What should I do with my ISA now that I live in Ireland?

 

An ISA stands for Individual Savings Account and it is a type of tax-efficient savings and investment account available to residents in the United Kingdom.

Ireland does not currently offer an equivalent savings structure with pensions currently the only real way for Irish residents to benefit from tax relief and tax-free growth.

Now that you are an Irish tax resident, you have a number of options as to what you do with your ISA.

 

Option 1 – Leave the funds in the current ISA Structure

As ISA’s aren’t an Irish product, this means they aren’t tax efficient from an Irish perspective. An Irish resident holding an ISA is taxed on a look through basis on the underlying investment funds. In most cases, ISA’s are invested in UCIT finds which are subject to exit tax in Ireland at a rate of 41% on both income and gains. This 41% Exit tax needs to be applied every 8 years regardless of whether any gains are crystalised or not! This is quite punitive compared with other options available.

As ISA’s are a UK based product, the administrators of the ISA will not deduct Irish tax at source, which means that an accountant will be required to carry out complicated and expensive returns. This is almost impossible to navigate for an individual DIY investor.

In the majority of cases, leaving funds in an ISA is not recommended once an individual becomes Irish tax resident.

 

Option 2 – Move the funds to an alternative structure

The type of structure you move to will depend on your tax status in Ireland.

 

2a. Irish resident and Irish Domiciled

In this instance, the individual will be liable to tax on their worldwide assets so it would make sense to move the funds to a tax compliant investment account in Ireland for ease of administration of tax returns as depending on the structure, the administrator will deduct the necessary taxes at source or else produce a document annually detailing the taxes due.

There are different types of investment structures in Ireland such as investment bonds which are subject to Exit Tax or alternatively, an individual can establish a share dealing account which can hold direct shares or investment trusts – these investment instruments are subject to the more favorable Capital Gains Tax regime.

 

Some Highlights of CGT Investing:

 

 

We can advise the most appropriate structure for you taking account of your personal circumstances and overall financial plan.

 

2b. Irish resident and Non-Irish Domiciled

If an individual falls into the category where they are resident in Ireland but not domiciled in Ireland, they should elect to be taxed under the ‘remittance basis of taxation’. In this instance, they will only be taxed on Irish-sourced income and gains, as well as foreign income and gains that are remitted (brought) into Ireland. This is much more favorable as the individual can leave assets to grow tax-free outside of the state once they are held in the appropriate structures.

This can give opportunity to those who hold ISA’s as they could move these funds into a structure designed to benefit from the ‘remittance basis’ status rather than leaving them in the ISA structure which will lead to complicated tax returns and 41% exit tax being paid every 8 years.

In order to do this, the account needs to be established in a country outside of Ireland and the instruments held in the portfolio need to be classified as non-EU collective instruments. We have access to fund managers who design portfolios specifically with this remit for the benefit of non-domiciled individuals.

 

Contact us

Please contact us should you want us to review your overall financial plan including any ISA’s you currently hold.