During your professional rugby career, you might sign a contract with a team overseas. This is an excellent opportunity to progress, play for some of the best teams in the world, and experience living in a new country.
However, earning income abroad, often temporarily before coming back to the UK, can make your financial situation more complex.
Here are three unique financial challenges you might face when playing overseas.
1. International transfer fees and currency risk
You will likely receive your salary in the currency of the country where your club is based, and it is important to consider whether you need to transfer some or all your earnings into UK sterling.
For instance, you might live and play in France but still have a property in the UK. You will need to pay the mortgage on that home in UK currency. This creates two potential difficulties.
First, if you send money from an overseas account back to the UK, you might pay international transfer fees, which reduce your total income. Although the fees may appear relatively small, the amount you lose adds up over time if you are sending money regularly for an extended period.
You also need to consider exchange rates and currency risk if converting your earnings to sterling.
Currency risk refers to the potential risk caused by fluctuations in exchange rates, meaning your income falls.
For example, if you were to play for a European club earning €10,000 a month, and the exchange rate was €1 to £0.85, you would receive £8,500 (minus any transfer fees).
If the euro were to weaken the following month and the exchange rate changed to €1 to £0.75, you would only receive £7,500.
This means you are effectively £1,000 worse off, even though your salary is the same, due to exchange rates.
It is important to note that in some months, the opposite may happen and exchange rates could work in your favour. Despite this, the combination of transfer fees and currency risk could reduce your income and make it more difficult to manage your finances.
There are several ways to overcome this hurdle.
Certain clubs might agree to pay directly in multiple currencies, eliminating the currency risk.
Alternatively, you could secure a forward contract with a currency provider. This means they lock in a certain exchange rate for a set period, such as a year. The reliable exchange rate could protect you from currency risk and make it easier to budget.
As well as dealing with currency risk, it is important to utilise your income in a way that secures your financial future. We can discuss your options to ensure that a lucrative overseas playing contract translates to long-term financial security.
2. The risk of overpaying tax
Having financial interests in two countries could create issues with taxation, too.
You will need to pay tax on your earnings from playing, and this will be calculated based on the unique rules in the country where your club is based. However, you may also have assets in the UK, which have different tax liabilities.
If you misunderstand your complex tax situation, you could pay more tax than necessary or make mistakes that lead to fines.
We can support you with your UK assets, ensuring that you make use of tax wrappers and reduce your bill, where possible.
However, you may need to consult with a financial professional overseas to understand the tax implications of earning an income outside the UK.
3. Complicated estate planning
If you spend a lot of time playing overseas, you might build up assets such as properties in various countries. This can make estate planning more complicated later.
As a UK resident, all your assets may be subject to Inheritance Tax (IHT), even those in other countries. Typically, the tax treatment of your assets depends on whether you are considered UK-domiciled. This means whether the UK is your permanent home for tax purposes.
The government of another country where you have assets may also attempt to tax them.
This could lead to issues with double taxation, and your loved ones may receive an unexpected tax bill on overseas assets.
We can help you plan for this by assessing your global assets and explaining the tax implications of your estate. This means you can plan effectively, and your family will know how much IHT they are likely to owe. We can also discuss ways to reduce your IHT liability.
Get in touch
If you want to discuss the financial challenges caused by playing overseas, please do get in touch with DBL Asset Management.
Email enquiries@dbl-am.com or call 01625 529 499 to speak to us today.
Please note
This article is for general information only and does not constitute advice. The information is aimed at individuals only.
All information is correct at the time of writing and is subject to change in the future.
Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.
The Financial Conduct Authority does not regulate estate planning or tax planning.