familiar with, and also building societies which offer banking facilities. The difference between the two is that building societies are mutual institutions, so the members are effectively its shareholders though many building societies are now actually banks and banks are listed on the stock market.

Choose a bank that is well known

The services provided by building societies and banks are very similar. It is however useful to choose a bank that is well known and offers free or cheap banking.

Lloyds TSB is a popular choice among expats; in addition to not needing a deposit, there’s also no application fee and free Internet and phone banking facilities. There is no monthly charge on their classic account and all applicants get a Visa debit card.

Another popular British bank for expats is HSBC, which likes to describe itself as the ‘world’s local bank’, and again they do not require a deposit and there’s also no application fee.

However, there is a minimum term for the expat account of one year and it does come with a monthly charge of £6 but includes free Internet and phone banking. There’s also a Visa debit card and a big network of free ATMs to use.

Another of the big banks is NatWest and they too don’t have an application fee, nor do they need a deposit. Again they issue a debit card and have a big network of ATMs to access as well as free Internet and phone banking.

Alongside these big players are Barclays and Santander – who have branches around the world – while the big building societies are Halifax and Nationwide. They all offer different services to attract customers and pay different rates of interest on savings and current accounts.

As for the terminology, a standard account is called a ‘current account’, which some expats may know as a checking account in their own country.

Essentially, a current account enables an expat to pay in their salary and create direct debits, as well as standing orders to pay bills including their mobile or cell phones, and many also offer overdraft facilities when required. Expats will also receive a debit card and a cheque book.

Another potential hiccup for an expat wanting to open a UK bank account – and this is also one that affects British expats moving overseas – is having a good credit score, which is a basic requirement for most current accounts.

For expats new to the country, it’s highly unlikely that they will have a credit file that the banks can refer to as this will record their credit history including repaying credit cards, overdrafts and using other forms of credit.

In recent years, banks have begun offering a very basic bank account for people with a poor credit history in the UK and these are also accessible for expats. Indeed, these basic bank accounts may be the better choice for them since they will still be able to receive their salary in the account, set up direct debits and withdraw cash from ATMs.

However, expats wanting a basic bank account in the UK should appreciate that these do not come with a chequebook and they do not have overdraft facilities. This means the expat will not be able to take out more cash than they have in the account.

In addition to current bank accounts and basic bank accounts, British banks also offer packaged accounts and these carry a monthly charge but come with a range of benefits including travel and mobile phone insurance as well as car breakdown cover. All the banks offer them and all have different benefits attached.

Banks in the UK also offer some very good bank accounts for students and postgrads travelling to the UK for their studies from overseas. Again, they come with a range of benefits and fees, many of which are free to open and use.

This issue of fees and charges brings us nicely on to how an expat should choose a UK bank account provider.

Along with the bank charges, some banks will charge fees for going overdrawn and processing cheques. Some banks also pay interest on a bank account balance that is kept in credit while others offer incentives for customers to open an account by crediting money to it.

An expat moving to the UK will also need to appreciate whether they want to deal with their bank in person, over the telephone or with online access. All banks offer online and telephone access and some banks are purely based on the Internet and do not have a High Street presence; these are often cheaper to use and it may be easier to open an account with them as well.

These banks can be contacted out-of-hours and on Bank Holidays and are growing in popularity for those who don’t need to visit a branch and just want a good bank account to enjoy.

Another important issue to remember is that the UK is not part of the euro, which is the single currency for the European Union, and instead has retained the British Pound.

If the expat is described as a high net worth individual then it might be more suitable to have an offshore bank account set up. Most major UK banks will be able to provide this facility. Generally, these accounts are only available for expats who have a large sum to invest and they will, probably, be allocated a relationship manager.

Expats moving to the UK should also appreciate differences in terminology; very few people refer to ATMs and instead will call them ‘cash machines’, ‘cashpoints’ or ‘holes in the wall’. Though it does help that many will have the letters ‘ATM’ printed on the front of them.

There are around 60,000 ATMs across the UK and most are free to use but some do carry a charge – this is clearly stated on the ATM.

In addition to most banks not charging for their banking accounts, unlike many other countries, there’s also the potential of being asked for ‘cashback’, or being offered the facility, which means the expat can get cash when they pay for goods in a shop with a debit card. This is particularly useful when there is no ATM nearby.

Savings accounts

Alongside current bank accounts, all banks and building societies offer savings accounts and again there’s a wide range available with lots of differences. The main attraction is how easily an expat can access their savings when necessary.

Most savings accounts in the UK need a minimum balance to ensure the account remains open and expats interested in them should look closely at the rate of interest being paid on the credit balance. Generally, savings accounts pay a higher rate of interest than a current account, but there’s a wide range of rates being offered.

Alongside these, banks and building societies also offer restricted access accounts which pay a higher rate of interest, but the account holder does not have instant access to their funds.

For expats looking to live and work in the UK for a lengthy period who are taxpayers, it’s worth looking at accounts that offer tax free savings for basic rate taxpayers as this means the expat will not be taxed on the interest earned on their money.

Once the expat has lived long enough in the UK to be termed as a resident they are then able to open an ‘Individual Savings Account’ (ISA) which will give them a variety of savings options that will be free of tax on the interest earned.

Essentially, while the process for an expat to set up a bank account in the UK is easy, the hardest part is actually deciding which of the many institutions will be the best banking provider for their needs.

More information

For expats moving to the UK to open a bank account there’s a wide range of choice which can appear to be bewildering. Help is available online, including the government’s Money Advice Service and also online comparison websites that may offer more details.

For more information about the taxes the expat will be paying in the UK and for National Insurance numbers and registering with HMRC for PAYE purposes, visit the HM Revenue and Customs website.

The HSBC also offers a helpful guide for expats moving to the UK that details the types of bank accounts available and their benefits along with other helpful financial advice.

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