The Brexit effect on bank accounts and what this means for non-UK resident landlords
23 November 2020
The end of the year is looming and, with it, the end of the Brexit transition period. Some banks are expecting this to change their ability to operate freely across borders in the European Economic Area, and are already taking steps to close accounts for some of their EU-based customers - including UK landlords living abroad.
UK banks currently benefit from an EU “passport”, which gives banks licensed in one European Economic Area (EEA) country “the right to conduct business in the EEA based on their home state authorisations” but this is likely to change once the UK officially leaves the EU at the end of 2020.
Under the passporting system, non-UK resident landlords who previously lived in the UK can hold and receive rental payments into their UK bank account. This means that they can choose to transfer rental income to an account in their country of residence when the exchange rate into their local currency is most beneficial.
They can also benefit from reduced international transfer fees. Rental payments can be transferred to their foreign account in bulk while bills can continue to be paid from their UK account, rather than incurring extra fees by frequently moving money in or out of an overseas account.
However, barring any last minute agreement reached, British banks will no longer have access to this passporting system after 1 January 2021. Some banks that have EU-based subsidiaries can transfer their customers’ accounts to one in their country of residence, but banks without EU branches would have to apply for a licence to trade in each EEA country - resulting in some banks now notifying non-UK resident customers that they’ll close their UK accounts.
What agents can suggest to their non-UK resident landlords
Check with the current account provider
If a landlord hasn’t already heard from their bank, they should check if their bank can transfer the account to an EU branch in their country of residence, or if the bank plans to close its UK accounts for EEA customers who don’t have a UK residential address.
Move to a UK bank that continues to offer accounts to non-UK residents
Not all bank account providers have confirmed the closure of these accounts - according to UK Finance, this will depend on “the operating model of their bank or provider, the product or service being provided, and the legal and regulatory framework in the country in which they are resident.” However, landlords should be prepared that any new bank they move to may also change its policy in the future.
Use a multi-currency account
Companies offering multi-currency accounts, such as Transferwise, can be cheaper than banks with better rates for holding and exchanging currencies and may already be licensed in an EU country, so the change in passporting rules won’t have an impact on their services. Some landlords may already have a contract with this type of currency specialist to protect themselves from currency fluctuations.
Review the local bank account options available
Landlords living in another country will likely have a local bank account - if the landlord’s a legal resident in a country, banks will have to allow them to open at least a basic bank account - but they can take the opportunity to shop around. Landlords should check that they can continue to receive rental payments into their local account, and what fees may apply.
Oh Goodlord Limited is an Appointed Representative of Goodlord Protect Limited for general insurance products and credit broking. Goodlord Protect Limited is directly authorised by the Financial Conduct Authority, registration number 836727. You can check this information on the Financial Services Register by visiting www.fca.org.uk/register or by telephoning 0800 111 6768 (Freephone) or 0300 500 8082 from the UK. The FCA is the independent watchdog that regulates financial services.