Create your own tax haven: How to a generate a tax free income in the UK

There are a number of ways to create an income when you become a tax resident in the UK that is free of tax, in effect to create your own tax haven.

Everyone receives a tax free allowance of £11,500 per year (2017/18), this is the amount before you are subject to income tax. There are other allowances such as savings starting rate (£5,000) and dividend allowance (£5,000) before you would pay tax on those assets. There is also capital gains allowance (£11,300) that can be utilised every year. In total, this could be £32,800 per year income before any tax is paid.

Furthermore there is option to use offshore bonds to generate a further tax free income into the UK. Whilst you're overseas as an expat you can build up a fund in this investment vehicle that will allow you to withdrawal the capital when you're in retirement. Regular withdrawals can be taken from an offshore bond soon after investing or that decision can be deferred until a future date.

This can be done through the 5% deferred tax withdrawal facility, which allows you to turn your existing capital into a tax-efficient income stream. A growth investment strategy can be followed initially, with a subsequent switch into income generating investments if and when that is desired. With the 5% deferred tax withdrawal facility you can take regular withdrawals from your offshore bonds, accessing the capital in a tax efficient way by withdrawing up to 5% of each investment amount every year without an immediate liability to tax. This is a very valuable benefit for higher rate taxpayers.

This 5% amount can be taken every year for 20 years, or accumulated over a number of years and withdrawn less frequently without triggering a chargeable event for tax purposes. There are a few other allowances that can be used with the account depending on how long you have been a non-UK resident. the ability to assigned the plan to other people or a trust is helpful when conducting financial planning.