Hong Kong & UK Tax Advisors

International tax planning: Moving from Hong Kong to the UK

Moving or investing in the United Kingdom or moving or investing in Hong Kong: Either way, it could cost you more tax than you bargained for. Have you done enough international tax planning before moving from Hong Kong to the United Kingdom?

Paying taxes in the United Kingdom and Hong Kong

Looking to move or invest in the UK: Hong Kongers need to remember that they still need to file tax returns to the Inland Revenue Department each year if they have a financial interest in their home country. Depending on the number of days living/working in the UK will determine if you also need to pay tax to HMRC.

Looking to move or invest in Hong Kong: Depending on the number of days that you choose to live in Hong Kong will determine your Hong Kong tax residence with the Inland Revenue Department. British people that become tax residents in Hong Kong will need to apply for a TIN number. Brits will then need to submit Hong Kong tax returns if they receive income from Hong Kong. The Inland Revenue Department will not charge tax on foreign earnings in most cases.

Our international tax advisors can save you tax in Hong Kong and United Kingdom

You may take tax advice from an accountant from your country. How much do the local accountants know about the country you are moving to and their tax system?

This is especially the case when people move from Hong Kong to the UK. The Inland Revenue Department or the IRD in Hong Kong has a much-simplified approach to taxation. This cannot be said of the HMRC in the UK.

Our Hong Kong and UK tax experts can help you minimise tax in both countries.

 

What do you need to consider when moving from or to Hong Kong?

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VISAs and residency

You may need to file and submit tax returns in both the UK and Hong Kong based on the number of days that you reside in each country and how much money you earn in those counties.

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Tax treaties

There is a double tax treaty between the UK and Hong Kong. However, you may not get full tax relief in one country for the tax you have paid in the other. Most people find that they pay more tax in the UK than they do to the Inland Revenue Department in Hong Kong.

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Tax return dates

Hong Kong’s Inland Revenue Department work on a 1st April to the following 31st March date for tax purposes. This is not the case in the UK where income is taxed by HMRC from 6th April to the following 5th April. Not only do you need to consider different timings but you also need to consider the foreign exchange rate differences too

Tax rates in the UK V tax rates in Hong Kong

Before leaving Hong Kong for the UK, please be aware of the different tax rates. The Inland Revenue Department in Hong Kong will only charge up to 17%. HMRC in the UK may charge you up to 45% tax. Big difference.

Hong Kong does not have a tax for any gains you make on selling assets. Moving to the United Kingdom will provide you with a nasty surprise. You could be faced with a UK Capital Gains Tax liability when selling Hong Kong assets if you do not use the right international tax structure.

The Inland Revenue Department in Hong Kong will not charge you estate tax when you die. The UK are not so generous and will tax you 40% on your assets above your lifetime IHT allowances that, currently stands at £325,000 individual £650,000 couples

 

Hong Kong V the United Kingdom

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Income tax rates

The top tax rate in the United Kingdom is 45% compared to the ultra low tax in Hong Kong of 17%

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Capital Gains Tax

HMRC will charge up to 28% UK Capital Gains Tax on certain types of gains you make by selling assets, even Hong Kong assets. The Inland Revenue Department in Hong Kong does not charge this tax. This tax may take many Hong Kongers by surprise.

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Inheritance Tax / Estate Tax

Hong Kongers that move to the UK from Hong Kong will be shocked to know that their worldwide assets could be subject to inheritance tax if they stay in the UK for 15 years. The rate of UK inheritance tax is 40%

UK Tax considerations before moving to the United Kingdom from Hong Kong

We are sure that you have considered many things about leaving Hong Kong to the United Kingdom. Vice versa applies if you are leaving the United Kingdom to move to Hong Kong

We appreciate that it is not a priority or natural to consider the amount of tax being paid to the Inland Revenue Department in Hong Kong or tax paid to HMRC in the UK, especially with the excitement of a new country.

That said the oversight of international financial and tax planning could cost you more tax than the cost of moving to a different country. Think about it another way. You may spend up to £30,000 or $300,000 moving to or from the United Kingdom to Hong Kong. However, the overpayment of tax could dwarf this amount time and time again and maybe compounded over time if you do not seek out the services of an international tax planning expert.

Many Hong Kongers do not understand that their Hong Kong home could be subject to UK Capital Gains Tax if they later sold the property and brought the money into the UK. The concept of paying tax on a gain will seem alien to most Hong Kongers.

UK Tax and tax identification documents for those moving from Hong Kong

You need to consider the basics. Do you need to pay tax in the country you are moving to? Fortunately, both the UK and Hong Kong gives similar tax treatments to residency. There are nuances in both counties so please get some advice from our international tax advisors before you move.

You may need to register with HMRC in the United Kingdom or with the Inland Revenue Department in Hong Kong to file and pay your taxes. It is straightforward in getting a Unique Tax Reference (UTR) code from the HMRC in the UK and a Taxpayer Identification Number (TIN) from the Inland Revenue Department in Hong Kong.

 

The things people need when moving from Hong Kong to the UK

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National Insurance Number

A UK National Insurance number of NI is required for you to make contributions towards your UK state pension and National Health Service also referred to as the NHS.

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Unique Tax reference Number

As soon as you become tax resident in the UK you may need to pay UK tax to HMRC. You will need a UTR in order for you to file tax returns to HMRC

Tax return filing to HMRC for people moving form Hong Kong

The tax years are different in Hong Kong as they are in the UK. The Inland Revenue Department Hong Kong tax system uses the dates 1st April to the following 31st March. The HMRC British tax system uses a fiscal year that starts from 6th April to the following 5th April.

Hopefully, you will see that you cannot simply transfer data from one tax return to another. If life was simple, you would be able to get your investment income on your Hong Kong tax return, which is submitted to the Inland Revenue Department, onto your HMRC SA100 tax return. Sadly, this is not the case, and you will need to take your earnings on a month by month basis. This could of course mean that you will pay different levels of tax in Hong Kong than you do in the UK.

An additional consideration here is the exchange rates. Hong Kongers that leave Hong Kong to the UK may cause themselves financial problems by exchanging their money with a low exchange rate. The vice versa clearly applies. It is important to work with a financial specialist to help you get the right exchange rate when converting Hong Kong dollars to British pounds (Sterling).

The exchange rate also provides potential problems to people that wish to do their tax returns. This is because HMRC and the Inland Revenue Department have exchange rates that need to be adhered to. Be sure to get this right to avoid investigations from either tax authority. Our international tax advisors are here to help you do your tax returns in either country.

It is entirely possible for you not to pay tax either in the United Kingdom or in Hong Kong as a British person moving to Hong Kong with some careful tax planning of when you actually move.

You must also remember that there is no tax suffered by the Inland Revenue Department in Hong Kong on UK earnings. This is because Hong Kong tax system does not tax you on foreign earnings. Please be sure to get tax advice before you assume anything. There may be nuances to this statement and it is general in nature.

This could mean that you earn money either in Hong Kong or the United Kingdom without any tax impact in the other country.

HMRC in the UK allows you to pay tax on a remittance basis. This means that you do not need to pay UK tax to HMRC on money earned in Hong Kong. However, you need to be careful not to pay a UK tax surcharge of the remittance basis that outweighs the benefits outlined. In addition, using the remittance basis in the UK means that you do not get a UK personal allowance. This could result you paying more UK tax than you need.

It is important to speak with an international tax advisor that understands the complexities of the UK tax system called HMRC and that in Hong Kong under the Inland Revenue Department.

 

UK tax returns and Hong Kong tax returns

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UK Tax return to HMRC

The UK tax year runs form 6th April to the following 5th April. A UK tax return needs to be filed with HMRC by 31st January the following tax year

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Hong Kong tax returns to the Inland Revenue Department

The Hing Kong tax systems runs from 1st January to 31st December, which is a calendar based tax year. A Hong Kong tax return needs to be filed with the IRD by July/August at the latest

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Global taxation

You may be alarmed to hear that the UK may tax you on your worldwide income. Hong Kong only tax you on the money you generate in Hong Kong.

United Kingdom tax on entry

Hong Kongers moving to the UK need to be careful about exit charges. Albeit there is no Capital Gains Tax in Hong Kong there is a danger that you will pay this tax if you sell certain assets in Hong Kong once you start paying tax in the United Kingdom.

We need to also consider you buying a home in the UK. In the UK you pay a tax called Stamp Duty Land Tax, also called SDLT, when you buy a home. There are also special surcharges of 3% higher rate if you already own a home anywhere else in the world. The 3% SDLT higher rate applies to the total value of the property if the property exceeds £40,000. Let’s be fair this basically means you pay 3% on the entire property value.

Buying a UK home will mean you pay the extra unnecessary 3% SDLT surcharge if you keep your Hong Kong home. It is important to think about selling your Hong Kong home before buying a home in the United Kingdom.

There is also another SDLT surcharge that you need to be aware of. This is called the 2% foreign surcharge. Like the 3% SDLT higher rate the 2%  SDLT foreign surcharge applies to the total value of the property. This may easily be avoided if you wait to buy a UK home when you get into the country from Hong Kong.

 

UK Tax on entry for Hong Kongers

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Stamp Duty Land Tax (SDLT)

There is a purchase tax transaction cost called SDLT. This is a cost of buying a house in the UK. It is important for people moving from Hong Kong to buy a home when living in the UK rather than buying one whilst still in Hong Kong to prevent an additional 2% tax charge.

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Capital Gains Tax (CGT)

It is better to sell assets before moving to the UK to avoid paying HMRC tax on the gains made in Hong Kong. This includes your home as certain reliefs from CGT disappear over time

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