Thanks for your investigation.
This issue has been added to the tracker:
https://winscp.net/tracker/842

There is a flag on the external editor configuration window
"Force text transfer for external editors"
Once I removed it - the encoding remains.
I think that by default it should be false

Thank you for your help!

Possible explanation is that WinSCP saves the file to a different temporary folder on every edit. So Notepad++ does not consider it to be the same file.
Though that should not be the case during a single WinSCP run, unless you have checked External editor opens each file in separate window (process) in editor preferences. Can you check please?
https://winscp.net/eng/docs/ui_editor_preferences
Let me know!

Hi,
Thank you for a great tool!
Version: 4.3.5 build 1463
Running on XP Pro
The scenario is like this:
I connect to remote Linux box (CentOS release 5.6 64Bit) using SFTP port 22
Double click to open text file on the remote box (file open using Notepad++)
Change the file encoding to UTF-8 (In Notepad++ -> Encoding -> UTF-8)
Save the file - > WINSCP copy the file to the remote box in the background.
Close Notepad++
Double click the file again on WINSCP
Notepad opens -> the encoding is not saved

I found out that if i first save the file on my desktop - then change encoding and drag and drop the file into WINSCP using binary file transfer - encoding will stay
So I tried the first steps using the default binary option (the combo on WINSCP toolbar) but it didn't help
Is this a bug or i am missing something?
Thank you very much!