Returning to South Africa? Financial tips for expats moving back

South Africa still faces many challenges, but there has been an upsurge in confidence since the formation of the Government of National Unity. Stats SA’s Migration Profile Report for South Africa, released last year, shows that since 2000, the number of South Africans in the UK has grown from 136,720 to 247,336. But now in a move that some have dubbed “reverse emigration”, many are heading home for a variety of reasons.

Why South African expats are returning home

Friends and family: Living so far away from loved ones can be tough, especially if you have ageing parents. There is also that sense of belonging and familiarity that can be hard to find in the UK no matter how many years you have lived there.

The South African lifestyle: The wide-open spaces, beautiful blue sky, mountains, beaches, wildlife, rich cultures, great quality food and world-class wines can be hard to beat.

Children: South Africa offers a more outdoor-oriented childhood and access to good schools. Being here also means the children get to grow up with their grandparents and other extended family members.

Cost of living: The UK is significantly more expensive than South Africa, especially when it comes to housing, eating out and labour costs.

Career and job opportunities: Expats coming home with skills and experience are often sought after in South Africa. The flexibility of remote work has also allowed some to keep their UK jobs while enjoying a better lifestyle at home.

Weather: South Africa’s weather for the most part is pretty good with long hot summers and fairly mild winters. For many expats, the UK’s long, dark and wet winters can be tough to handle.

Retirement: Returning home with Pounds means you will be able to sustain your standard of living and not have to cut back on things like travel, entertainment and shopping.

Getting your financial affairs in order

If you want to enjoy a seamless homecoming, make sure you get good financial planning advice from experts who can help you understand your tax status, investments and other assets to avoid costly mistakes.

Tax implications

Residency status

You will need to determine your tax residency status in both the UK and South Africa, as this will impact how your income and worldwide assets are taxed.

Double Taxation Agreement (DTA)

It is important to familiarise yourself with the UK-South Africa DTA to avoid being taxed twice on the same income.

Income tax in South Africa

Be aware that South Africa taxes residents on their worldwide income while non-residents are taxed only on South African-sourced income.

Foreign exchange and currency risk 

Exchange rates

It is a good idea to monitor the GBP/ZAR exchange rate to plan the timing of your transfers. The Rand can be volatile so it may be a good idea to work out your income and capital needs in South Africa and transfer only the amount that you are planning to spend there. Remember that retaining funds offshore can hedge against a weakening currency.

Retirement and pensions

UK pension schemes

Make sure you review your UK pension arrangements before you leave. There are several UK pension providers that will not accept SA residents on their platform or, when you become non-resident in the UK, will not allow you to make further changes to your existing UK pension. This could have a material impact on your retirement planning.

UK pension freedom allows for a variety of options when it comes to  accessing your UK pension income. Some pensions are exempt from tax in South Africa which can be a big boost for your finances.

A note of caution is that transferring your UK pension offshore when you are resident in South Africa may come with an Overseas Transfer Charge of 25% – so be wary of any advice you receive about this.

A UK pension provides access to global portfolios (held in GBP) which is an ideal hedge against the Rand. However, if you are still planning to work in South Africa, then a retirement fund there could well make sense for income tax purposes.

Savings and investments

UK investments

Make sure you understand the tax treatment of your UK investments in South Africa, including potential liabilities for Capital Gains Tax or foreign dividends.

A question that comes up often is “Should I retain my ISAs?” Unfortunately, ISAs are not tax-free in South Africa, which has its own version of an ISA called a Tax-Free Savings Account. Depending on the provider you are with, it might make more sense to sell the ISAs and transfer them to a tax-efficient vehicle once you are back in South Africa.

South African investment opportunities

If you are retaining cash or investments offshore, you could look at the possibility of an Offshore Endowment or an Offshore Pension. Both have advantages.

Property ownership

Selling UK property

You will need to decide whether to sell, rent out or retain your UK property. Be aware of tax implications such as Capital Gains Tax and rental income tax in both countries.

Buying property in South Africa

Buying property in South Africa is fairly straightforward, but make sure that you do your due diligence before any large purchase.

Banking and financial accounts

Bank accounts

Remember that joint bank accounts are not available in South Africa. It can also be nearly impossible to open a bank account until you are physically present back in the country.

Offshore accounts

Consider retaining offshore accounts for holding non-Rand assets and maintaining flexibility.

Health and insurance coverage

South Africa has private healthcare and some of the best healthcare specialists in the world. You will need to research various medical aid options well ahead of moving back.

Be aware that medical aids can impose a late joiner penalty for anyone over the age of 35, who has not been a member of a South African medical scheme.

Retaining global health insurance with companies such as Bupa could be an option but is prohibitively expensive.

Moving back to South Africa can be exciting but a bit overwhelming when having to juggle your financial affairs and taxes across borders. Sable International’s cross-border experts are hosting exclusive in-person consultations for expats looking to move back home. We can help you with everything from wealth to tax to foreign exchange transfers to ensure a smooth financial transition.

Consultations are happening from 3 – 6 March in London and Cape Town. Spots are free but limited, so book now to make sure you don’t miss out.

Get in touch with our Wealth team by calling us on +44 (0) 20 7759 7519 (UK) or +27 (0) 21 657 154 (SA) or emailing wealth@sableinternational.com