Declaring Foreign Bank Accounts to HMRC

Matt Di Vincere (Chief Editor)
Last Edited Oct 21, 2021

A key feature of UK tax law is that individuals who are deemed to be UK residents must declare all foreign income and gains that arise from their worldwide assets – both in the UK and outside of the UK. Whether you opened a bank account in USA as a UK resident  or under other circumstances – not declaring income to HMRC is an offence and could lead to significant penalties and legal action. Thus, if you are earning savings interest on your offshore accounts then declaring foreign bank accounts to HMRC is a requirement.

Please note that we are not accounting nor legal professionals and that this guide does not constitute as advice.

HMRC Offshore Disclosure

If you’re a resident of the UK then chances are you will be required to pay tax on your worldwide income. This can include:

  • Overseas wages
  • Foreign investment income, including interest on savings
  • Rental income from overseas property
  • Overseas pensions

Guidance from HMRC says there is nothing wrong with having accounts overseas, as long as you declare all taxable income and gains on your UK tax return. Therefore, you should first see if the money you hold in international bank accounts is earning interest. If you have money sitting in an international current account, it may not be earning any interest in the first instance. There is no requirement for declaring foreign bank accounts to HMRC if they are non-interest bearing accounts.

A Deeper Dive into Reporting by Churchill Tax Advisers

How Will HMRC Know If I’m Not Declaring Foreign Bank Accounts?

In 2018, HMRC had its largest drive to date for UK taxpayers to notify HMRC about any offshore tax liabilities that could relate to UK income tax, capital gains tax, or inheritance tax. New legislation called the ‘Requirement to Correct’ came into force with significant penalties for those who failed to comply.

HMRC conducts its own risk assessment on the offshore element of tax returns (including when nothing is stipulated by the individual filing the tax return). The reason 2018 saw such a large drive by HMRC is because the UK and over 100 other countries adopted the Common Reporting Standard (CRS) which is a global initiative for the automated reporting of financial account information. The initiative, which is overseen by the OECD, provided HMRC with details of 5.7 million offshore accounts held by UK residents in 2018. Again, you don’t necessarily have to declare foreign bank accounts to HMRC if no interest is gained on the accounts, but you must report all overseas income.

HMRC is now proactively challenging taxpayers who it suspects may have under-reported or evaded tax altogether on offshore income. This is a focus area for HMRC in identifying cases for routine enquiry and, if required, criminal investigation.

Not Declaring Income to HMRC

This is ultimately what HMRC is trying to crack down on. If you simply have an overseas current account which earns no interest, then this is absolutely fine and does not need reporting. Not declaring income to HMRC, including overseas income, is the primary offence.

For UK residents, there are no minimum limits for reporting overseas income. No matter how negligible the amount might actually be, it is still a requirement to include this in the overseas section of your tax return. In the end, the tax impact may be small, but it’s the cost of non-compliance which could be felt further – especially if penalties apply.

How to Receive Money from Abroad Without a Bank Account?

If you want to avoid the hassle of reporting a bank account to HMRC you could simply skip having a bank account abroad. It may sounds funny but many people are looking for an offshore or international bank account just because they need to receive money from abroad.

There are two ways to circumvent that:

  1. Create a virtual bank account abroad also called a multi-currency account. which is not a bank account per se, but rather a PAYMENT account that can accept inbound and outbound transfers in multiple currencies (but does not have other bank functions like accumulating interest).
  2. Use a currency broker – a type of brokerage that specialises in large payments including receiving large amounts of money from abroad. They make the process easy and swift while applying wholesale exchange rates to your transfer. Since no bank account opening is involved, you don’t need to report it to HMRC.

Concluding Remarks – Foreign Bank Accounts and HMRC

Reporting overseas assets and overseas income is arguably the most complex element of filing a tax return. Should you make an error on your tax return and realise that you should have been declaring foreign bank accounts to HMRC then it will always be better for you to proactively reach out and notify HMRC of the error. HMRC now has access to more overseas account information than ever before and not declaring income to HMRC that you earned overseas can see you penalised and face criminal prosecution. Providing you disclose all income from the UK and around the world you should have nothing to fear from an HMRC investigation.