Anticipate with the tax man for your move to the UK
The UK has a fierce global tax system. The tax system collects salaried income, gathers property rental income, and collects online revenue. Gathering on pension income can collect your gains on assets such as bitcoin and other cryptocurrencies. There are over 17,000 pages in the UK tax code, whereas Hong Kong has around 300 pages.
The more you own, the more you have to pay attention. Leaving money in a bank account offshore, your relative’s name, or any other financial institute and not declaring it when you become a UK resident is tax evasion and illegal. It could lead to an HMRC investigation and block your use of assets for 15 years.
The UK Government has official information which shows the public how to report a potential tax offence. They pay the reporting parties a reward. It is private what the prize is, but a case-by-case scenario.
Differences between HK and UK Taxes
Declaring a low income and living in a big house with a flash car, kids at private school and high-end living will get you into trouble with friends and colleagues. Whether they believe it is for the betterment of society or because the green-eyed monster (envy) arrived. They can send the information anonymously to HMRC, then put a name to the claim and get paid for it.
You may do this unintentionally, as you need to know about the potential taxes that can be imposed. HK is friendly regarding tax collections for the average person; the longer you live under this guidance, the longer you get used to it. We pay income tax on earnings made in HK and get significant allowances to offset some liability. We pay property rental income tax of 15%, whereas the UK adds this income to your current income. If you are a high earner, your HK property rental income could be as high as 45% (you pay HKIRD the 15%, and HMRC handles the difference.) We may have a company in HK and therefore pay profits tax. We don’t pay any other taxes!
The UK has many taxes. These include high-income tax, capital gains tax (profits you make on personal assets or investment property), and Inheritance Tax (40% above your estate value of GBP325,000.)
The UK has just announced an increase in income taxes. They are likely to affect 14% of the population (just over 4,000,000 working people) by 1.2% – it is small for now. Still, they will continue to levy wealth taxes on overseas property owners, high-net-worth individuals and companies, executive pensions, and so many more.
Someone has to pay for the effect of Covid 19. The UK government has no loyalty to foreign property owners or the super-rich. There could be a government change which could increase the wealth taxes.
Forewarned is forearmed!
Many people ask me, “how would they know?” meaning how the UK Government would know what you own. Although “big brother” is not quite in place around the world. The various tax offices have implemented FATCA (USA) or CRS (rest of the world) over the last 15 years to pressure the financial institutes to declare our assets to the relevant tax offices.
Your bank is informing them. In other words – the governments can apply financial pressure on these institutions and give them the needed information. The majority are cooperating for fear of being closed down or fined. https://en.wikipedia.org/wiki/Common_Reporting_Standard lets you know the banks and the s imposed due to the disclosure of customers so would be best if you prepare to declare (all of) your assets when you become a UK resident. In other words, unless you have created an estate plan that helps you maintain a higher net worth for your loved ones when you pass away.
What can you expect to plan?
Before you sell up (HK) and run off to brighter pastures (UK), you should discuss with an estate planner (me) your situation – what assets you hold, what you want to do with them, where they are, what taxes may be due, what you can do to protect your loved ones.
Once you become a UK resident, you have less planning time. The UK tax office does not like tax avoidance. You create the structure to save taxes. They like to see you plan your way to include distribution of your estate to loved ones, which may affect tax mitigation or removal.
Any assets cited in the UK, including your business, investment properties, stocks, and shares, are difficult to remove from UK taxes. However, you can protect your offshore assets with proper planning.
The differences found are on your domicile. If you are a Brit returning, you fall back into UK domicile as soon as you become a UK resident. UK domiciles pay taxes on global assets (you must tell them everything you own.)
As a newly arrived resident, you can report on a remittance basis. You’re liable to UK tax on source income and gains but not on foreign assets. It only lasts for seven years, though. After that, the UK government will deem capital gains and charge you GBP35,000 p.a. If you apply for a British Citizen (6th year with a BNO passport per se), you are effectively declaring the UK as your domicile.
When would you like to start planning?
If you want to move to the UK, you should start discussing your options. As the tax year is 06.04 – 05.04, it allows you to consider options based on the rules of 2021. They may well change in the future, but your planning could exempt you from those changes.
To summarise my article, leaving money offshore and not declaring your ownership is tax evasion and illegal.
Creating a structure to mainly save UK taxes just before you move to the UK is tax avoidance. The UK does not like this planning form and could challenge your actions.
It would be best if you discussed all of your options. Established on what you own and what you want to happen to it should you die or become incapacitated. Also, how do you want access to your assets and anything else about your standard of living in the UK? From this, you can establish what structure, if any, would suit you and your family’s lifestyle and hopefully be able to keep a higher net worth in your estate.
It costs you time only for my initial consultation to ask questions and see if I can help with your estate planning needs.