Originally posted on: 19 January 2026
Updated on: 2 February 2026
Introduction
When Kiwis and Aussies move to the UK, there is a long list of things that need sorting. Visas, work, somewhere to live, getting paid. What almost never makes that list is the bank interest still ticking along back home.
If you moved to the UK and left no money sitting in a bank account back home, this blog probably isn’t for you. You can safely return to your Reels.
I do however speak with a surprising number of Kiwis and Australians each month who live in the UK and have left some money behind, or who later receive an inheritance, sell a house, or move a lump sum into a savings account or term deposit back home. Very often that interest is either being taxed incorrectly overseas or not being taxed (or reported) properly in the UK.
In fact, undeclared bank interest from New Zealand or Australia is one of the most common triggers we see forHMRC letters asking, “Do you receive any income from overseas that you need to tell us about?”
A savings account in New Zealand or Australia feels harmless. The interest is usually modest, it is often taxed automatically by the bank, and it sits firmly in the mental category of “that’s dealt with over there”. As a result, most people don’t give it a second thought.
The problem is that once you are UK tax resident, those assumptions stop being reliable. The way bank interest is taxed changes, the UK often expects to see it reported, and in many cases, people end up paying more tax than they need to, simply because they didn’t realise this income still mattered.
This blog is a practical guide for Kiwis and Australians living in the UK who still have savings back home. We’ll look at how bank interest is taxed in New Zealand and Australia once you’ve left, how the UK views that same income, and why, for many people, bringing savings into a UK ISA can be a cleaner and more tax-efficient long-term option.
The Starting Point, UK Tax Residence Changes the Rules
Once you become UK tax resident, the starting assumption is simple. HMRC is interested in your worldwide income, not just what you earn in the UK.
Bank interest is part of that picture, even if it feels passive, small, or “already dealt with” back home. From HMRC’s perspective, interest is still income, and in most cases, they expect to see it reported on a UK tax return.
The UK’s Double Tax Agreements with New Zealand and Australia are designed to prevent the same income being taxed twice. They do not remove the obligation to report that income in the UK. In practice, overseas tax often reduces or eliminates the UK tax bill, but the reporting requirement usually remains.
That principle underpins everything that follows. There is also, of course, the new FIG regime, which in limited circumstances can allow you to choose not to report overseas bank interest in the UK. In practice, those situations are relatively rare, and for most people the default position is still that overseas interest needs to be considered and reported.
New Zealand Bank Interest, How It’s Taxed Once You Leave
Resident vs Non-Resident Treatment
While you are New Zealand tax resident, bank interest is usually subject to Resident Withholding Tax (RWT), deducted automatically by the bank. The rate depends on what you have told the bank, but for many people it sits around 30% to 33%.
Once you become non-resident for NZ tax purposes, that switches to Non-Resident Withholding Tax (NRWT). For UK tax residents, the New Zealand–UK tax treaty typically limits NRWT on bank interest to 10%. This applies equally to interest earned on savings accounts and term deposits.
So, although the account may still be in New Zealand, the tax treatment changes once you leave.
The Importance of Telling Your Bank
New Zealand banks do not reassess your tax status automatically. They apply withholding tax based on the information they have on file.
If you do not tell your bank that you have become non-resident, two common things happen. The bank may continue deducting RWT at resident rates, often around 33%. Alternatively, it may apply the standard NRWT rate of 15%, rather than the lower treaty rate of 10% that usually applies to UK residents.
In both cases, the result is the same. Too much tax is taken, not because the rules are harsh, but because the bank was never told your situation had changed. This is extremely common, and almost always accidental.
Approved Issuer Levy (AIL), The Bit People Hear About
You may have heard about the Approved Issuer Levy or AIL. In simple terms, AIL is a 2% levy that can be applied to certain interest payments so that NRWT is reduced to 0%.
On the face of it, that sounds attractive. Only 2% deducted in New Zealand feels far better than 10%. Where do I sign?
The catch is that AIL is not treated as income tax. From a UK perspective, it is not creditable under the UK / New Zealand tax treaty, and in practice there is usually no meaningful UK tax relief for it. That means you may pay full UK tax on the interest, on top of the 2% already paid to Inland Revenue. It’s rarely a great result.
For most UK tax residents, NRWT at 10% is often the more sensible option. It is recognised as foreign income tax, and it can usually be credited against any UK tax due on the same interest. As a result, AIL is often talked about, but less often genuinely useful once the UK tax position is taken into account.
Australian Bank Interest, Similar Outcome, Different Traps
Australian Residents vs Non-Residents
While you are an Australian tax resident, bank interest is generally paid with no tax withheld, provided you have given the bank your Tax File Number (TFN). The interest is reported to the ATO and taxed through your annual tax return at your marginal rate.
Once you become a non-resident, the position changes. Australian-sourced bank interest is usually subject to a flat 10% non-resident withholding tax. When this 10% is applied correctly, it is a final tax, and you do not normally need to lodge an Australian tax return just because of that interest.
What Goes Wrong in Practice
Most problems arise simply because the bank is never told that you have left Australia.
If the bank still treats you as a resident, two things commonly happen. The first is that no tax is withheld at all. The interest is then reported to the ATO, and when it eventually appears in a tax assessment, it is taxed at non-resident rates, which start at 32.5% from the first dollar.
The second outcome is withholding at the wrong rate. Where a bank does not have the right residency details, or where a TFN is missing or outdated, interest may be subject to a default withholding rate of around 47%. This is far higher than the correct 10% non-resident rate.
Both scenarios catch expats out regularly because nothing looks obviously wrong at the time. The interest is small, statements arrive quietly, and the problem only surfaces later, often when an unexpected tax bill or ATO correspondence lands.
As with New Zealand, a simple update to your bank details, confirming that you are now non-resident and living in the UK, is usually all it takes to get the correct 10% withholding applied and avoid unnecessary tax and admin later on.
UK Tax on Overseas Bank Interest, The Missing Piece
How the UK Taxes Interest
From a UK perspective, bank interest is treated as savings income. Once you are UK tax resident, that applies just as much to interest earned overseas as it does to interest earned from a UK bank.
Any interest that falls outside your tax-free allowances is taxed at your marginal income tax rate. For 2025/26, that means 20% for basic rate taxpayers, 40% for higher rate, and 45% for additional rate taxpayers.
The 0% Buffers That Often Apply
In practice, many people pay little or no UK tax on bank interest, at least initially. That is because the UK provides several 0% bands that often absorb modest amounts of savings income.
These include the Personal Allowance, where it is not already used by other income, the Starting Rate for Savings (available where non-savings income is low), and the Personal Savings Allowance. Depending on your income level, that allowance is £1,000 for basic rate taxpayers, £500 for higher rate taxpayers, and nil once you reach the additional rate band.
This is why overseas bank interest can sit under the radar for a while. There may be nothing to pay in the UK, even though the income still technically exists and often still needs to be reported.
Foreign Tax Credits, Helpful but Not Magical
Where overseas tax has been deducted, the UK will usually allow foreign tax credit relief to prevent double taxation. However, that relief is capped at the amount of UK tax due on the same income.
In practice, this means that New Zealand or Australian withholding tax at around 10% often simply “washes out” against UK tax, particularly where the interest sits within UK allowances.
The key point is that overseas tax and UK tax interact, but they do not cancel each other out automatically. And where the overseas deduction is not recognised as income tax, such as AIL, there may be no UK relief at all. Understanding how the two layers fit together is essential before deciding where it makes sense to hold cash long term.
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Does It Still Make Sense to Keep Savings Back Home?
Once you put all the pieces together, a bigger question usually follows. Does it still make sense to keep long-term savings sitting in New Zealand or Australian bank accounts once you are living in the UK?
From a tax perspective, the answer is often no. I speak with many Kiwis and Australians in the UK who would have no UK personal tax filing obligations at all, were it not for the bank interest still being earned back home. That interest is often taxed overseas, sometimes taxed again (or at least reported) in the UK, and frequently ends up being taxed at a higher overall rate than if the same money were held in the UK.
For many people, this creates a frustrating loop. Overseas withholding tax, UK reporting, exchange rate conversions, and admin, all for income that feels minor, but keeps dragging them into the UK tax system.
That said, the real answer is still “it depends”. Keeping money back home can make sense in the short term, particularly where funds are earmarked for a specific purpose, or where moving the money is impractical. There is nothing inherently wrong with having overseas savings.
The issue is that, over time, overseas bank accounts often stop being the neat, set-and-forget solution people assume they are.
This is where many Kiwis and Aussies encounter something that is still relatively unfamiliar.
UK ISAs, The Part Most Expats Miss
One of the most generous and underused features of the UK tax system is the Individual Savings Account, or ISA.
An ISA allows you to hold cash or investments in the UK with all income completely free of UK tax. Interest earned inside a Cash ISA is not taxed. Interest, dividends, and capital gains inside a Stocks and Shares ISA are also tax-free. There is no UK tax to pay and, just as importantly, no reporting required on a UK tax return.
Each UK tax year, you can contribute up to £20,000 across all your ISAs. That allowance is use-it-or-lose-it. Once a tax year ends, any unused ISA allowance disappears.
Over time, the difference can be material. Savings held overseas may face withholding tax and ongoing UK reporting, even where the UK tax ultimately comes out at nil. Savings held inside an ISA grow quietly in the background, with no tax, no allowances to track, and no admin.
This is not a blanket rule, and it is not a reason to rush money around unnecessarily. But for UK tax residents building up long-term savings, ISAs are often a cleaner and more tax-efficient home for cash than bank accounts back in New Zealand or Australia.
For many expats, the real question is not “can I keep my savings back home?”, but whether doing so still makes sense now that the UK offers a much simpler alternative.
Wrapping It All Up
Bank interest is rarely the thing people worry about when they move to the UK. It feels small, passive, and already “dealt with” back home. But as we see repeatedly, it is one of the most common reasons Kiwis and Aussies in the UK end up paying more tax than they need to, or finding themselves pulled into UK tax reporting for the first time.
The rules themselves are not especially complicated. What causes the friction is the interaction between three systems, New Zealand or Australia, and the UK. Add in banks applying the wrong withholding rates, different tax year ends between countries, overseas interest quietly building up, and unfamiliar UK allowances, and it is easy to see why this area gets overlooked.
For many people, a simple review of where savings are held, how interest is being taxed, and whether a UK ISA is being used can remove a surprising amount of ongoing admin and uncertainty. These are quiet decisions, but they compound over time.
At No Worries Accounting, this is exactly the kind of issue we deal with every day. We work with Kiwis and Aussies living in the UK, helping them understand how overseas income fits into the UK tax system, what actually needs to be reported, and where slight changes can make a meaningful difference.
If you have savings back home and are not entirely sure how the interest is being taxed, or whether it still makes sense to keep those funds overseas, getting clarity sooner rather than later can save a lot of hassle down the line. We’re here to help you understand what matters, what doesn’t, and what your best next step should be, so you can get on with life in the UK without unnecessary tax surprises.