Hong Kong Watch Community Event:
Personal Tax Workshop
Presented by: Thomas Fung
Table of content
1. About Me
2. UK Tax Resident
3. UK Domiciled
4. Self Assessment
5. Pay As You Earn
6. Remittance Basis
7. Capital Gains Tax
8. Disposals of residential property outside the UK
9. Inheritance Tax
10. Foreign Insurance Policies
11. Q&A
Income
Tax
Inheritance Stamp
Tax Duty
Personal
Tax
Capital National
Gains Tax Insurance
When will I become UK tax resident?
Is it simply 183 days after the arrival?
https://assets.kpmg/content/dam/kpmg
/pdf/2016/01/statutory-residence-test-
flowchart.pdf
https://assets.kpmg/content/dam/kpmg
/pdf/2016/01/statutory-residence-test-
flowchart.pdf
Dates of arrival to become UK tax resident
6th April 23 to 5th Oct 23 6th Oct 23 to 6th Dec 23 7th Dec 23 to 5th Apr 24
365 – 183 days 182 – 121 days 120 – 91 days
If 2 UK ties, UK tax resident Both 2 & 1 UK ties, non-UK tax
Automatic UK tax resident If 1 UK tie, non-UK tax resident resident
What is domicile?
• Domicile status differs from the concepts of
nationality and residence, it is based on
your permanent home. You can only have
one domicile at any one time
• Inherit permanent homeland of father,
therefore HKers with BNO are unlikely to be
UK domiciled when they arrive in the UK
• Deemed UK domiciled if you have been UK
resident for 15 of the previous 20 years
• Deemed UK domiciled, not able to claim
remittance basis for Income Tax and Capital
Gains Tax; also worldwide assets for
Inheritance Tax
Tax implication of becoming UK tax resident
• All global income become taxable to UK 2023/24 Taxable income Normal Dividend
personal tax rates rate
Basic rate £1 - £37,700 20% 8.75%
• Including Sole Trade, Investment, Higher rate £37,701 - £125,140 40% 33.75%
Dividend, Interest, Rental, Pension, Additional rate Over £125,141 45% 39.35%
Capital Gain
Personal allowance
• Double tax treaty between UK & HK, HK Personal allowance £12,570
tax paid can be used as tax credit in the Transferable amount £1,260
UK Income limit £100,000, personal allowance goes
down by £1 for every £2
• Split Year Basis applies to split part of Zero personal allowance £125,140 or move
your income between period in the UK & Dividend nil rate band £1,000
HK Interest nil rate band £1,000 on basic rate, £500 on higher
rate & nil on additional rate
• Don’t need to do personal tax return if
you only have UK employment income
• UK tax rates & allowances for 2023/234
About Self Assessment
• Who needs to file?
• Self employed profits > £1,000
• Landlords with income > £10,000 or profit > £1,000
• Employees with income > £100,000
• Anyone receives investment income not already taxed
• Important dates:
• Tax year: 6th April to 5th April
• Paper filing: 31st October of the same year
• Online filing & payment: 31st January of the following year
• You must report and pay any Capital Gains Tax on most sales of UK property
within 60 days
Pay As You Earn (PAYE)
Employer (ER)
ER calculate EE
agree payroll
Employee’s Employer’s contribution for
Reporting
Deadlines details with
contribution contribution period the period
employee (EE)
• Income tax • Employer • Monthly • The 19th and
national 22nd after the
• Employee insurance • Quarterly end of
national insurance contribution reporting
contribution (£4,000 period
annual • Annually
allowance) ER calculate ER
• Student loan ER pay net
salary to EE at contribution for
• Employer
• Childcare voucher pension the agreed date the period
contribution
• Employee
pension
contribution
• Other deductions
ER submit and ER pay pension
pay PAYE to contribution to
HMRC before the the pension
deadlines provider
Examples of take-home-pay
Gross wage Gross wage
£25,000 per year £2,083 per month £40,000 per year £3,333 per month
Income tax Income tax
£2,298 per year (9.2%) £192 per month £5,148 per year (12.9%) £429 per month
Employee national insurance contribution Employee national insurance contribution
£2,003 per year (8%) £167 per month £3,991 per year (10%) £333 per month
Employee pension contribution (i.e. 5%) Employee pension contribution (e.g. 5%)
£938 per year (3.8%) £78 per month £1,688 per year (4.2%) £141 per month
Net wage Net wage
£19,760 per year (79%) £1,647 per month £29,173 per year (72.9%) £2,463 per month
Remittance Basis of
assessment for • Normally your global income will be taxed on an arising
overseas income basis
• Under remittance basis, only overseas brought to the UK
will be tax
• All personal allowances will not be available if claiming
remittance basis
• If overseas income and gains < £2,000, personal
allowances still available
• Additional remittance basis charge applies if
Additional charge: UK resident for:
£30,000 p.a. 7 out of last 9 tax years
£60,000 p.a. 12 out of last 14 years
About Capital Gains Tax
Normal rates Residential • Transfers between spouses are treated as ‘no gain/no
property loss/ transfers
Lower rate 10% 18% • Chargeable disposal:
i. Sale or gift of the whole/part of an asset
Higher rate 20% 28% ii. Exchange of an asset
iii. Loss or total destruction of an asset
Annual exempt amount £6,000 for 2023/24 iv. Receipts of a capital sum derived from an asset, for
example:
Business Assets Disposal Relief and • Compensation received for damage to an asset
investors’ relief
• Receipts for the surrender of rights to an asset
- Lifetime limit £10,000,000 • Exempt disposal:
i. Disposals as a result of the death of an individual
- Rate of tax 10% (Inheritance Tax)
ii. Gifts to charities
• Exempt assets:
• Motor vehicles
• Cash
• Investment held within Individual Savings Account (ISA)
• Foreign currency for private use
• Prizes and betting winnings
Disposals of residential property outside the UK
• If you become a UK tax resident, selling
your residential property in HK will be
subject to UK Capital Gains Tax
• Property outside the UK also qualifies for
Principal Private Residence (PPR) relief
• You must live in the home for at least 90
days in the tax year
• Full relief for :
• The years you lived in the home
• Up to the first 2 years if the home was being
built/renovated or could not sell your old home
• The last 9 months you owned the home – even
if you were not living at the time
Example of disposals of residential property outside the UK
• Example 1 • Example 2
• You bought a HK property for £400,000 as • Same background as Example 1. But you
your main residence on 1st Jan 2010. sold the property for £620,000 on 31st Dec
2024 leaving the property unoccupied for 18
• You moved to the UK on 30th Jun 2023 and months.
sold the property for £600,000 on 30th Sep
2023. • Total period of ownership: 180 months
• Exempt period: (180 – 9) = 171 months
• Since you would be a UK tax resident for the • Chargeable Gain: £220,000 - (£220,000 x
tax year 2023/24, the gain of £200,000 be 171 / 180 ) = £11,000
taxable for Capital Gains Tax.
• After deducting the CGT annual exemption
• But the unoccupied period of 3 months would amount of £6,000, a gain of £5,000 will be
be covered by the PPR relief, therefore no subject to CGT and therefore (£5,000 x 18%)
gain is due for CGT. = £900 will be payable for CGT.
Tax on foreign insurance policies
• In general, insurance policies from HK are non- • Taxable Profit = TB – (TD + PG)
qualifying policies for UK income tax (not Capital
Gains Tax), therefore they are taxable
• TB = The value of what you receive on
• Remittance basis is not permitted on income from maturity or full surrender plus the value of
foreign insurance policies what has been received previously
(surrender value on death even if received
• Insured Amount on the policy is not taxable the value on maturity)
• Payments from sickness & critical illness polices • TD = All amounts paid as premiums
are not taxable
• PG = Gains that were someone’s income
• Education funds are bursaries, also not taxable
for tax purposes
• HS320 Gains on UK life insurance policies
• HS321 Gains on foreign life insurance policies
Tax on foreign insurance policies (cont.)
• Time-apportioned reduction is applied to
your gain for periods during which you were
not resident in the UK
• The gain is reduced by an appropriate
fraction, equal to A / B
• A = the number of days which the policy holder
was not UK resident in the policy period
• B = the total number of days in the policy
period
• A gain arising on:
• A full surrender or maturity
• Death
• Sale
• Part surrender
Examples on tax on foreign insurance policies
Policy One Policy Two
Premium paid £10,000 £10,000
Value at maturity/death £50,000 £4,000
Value at surrender £8,000 £2,000
Dividends £25,000 £6,000
At surrender:
Value received (£8,000 + £25,000) = £33,000 (£2,000 + £6,000) = £8,000
Taxable income (£33,000 - £10,000) = £23,000 Nil due to not breakeven to premium
At death:
Value received (£50,000 + £25,000) = £75,000 (£6,000 + £4,000) = £10,000
Taxable income (£33,000 - £10,000) = £23,000 Nil due to not breakeven to premium
Examples on tax on foreign insurance policies (cont.)
Under time-apportioned reductions
Policy One Policy Two
Policy period 2012 - 2062 2012 - 2062
Premium paid £20,000 £10,000
Value at maturity £50,000 N/A
Value at surrender £15,000 £8,000
Dividends £20,000 £28,000
If surrender/death at 2032:
Value received (£15,000 + £20,000) = £35,000 (£8,000 + £28,000) = £36,000
Taxable income (£35,000 - £20,000) = £15,000 (£36,000 - £10,000) = £26,000
Becoming UK tax resident in 2022 2025
Time-apportioned reduction (10 years / 20 years) = 50% (13 years / 20 years) = 65%
Adjusted taxable income (£15,000 x (1 – 50%)) = £7,500 (£26,000 x (1 – 65%)) = £9,100
About Inheritance Tax
• Very complicated!
• Your “estate” – money you leave to others
on death
• Spouse/Civil partners tax free
• Charities/political parties tax free
• UK assets only for non-UK domiciled,
worldwide assets for UK domiciled
• Chargeable lifetime gifts are taxed at 20% if
above £325,000 within previous 7 years
• IHT rate 40% at death
