The EU savings tax directive (EUSTD) sets out to make sure that we declare and pay tax on all the income we earn from interest on savings. That includes money held away from the direct gaze of the HM Revenue & Customs in offshore tax havens.

These offshore accounts have long been popular among UK-resident savers, so how does the directive affect cash held offshore – and are there ways around it?

Deposit accounts
UK residents who hold money offshore in the Isle of Man and the Channel Islands may find that their next statement carries a tax deduction made locally. This is currently charged at 15 per cent, although this it will rise to 20 per cent at the end of June 2008, and then up to a whopping 35 per cent at the end of June 2011.