Reasons why planning your move to the UK is important:
The UK has a fierce global tax system – they collect on salaried income, they collect on property rental income, they collect on online income, they collect on pension income, they collect on gains you have made on assets (including bitcoin and other crypto-currencies,) they collect on assets you have not in use, they even collect when you die. There are over 17,000 pages to the UK tax code whereas Hong Kong has around 300 pages.
The more you own, the more you have to pay attention – leaving it in a bank account offshore (not in the UK) or in your relative’s names or any other financial institute and just not declaring it when you become a UK resident is tax evasion, and illegal, therefore punishable by prison. Not to mention HMRC investigating and blocking your use of assets for up to 15 years if you get caught.
The UK Government has official information which shows the public how to report a potential tax offense. They pay the reporting parties a reward. It is not public what the reward is, more of a case-by-case scenario. The bigger the fish, the bigger the reward:-:-
Declaring a low income and living in a big house with a flash car, kids at private school, high-end living will get you into trouble with friends and colleagues. Whether they believe that it is for the betterment of society or because the green-eyed monster (envy) arrived, they can send in the information anonymously to HMRC, then put a name to the claim and get paid for it.
You may do this unintentionally as you may not be aware of the potential taxes that could be imposed – HK is pretty friendly when it comes to tax collections for the average person and 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 big 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 the difference is paid to HMRC.) We may have a company in HK and therefore pay profits tax. We don’t pay any other taxes!
The UK has many taxes including high-income tax, capital gains tax (profits you make on personal assets or investment property), and Inheritance Tax (40% above your estate value GBP325,000.)
The UK has just announced an increase in income taxes which are likely to affect 14% of the population (just over 4,000,000 working people) by 1.2% – it is small for now but they will continue to levy wealth taxes on overseas property owners, high-net-worth individuals and companies, executive pensions and many more. We have been warned with a small increase in income tax for now and the speech made by Boris Johnson that taxes will get worse, not better.
Someone has to pay for the effect of Covid 19 and the UK government has no loyalty to foreign property owners or the super-rich. There could be a change in government which could make the wealth taxes even higher.
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 put pressure on the financial institutes to declare our assets to the relevant tax offices.
Your bank is informing then, in other words – the governments can apply financial pressure to these financial institutes to give them needed information, and the majority are co-operating for the fear of being closed down or fined. https://www.kyckr.com/42-lessons-from-42-aml-banks-fines-in-2021/ lets you know the banks and the fines imposed due to non-disclosure of customers so far to date in 2021.
You should be prepared 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 planning can be done?
Before you sell up (HK) and run off to brighter pastures (UK,) you should discuss with an estate planner (me) about your situation – what assets you hold, what you want to do with them, where are they, what taxes may be due, what you can do to protect your loved ones.
I say “before” as once you become a UK resident (there are statutory resident days based on your ties to the UK) you have less planning time – AND the UK tax office does not like tax avoidance either, meaning that you create a structure to only save taxes. They like to see you plan your way to include the distribution of your estate to loved ones which may have the effect of tax mitigation or removal.
Any assets sited in the UK, including your business, investment properties, stocks, and shares are difficult to remove from UK taxes, however, and you may be able to protect your offshore assets with the right planning.
The differences would be based on your domicile. If you are a Brit returning, as soon as you become a UK resident, you fall back into UK domicile – UK domiciles pay taxes on global assets (you have to tell them everything you own.)
As a newly arrived resident, you can report under the remittance basis – you’re liable to UK tax in the normal way on your UK source income and gains but not on your foreign assets. This only lasts for 7 years though, after which the UK government will deem capital gains and charge you GBP35,000 p.a. for the privilege of this service. If you apply to be a British Citizen (6th year with a BNO passport per se) then you are effectively declaring the UK as your domicile.
When to start planning?
If you have an idea of when you want to move to the UK, or that you want to move at some point, you should start discussing your options as the tax year (UK is 06.04 – 05.04) is important for when you arrive. This also allows you to consider the options based on the rules of 2021 – they may well change in the (near) future but your planning could exempt you from the effects of these changes.
So to summarise my article, leaving money offshore and not declaring your ownership is tax evasion and illegal.
By creating a structure to mainly save UK taxes just before you move to the UK is tax avoidance – the UK does not like this form of planning and could challenge your actions.
Planning, however – discussing all of your options is based on what you own, where it is held, what you want to happen to it should you die or become incapacitated, how you want access to your own assets, and anything else pertaining to 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 to see I can be of assistance with your own estate planning needs.