The hidden costs of living abroad in the UK

New to the United Kingdom? Make sure to account for these expenses in your budget.

Xe Consumer UK

October 23, 2020 6 min read

Young woman working in London

Whether you’re relocating for a new work opportunity, moving to be closer to friends or family, studying abroad or just looking for a new change of scenery, life as an expat has many benefits. However, as other expats will tell you, there may also be some surprising costs.

We all know how expensive moving can be, but even once you’re settled, there are several costs that may not have made it into your budget, and can sneak up on you if you’re not careful. If you’ve recently relocated to the United Kingdom, make sure that you’re prepared for these surprise costs.

Exchange rates and transfer fees

Are you planning on sending money home regularly? Or maybe you’re living in the UK but working remotely for a company based in another country? Whatever your circumstances may be, when you’re living the expat life, there are countless reasons why you may need to convert your money, send money overseas, or deal with foreign currency. Sometimes the exchange rates will be in your favor, but you can never guess which way the markets are moving.

You’ll find numerous options for sending your money or converting your currency, but they won’t all provide the same level of service. Before you send money, check the exchange rates with multiple providers—you could be surprised by the difference.

At Xe, we can send money from the UK to over 130 countries around the world. Our money transfers travel quickly and give you the rates informed by data from the live markets, and they’re easy to initiate on the sender side. If you’re planning on frequently sending money overseas, we can even set a Rate Alert that will notify you when it’s a good time to send money.

Social Security and pension

If you start your new job in the UK without being registered with social security, you will need to pay emergency tax for the first month, and this will be a substantial overpayment for you, though the difference will be returned after the second or third month.

Your Social security benefits will cover you for costs including unemployment, sickness, maternity leave, and disability, but the rate will depend on how the coverage term and your income. For example, if you’re earning between £702–£3,863 a month, you would pay 12% to social security. If you’ve relocated from other European Economic Area countries, you can also draw benefits earned in your native country upon retirement.

UK Taxes (and maybe taxes back home too)

Guess what: new country, new taxes! Once you’ve been living and working in the UK for more than 183 days, you’re eligible to pay personal income tax from your monthly salary, unless you earn less than £11,850 in England. If you are self-employed, you are still obligated to submit a nil-return tax form.

These are the tax brackets in the UK:

  • Up to £11,850: 0%

  • £11,851–£46,350: 20%

  • £46,351–£150,000: 40%

  • Over £150,000: 45%

But UK taxes may not be all you’re responsible for. Depending on where you’ve moved from, you may have to pay taxes in your former country as well. Some countries—such as India—do not require you to pay taxes on income earned outside the country (though if you would be taxed on any income earned through an Indian business). But not every country has the same policy. Make sure you know what you’ll need to pay!

Depending on your age, you may not be thinking about pensions just yet. But many expats have reported frozen pensions upon relocating, meaning that they did not qualify for any further increases.

Property—laws and costs

If you’re moving abroad for a long period of time (or even permanently), renting probably won’t be the most cost-effective option for you. When moving permanently abroad or for an extended period of time it’s likely that renting may not be cost efficient.

But purchasing property as an expat can come with its own issues, depending on where you are. Some nations may have restrictions on buying, inheriting  or selling property as a foreigner, which when overlooked could lead to higher costs or legal issues down the line.

Fortunately, you can buy property in the United Kingdom as a foreigner. However, it can be difficult to apply for mortgages or other loans if you are not a citizen, so you will have an easier time if you are a cash buyer.

Property prices in the UK can be high, particularly if you are looking at London or other similar areas. In late 2018, the average price for flats in London was £414,889, and £493,579 for terraced properties. Housing prices average around £300,000–£500,000 in the south, and £200,000–£400,000 in the midlands and further north. Though the market is stable now, at the end of 2020 the Brexit transition period will end, which could lead to changes in pricing.

And don’t forget about your utilities and energy bills! Due to the privatization of energy companies in the UK, utility costs keep getting higher each year, even as the government attempts to introduce policies to reduce their costs.

Transportation—private and public

Were you planning on shipping a car over? You might want to know: owning a car in the UK can be pretty expensive. (And good luck with those shipping costs, while we’re at it). Fuel costs are high; in January 2019, you could expect to pay £1.20 per litre for unleaded and £1.30 per litre for diesel.

Fortunately, you’ll also have plenty of public transportation options, though those can potentially also add up. In some areas, your only option will be the bus. Buses typically cost at least £1.20, though that will vary depending on the area.

If you’re in London, you’ll be able to enjoy the excellent public transportation option that is the Underground, but it’ll also cost you. If you’re living in London, we recommend investing in an Oyster card for slightly cheaper rates on the buses and metros.

Trains are also a great option in the UK, though they can also be pricey without a monthly pass and some smart planning. Booking your trips at least a few weeks in advance could help you save significantly on train fare.

In short…

No matter where in the world you go, you’ll find costs. But doing your research, being prepared and taking the right steps to minimize those costs can go a long way in helping you to save money, even in an unfamiliar country.