James Moore and his fiancée, Naomi Moore (the shared surname is a coincidence), are about to embark on a trip that will transform their lives.

They recently received the all-clear to emigrate to Australia and are planning to move to Melbourne, leaving their current home in Nottingham more than 10,000 miles behind.

James, a 35-year-old consultant for a data company, says: “We made a joint application and because of our skills and experience — Naomi is a secondary school teacher — the application was fast-tracked.”

It will be the first time that Naomi, 28, has been to Australia, although it is a country that she has always wanted to visit. James, however, worked there for a year as a high-rise window cleaner in his twenties. He says: “The idea to move came to us a few months ago and was driven primarily by a desire for a better lifestyle. We plumped for Australia because I know it and we have friends out there.”

Before they leave in early September the couple have many loose ends to tie up. James is close to completing the sale of his home. He is selling the three-bedroom semi-detached house for £180,000, which will release £85,000 in equity.

“We would like advice about what we should do with this money and the rest of our savings,” James says. “Is it better to leave it in a high-interest bank account or would it make more sense to invest some in shares?”

James has another £11,000 in a First Direct Isa, which is paying 3.1 per cent interest, plus £4,000 in an Alliance & Leicester savings account. Naomi holds £5,000 in a Scarborough Building Society Isa. The couple have a further £6,000 split between a number of different savings accounts, none of which is paying a particularly high rate of interest.

Their only share-based investment is £2,000 in the Gartmore China Opportunities fund. James pays £50 a month into the saving scheme.

Once the couple have deducted expenses, such as flights and shipping costs, they expect to have a pot of £112,000. As they are waiting until they arrive in Australia to find jobs, these funds will help them to establish themselves there.

James asks: “Should we leave these savings and investments where they are, or would we be better off moving them offshore or taking them to Australia with us? I would also appreciate some advice about how easy it will be to set up accounts in Australia and transfer money from the UK.”

James also owns a buy-to-let flat in Nottingham, which he would like to keep. However, he is unsure what to do with the mortgage. “Would it be a good idea to use capital from my savings to pay off the £56,000 mortgage on the flat? I suspect not, for tax reasons, but I would like that confirmed.”

His mortgage costs £100 a month and he collects £425 in rent. He says: “Will I have to declare the monthly £425 on a UK tax return even after I have moved overseas?”

Their final dilemma concerns pensions. Naomi has a teacher’s pension but because she has worked in the profession for less than two years she has been told that she can cash in the scheme. “Is that a good idea?” asks James.

Naomi has another pension with a former employer and she would also like to know whether she is best leaving that where it is.

James, meanwhile, has a police pension, from his previous job, which will pay him about £1,200 a month from the age of 55. He is in a money purchase scheme with his current employer and makes monthly contributions of £66.

He would like to know whether he should leave these pension savings where they are or transfer them to an Australian scheme — if that is allowed.

What the experts say

Financial planning: Jonathan Spring-Rice, Towry Law

“The biggest impact on their financial decisions will be that their ‘home currency’ will change to the Australian dollar. Retaining money in sterling in UK bank accounts will add the risk of the exchange rate going against them and reducing its buying power in Australia. Over the past five years the value of sterling has fallen by nearly 20 per cent against the Australian dollar. What may seem like an almost risk-free investment can turn out to be anything but.

“When James and Naomi move to Australia they will be liable to tax in Australia on worldwide income. While there is a tax treaty between Australia and the UK, this only prevents tax being paid twice.

“The money held in Isa accounts, while tax-free under UK rules, will not avoid a tax charge in Australia. There is a tax liability under Foreign Investment Fund rules, which broadly taxes the growth in the fund on an annual basis. James and Naomi should be aware of this when deciding to retain or sell the Gartmore investment.

“The decision to retain cash or invest in another asset should be taken with care. However, they should retain a higher level of cash until their plans are more certain. If they are going to invest, it would be better to do this once they are in Australia and can take into account the currency and tax issues.

“Opening bank accounts in Australia before they arrive is fairly simple. Many of the leading Australian banks have a branch in the UK and are able to assist in opening accounts. Current accounts, often referred to as transaction accounts, can be arranged with debit cards and can offer the usual services provided by a UK bank.

“When transferring large sums of money, they should check out the exchange rate with a specialist currency exchange company, such as HIFX, where the costs of sending the money can be much less.”

Action plan

Be aware of the risk of leaving money in UK bank accounts.

Keep spare cash in bank accounts until their plans are more certain.

Use a UK branch of an Australian bank to open a new account.

Property and mortgages: David Hollingworth, London & Country Mortgages

“While standard advice would be that it makes sense to pay off a mortgage rather than retain savings, it is not quite so simple when it comes to buy-to-let. Many landlords choose to retain a level of mortgage on their investment properties because they can deduct the mortgage interest from the income, helping to reduce the level of income tax liability.

“From James and Naomi’s monthly payments, it sounds as if the mortgage rate is very competitive, but they should check whether that rate is ongoing or will revert to a higher one at some point. If it is an ongoing rate, it does not look like there will be much scope to switch to a better rate in the current market.

“Whether or not rental income must be declared for tax purposes after emigrating, the short answer is yes. The non-resident landlord’s scheme requires the letting agent or tenant to pay the rent to the landlord having already deducted tax.

“However, it is possible to apply to HM Revenue & Customs (HMRC) for the income to be paid without any tax deducted, which would certainly be worth doing in James’s case, assuming that his tax affairs are up to date. Information can be found at www.hmrc.gov.uk. If approval is granted, the rental income is still liable to income tax, but he will have control in ensuring that he deducts any allowable expenses. Much will also depend on the level of other taxable UK income, as the rental could be covered by his personal allowance.”

Action plan

Consider keeping mortgage to reduce tax payments.

Apply to HMRC for rental income to be paid without any tax deducted.

Pensions: Robert Reid, Syndaxi Chartered Financial Planning

“Naomi should think carefully before cashing in her pensions — she will not get a full refund of the contributions she has paid. The amount will be subject to deductions for tax. She may get a better deal by transferring both pensions into a single scheme.

“All the pensions can be left in the UK, moved to Australia or even another jurisdiction, but there are a lot of factors to consider. Pensions not moved to Australia within six months of residency are subject to tax charges. However, James and Naomi should watch for Australian advisers keen to push them into Australian funds. What if they don’t settle? Their visa also bars a release of pensions moved to Australia until they are 60.

“Before they depart, it is a good idea to seek advice from a company such as Montfort International, which is a specialist in this area.”

Action plan

Consider transferring Naomi’s pensions rather than cashing them in.

Do not rush to move pension funds to Australia.

James’s response

The experts have given me a useful starting point for organising my finances before we emigrate. Keeping our money in cash did appear risk-free but, as Mr Spring-Rice mentions, fluctuations in currency rates make it a big gamble.

If I exchange all our money now it would be annoying if the pound strengthened against the dollar. I agree that it is best to remain liquid until we settle and I will look at opening a bank account in Australia (I see that you can open one with Westpac over the internet) and transferring some, or all, of our cash, depending on the exchange rate.

As for the rental property, it looks as if it makes most sense to retain the mortgage. I have set up a meeting with an accountant to discuss the tax situation. I have also set up a meeting with Montfort International and look forward to hearing what they have to say about my pension.

Australia could be a great experience for us, and getting our financial situation sorted is important to making it work.

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