Tax considerations for Hong Kongers moving to the UK or buying UK property

Please be advised that the information in this article regarding QNUPS and IHT is no longer accurate due to the recent changes announced in the UK Budget. Starting in April 2025, the regulations will have significant implications that may affect your understanding of these topics. We encourage you to stay informed and consult with a Soteria Trusts expert to navigate these changes effectively.

Hong Kong citizens who are considering relocating or investing in the UK property market should ensure they have a thorough understanding of the UK tax system, and they should be proactive about tax planning prior to arrival or purchase. Those with a BNO visa, too, will be subject to the UK’s global tax system, which means their rental income from Hong Kong will be taxed in the UK, and if they buy a residential property in the UK without selling their Hong Kong property first, they must pay an extra 3% of Stamp Duty Land Tax. 

New country, new house, new tax system

Hong Kong’s income tax rates are generally low, whereas UK income tax rates are higher, and can reach up to 45%. Additionally, the UK also levies capital gains and inheritance taxes on international assets. These taxes make the move to the UK much more difficult when it comes to tax planning, a lot of which is required to make sure they are as tax neutral or efficient as they can be.

On January 31, 2021, a new visa became available to British National (Overseas) citizens (BNOs) in Hong Kong and their close family members. BNO visa holders who stay in the UK for 5 years can apply for settlement and after one more year of residence, they can apply for British citizenship.

UK Property Taxes

Hong Kong residents moving to the UK need to learn about the complex process of purchasing and owning a home in the UK. For years, investing in UK residential properties has been very popular with Hong Kong investors, many of whom have one or more buy-to-let properties there. Over the last decade, however, UK tax laws have changed, and not for the benefit of taxpayers. One of the biggest changes relates to Stamp Duty Land Tax, which is a tax paid for any property or land purchase in the UK. A few of these tax changes include:

• 2% Stamp Duty Land Tax (SDLT) surcharge for foreign buyers of UK residential properties (effective April 2021);
• For second homes and corporate buyers there is a 3% surcharge on SDLT;
• UK residential and investment property will be subject to UK Inheritance Tax (IHT) regardless of whether a non-UK citizen holds the asset structure;
• With limited exceptions, UK Capital Gains Tax (CGT) will apply for UK property sale, regardless of where the investor resides;
• The UK will tax your net rental income;
• UK Inheritance Tax can be charged on worldwide assets, even those you left back in Hong Kong.

Tax residence and domicile considerations

Hong Kong BNO visa migrants move to the UK with the intention to settle there, and therefore, to become residents for tax purposes in the UK. With that in mind, they should know that their worldwide income and gains will be subject to UK taxation. Furthermore, their worldwide assets will also be liable to UK inheritance tax (IHT).

UK Inheritance Tax

Something that local Hong Kong residents might not know much about is the UK’s Inheritance Tax. Charged at 40% of one’s estate over a certain threshold, IHT is a tax that should be taken into consideration when moving to the UK, as it can undermine one’s plans if not carefully planned for. 

UK property ownership and IHT

The vast majority of people’s wealth, and ultimately their estate following death, comes from the properties they own. Property prices continue to increase in the UK, and for some that may be a reason to celebrate, but also a concern as their beneficiaries are exposed to inheritance tax that has to be paid before they can receive the family home or investment property as an inheritance. After all, most of the plans we make are for the benefit of our loved ones so isn’t it sensible that we plan and structure things correctly? 

Why then save and invest in property, which is a great asset class in its own right, when it can bring large tax liabilities with it?

With consideration and careful planning, one can enjoy the benefits of steady capital appreciation and rental income that owning property brings, whilst ensuring that the assets can be handed over with as little tax liability as possible following death. Read more about how to avoid IHT on UK property here.