Large uplift in salary - investment advice?
Discussion
I’m in the fortunate position of having an opportunity that would see my take home pay significantly uplifted.
Current situation is as follows: 26, no kids, own house shared with partner, approx £2600 avg take home pay with £1300pm mortgage/living costs etc. Spend around £750-1000pm and therefore save around £300-500pm.
New opportunity would mean monthly take home increasing to approx £7500pm (£6500 salary/£1000 rental income). Would require moving abroad.
I want to strike a balance between being able to enjoy/reward myself and live comfortably but also conscious that this is likely to be time limited (likely to be circa 10 years). In terms of budgeting I am looking at £1500pm anticipated living costs, £1500pm average expenditure and £1000 on vehicle finance to cover large toys ie. car/motorbikes (playing the low depreciation game to ultimately save more in long run but will remove this figure from budgeting for this purpose). Which leaves £3500pm saved.
I have £30k as a starting ‘pot’ alongside the monthly income to begin.
Interested to hear how people would approach this - my left of arc would be to invest in low-medium risk funds which would return say an average of 5% pa which would leave me with circa £650k after 10 years. Comfortable but I do want to leverage this level of income as much as possible and can’t help but feel there could be more to be made through combining with some higher risk such as BTL on UK properties (given non resident landlord tax advantage whilst living abroad).
I will fully admit I’m fairly naive in this area and have until now kept my money tied up in assets that I can enjoy rather than planning for the longer term - but the significant opportunity here if I play my cards right to produce significant extra cash flow / earlier retirement etc are not lost on me and so very interested to hear how others would approach in the same situation!
Caveated that any route I did go down would be done in conjunction with professional advice etc...
Cheers!
Current situation is as follows: 26, no kids, own house shared with partner, approx £2600 avg take home pay with £1300pm mortgage/living costs etc. Spend around £750-1000pm and therefore save around £300-500pm.
New opportunity would mean monthly take home increasing to approx £7500pm (£6500 salary/£1000 rental income). Would require moving abroad.
I want to strike a balance between being able to enjoy/reward myself and live comfortably but also conscious that this is likely to be time limited (likely to be circa 10 years). In terms of budgeting I am looking at £1500pm anticipated living costs, £1500pm average expenditure and £1000 on vehicle finance to cover large toys ie. car/motorbikes (playing the low depreciation game to ultimately save more in long run but will remove this figure from budgeting for this purpose). Which leaves £3500pm saved.
I have £30k as a starting ‘pot’ alongside the monthly income to begin.
Interested to hear how people would approach this - my left of arc would be to invest in low-medium risk funds which would return say an average of 5% pa which would leave me with circa £650k after 10 years. Comfortable but I do want to leverage this level of income as much as possible and can’t help but feel there could be more to be made through combining with some higher risk such as BTL on UK properties (given non resident landlord tax advantage whilst living abroad).
I will fully admit I’m fairly naive in this area and have until now kept my money tied up in assets that I can enjoy rather than planning for the longer term - but the significant opportunity here if I play my cards right to produce significant extra cash flow / earlier retirement etc are not lost on me and so very interested to hear how others would approach in the same situation!
Caveated that any route I did go down would be done in conjunction with professional advice etc...
Cheers!
Edited by Bordtea on Wednesday 18th November 02:52
Usually the larger incomes associated with overseas working entails a certain amount of additional hardship. The important thing is to do it with some sort of goal in mind. Another couple of hundred K in the bank is not really a goal. Once you have some sort of idea what you want to do with it you can start to shape your investment plans. If you don't really have a plan the temptation to just fritter it away is too great as is the temptation to extend you spend to meet your income.
Where are you moving to? I know a family who moved to Dubai, and whilst he is earning a lot on paper, the cost of living takes up a large chunk of this. From what I understand the rent is expensive and they have had to pay for private school.
Their plan was to go out there and save a deposit to buy a house in the UK, but judging by their Facebook updates I think they will come home with nothing eventually.
Their plan was to go out there and save a deposit to buy a house in the UK, but judging by their Facebook updates I think they will come home with nothing eventually.
I would echo this that depending on where you move to that living costs can get considerably higher ..
My salary tripled from moving from U.K. to Switzerland ... while I am saving the cost of living mainly being rent, health Insurance and Nursery fees take a large chunk of the uplift.
Where are you moving too?
My salary tripled from moving from U.K. to Switzerland ... while I am saving the cost of living mainly being rent, health Insurance and Nursery fees take a large chunk of the uplift.
Where are you moving too?
Simpo Two said:
One word not mentioned is 'pension', that you might like to add to the list for consideration. But you won't be able to take it out in 10 years of course.
Usually this would be good advice due to the massive tax benefits. However in this instance we have no idea as investment strategy will be highly influenced by the tax rules and implications of the country of residence. It might be the worst thing to do as no tax benefits and capital tied up for 40 years.I did the same at your age for more money, the reason they pay more is that it’ll be more expensive!
Will your girlfriend be going with you? Does she have a visa to work? Can she stay full time? (This put paid to our move to California). You may need to give some to her, similar to what she earns today.
Pay down your mortgage, maximum allowed, there shouldn’t be any real tax implications unless you sell the property as a non-resident (so don’t), your ISA / pension allowances will change as a non-resident, I took the option to stay in the UK social system due to a dual taxation agreement with Germany so kept my UK DB pension and continued to make UK NI contributions.
All depends where you are going and the agreement with the UK.
ETA; currency fluctuations are real! It may not seem much but the EUR:GBP went from about 0.7 to 0.9 whilst I was away, it’s a big difference.
Have a look at the last currency changes and move it 10% each way to see what it does to your budget, do you plan on sending funds back to the UK, etc.
Will your girlfriend be going with you? Does she have a visa to work? Can she stay full time? (This put paid to our move to California). You may need to give some to her, similar to what she earns today.
Pay down your mortgage, maximum allowed, there shouldn’t be any real tax implications unless you sell the property as a non-resident (so don’t), your ISA / pension allowances will change as a non-resident, I took the option to stay in the UK social system due to a dual taxation agreement with Germany so kept my UK DB pension and continued to make UK NI contributions.
All depends where you are going and the agreement with the UK.
ETA; currency fluctuations are real! It may not seem much but the EUR:GBP went from about 0.7 to 0.9 whilst I was away, it’s a big difference.
Have a look at the last currency changes and move it 10% each way to see what it does to your budget, do you plan on sending funds back to the UK, etc.
Edited by Lord.Vader on Wednesday 18th November 11:31
Edited by Lord.Vader on Wednesday 18th November 11:45
Lord.Vader said:
ETA; currency fluctuations are real! It may not seem much but the EUR:GBP went from about 0.7 to 0.9 whilst I was away, it’s a big difference.
Have a look at the last currency changes and move it 10% each way to see what it does to your budget, do you plan on sending funds back to the UK, etc.
Good point, I worked in Australia for 3 years and in that time the rate went from 1.6 AUD/GBP (Happy days, earning a fortune) to 2.2 AUD/GBP (Really depressing, ment I was earing less than I was in the UK).Have a look at the last currency changes and move it 10% each way to see what it does to your budget, do you plan on sending funds back to the UK, etc.
On the OK salary I was on at the time, that ment a difference of £1000 a month between the best and worst exchange rates.
And if you don't transfer it and decide to do it all when you move back to the UK the exchange rate could make a massive, massive difference.
That was one thing I really didn't like, if I had timed it right I would have been £10K plus better off over 3 years.
Thanks all for very useful responses - certainly some aspects to consider!
Destination is Belgium - but the tax situation is a little complicated as I will be working for an international organisation where salary is exempt from income tax. The figures in the original post are calculated based on my understanding of remaining liability to social security payments/health insurance etc and budgeted approx 40% extra 'disposable' over what I have now to address increase in beer costs etc.
Living costs of £1500/1700 euros from internet googling should be enough to cover cost of decent 1/2 bed apartment around the outskirts of Brussels with secure parking for bikes/car and basic utilities/food. Intention would be to rent whilst out there, not least due to massive (approx 15%) cost of stamp duty/legal fees equivalent for purchase of property. Cash likely better put back into UK property; as below!
On other points raised:
Currency fluctuation - a very good point, clearly the Euro is strong against the pound at the moment but this could very feasibly change over the next few years. There is an option of withdrawing 50% of salary in GBP, based on exchange rate at the time. I will move most back to GBP eventually I imagine, so this might be worth considering
Pension - I'm glad this has been brought up as I am in two minds here. I currently contribute 5.5% of salary / employer 21% (have been since I was 21) and the new position would be an 8% / 13% split. At the moment I am tempted to opt out of the pension scheme for at a few years and use that money to plow into the more 'high risk' side of things to ultimately produce more income. If I were older I may think differently but I already have a decent amount in pension pot given my age and the circa 500 euros p/m is possibly better off going towards the proposed BTL portfolio. Fully accept this could be completely mental, again pension is not really something I've majorly considered before now...
UK NI Contributions - another good point that hadn't crossed my mind at all. Can anybody point me in the direction of a source to help understand the implications of this?
Renting UK property - again good advice around damage to home upon return and factoring that in. My understanding is there is a flat 20% rate of tax for non resident landlords, but crucially the £12,500 personal allowance is retained. What I haven't yet been able to find is whether the 20% rate remains no matter how much rental income you have (ie. if you had multiple BTL properties as well), or whether there are thresholds where the rates increase. I think it's the former but haven't been able to confirm this. If this is the case, IMO it pushes me heavily towards investing substantial amounts of the money into UK property (which wouldn't be double taxed due to agreement with Belgium).
Partner - Doctor, trainee Anaesthetist. Ongoing training programme so would remain in UK for next 3 years (as seems very difficult to transfer across at this stage) and then subsequently move out and work in Belgium once she is at registrar level. Luckily is quite adept at languages! Haven't been able to find out much info about doctors pay in Belgium, other than the average being somewhere between 120k-190k euros per year (which will reduce heavily after tax), but this could be based on consultant pay for all I know; not much info to go on! If anyone happens to have any insight please do let me know!
Destination is Belgium - but the tax situation is a little complicated as I will be working for an international organisation where salary is exempt from income tax. The figures in the original post are calculated based on my understanding of remaining liability to social security payments/health insurance etc and budgeted approx 40% extra 'disposable' over what I have now to address increase in beer costs etc.
Living costs of £1500/1700 euros from internet googling should be enough to cover cost of decent 1/2 bed apartment around the outskirts of Brussels with secure parking for bikes/car and basic utilities/food. Intention would be to rent whilst out there, not least due to massive (approx 15%) cost of stamp duty/legal fees equivalent for purchase of property. Cash likely better put back into UK property; as below!
On other points raised:
Currency fluctuation - a very good point, clearly the Euro is strong against the pound at the moment but this could very feasibly change over the next few years. There is an option of withdrawing 50% of salary in GBP, based on exchange rate at the time. I will move most back to GBP eventually I imagine, so this might be worth considering
Pension - I'm glad this has been brought up as I am in two minds here. I currently contribute 5.5% of salary / employer 21% (have been since I was 21) and the new position would be an 8% / 13% split. At the moment I am tempted to opt out of the pension scheme for at a few years and use that money to plow into the more 'high risk' side of things to ultimately produce more income. If I were older I may think differently but I already have a decent amount in pension pot given my age and the circa 500 euros p/m is possibly better off going towards the proposed BTL portfolio. Fully accept this could be completely mental, again pension is not really something I've majorly considered before now...
UK NI Contributions - another good point that hadn't crossed my mind at all. Can anybody point me in the direction of a source to help understand the implications of this?
Renting UK property - again good advice around damage to home upon return and factoring that in. My understanding is there is a flat 20% rate of tax for non resident landlords, but crucially the £12,500 personal allowance is retained. What I haven't yet been able to find is whether the 20% rate remains no matter how much rental income you have (ie. if you had multiple BTL properties as well), or whether there are thresholds where the rates increase. I think it's the former but haven't been able to confirm this. If this is the case, IMO it pushes me heavily towards investing substantial amounts of the money into UK property (which wouldn't be double taxed due to agreement with Belgium).
Partner - Doctor, trainee Anaesthetist. Ongoing training programme so would remain in UK for next 3 years (as seems very difficult to transfer across at this stage) and then subsequently move out and work in Belgium once she is at registrar level. Luckily is quite adept at languages! Haven't been able to find out much info about doctors pay in Belgium, other than the average being somewhere between 120k-190k euros per year (which will reduce heavily after tax), but this could be based on consultant pay for all I know; not much info to go on! If anyone happens to have any insight please do let me know!
Edited by Bordtea on Wednesday 18th November 18:05
Edited by Bordtea on Wednesday 18th November 18:07
Edited by Bordtea on Wednesday 18th November 18:09
Pension: if your company is doing contribution matching or similar then this is effectively free money so make the most of that by contributing as much as they will match.
NI: the UK has reciprocal arrangements with many countries where if you contribute to that country's equivalent state scheme then those are recognised as UK contributions if you retire and draw your pension in the UK. Conversely if you stay in the overseas country and draw state pension there when you retire then your previous UK contributions count towards that pension entitlement. Not sure what the position is with EU countries (I lived in NZ and Oz) or what impact Brexit will have but the hmrc.gov website will tell you all you need to do. For a government site it's actually very well laid out and easy to grasp the basics.
Exchange rate: I don't see this as an issue unless you are holding large amounts of cash or making big one off transfers e.g. to buy a house. If your investments are going into global funds and equities then they sort of take care of themselves as it doesn't matter what currency the initial purchase was in. The best bit of advice for this is once you are overseas forget about what the GBP equivalent of stuff you need to buy is. Exaggerated example but say you pay €1 for a loaf of bread on Monday the UK conversion might be £1. On Friday the exchange rate has moved massively and the GBP equivalent is £2. Your're no worse off as your loaf of bread has still cost you €1 and as you are paid in Euros it makes no difference. Seriously - for all day to day stuff and regular saving just forget about the exchange rate - it'll drive you insane otherwise.
NI: the UK has reciprocal arrangements with many countries where if you contribute to that country's equivalent state scheme then those are recognised as UK contributions if you retire and draw your pension in the UK. Conversely if you stay in the overseas country and draw state pension there when you retire then your previous UK contributions count towards that pension entitlement. Not sure what the position is with EU countries (I lived in NZ and Oz) or what impact Brexit will have but the hmrc.gov website will tell you all you need to do. For a government site it's actually very well laid out and easy to grasp the basics.
Exchange rate: I don't see this as an issue unless you are holding large amounts of cash or making big one off transfers e.g. to buy a house. If your investments are going into global funds and equities then they sort of take care of themselves as it doesn't matter what currency the initial purchase was in. The best bit of advice for this is once you are overseas forget about what the GBP equivalent of stuff you need to buy is. Exaggerated example but say you pay €1 for a loaf of bread on Monday the UK conversion might be £1. On Friday the exchange rate has moved massively and the GBP equivalent is £2. Your're no worse off as your loaf of bread has still cost you €1 and as you are paid in Euros it makes no difference. Seriously - for all day to day stuff and regular saving just forget about the exchange rate - it'll drive you insane otherwise.
If you are letting a property in the UK you (presumably) need to factor in some mortgage costs? As you will have some UK based income you will need to declare that to HMRC too.
Also, what international organisation has an arrangement with the Belgian government which excludes their staff from paying income tax?
Also, what international organisation has an arrangement with the Belgian government which excludes their staff from paying income tax?
Condi said:
If you are letting a property in the UK you (presumably) need to factor in some mortgage costs? As you will have some UK based income you will need to declare that to HMRC too.
Also, what international organisation has an arrangement with the Belgian government which excludes their staff from paying income tax?
NATOAlso, what international organisation has an arrangement with the Belgian government which excludes their staff from paying income tax?
That salary would be a medium grade techie. Grade A3.
If it's Mons, it'll be reasonably cheap, if central Brussels not so.
Edited by worsy on Thursday 19th November 09:52
worsy said:
Condi said:
If you are letting a property in the UK you (presumably) need to factor in some mortgage costs? As you will have some UK based income you will need to declare that to HMRC too.
Also, what international organisation has an arrangement with the Belgian government which excludes their staff from paying income tax?
NATOAlso, what international organisation has an arrangement with the Belgian government which excludes their staff from paying income tax?
That salary would be a medium grade techie. Grade A3.
If it's Mons, it'll be reasonably cheap, if central Brussels not so.
Presumably (?) some income tax is payable *somewhere* ? Or is this the next great scandal?!
mikeiow said:
worsy said:
Condi said:
If you are letting a property in the UK you (presumably) need to factor in some mortgage costs? As you will have some UK based income you will need to declare that to HMRC too.
Also, what international organisation has an arrangement with the Belgian government which excludes their staff from paying income tax?
NATOAlso, what international organisation has an arrangement with the Belgian government which excludes their staff from paying income tax?
That salary would be a medium grade techie. Grade A3.
If it's Mons, it'll be reasonably cheap, if central Brussels not so.
Presumably (?) some income tax is payable *somewhere* ? Or is this the next great scandal?!
worsy said:
Condi said:
If you are letting a property in the UK you (presumably) need to factor in some mortgage costs? As you will have some UK based income you will need to declare that to HMRC too.
Also, what international organisation has an arrangement with the Belgian government which excludes their staff from paying income tax?
NATOAlso, what international organisation has an arrangement with the Belgian government which excludes their staff from paying income tax?
That salary would be a medium grade techie. Grade A3.
If it's Mons, it'll be reasonably cheap, if central Brussels not so.
Edited by worsy on Thursday 19th November 09:52
Worsy - seems you know the place quite well. Have you worked there before? Would be grateful if I could DM you if so!
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