Immigration News
UK Tax Guide 2023: Tax System and Tax Residency Explained
Posted by Uni Immigration on 2023-01-20
UK Tax Lazy Guide 2023｜Proceed with UK tax planning before immigrating to avoid any loss of wealth!
The UK has continued to relax BNO visa application qualifications in recent years, triggering a large-scale immigration wave from Hong Kong to the UK. If you are considering immigrating to the UK, how well do you know the UK tax system? The British tax system is more complicated than Hong Kong, and the tax rate is also higher. Once you become a British resident, you will have the opportunity to be taxed globally, which means that income and asset appreciation from all over the world will need to be taxed. You will also have to pay several taxes that are not available in Hong Kong, such as asset appreciation tax, inheritance tax and dividend tax. Your wealth will be greatly reduced at any time.
If you want to avoid giving a large portion of the assets you have accumulated over the years to the British government, you must have a clear understanding of the British tax system. First, Uni Immigration will teach you the differences between the British tax system and the Hong Kong tax system, the definition of British tax residents, the four major taxes in the UK, and how to handle the tax planning of immigrating to the UK.
The differences between the British tax system and the Hong Kong tax system
The biggest difference between the British tax system and the Hong Kong tax system is that Hong Kong adopts the "territorial source principle" for taxation, while the UK implements "global taxation".
Hong Kong tax system - territorial source principle: only income and profits derived from Hong Kong will be taxed, while income or profits earned overseas are not subject to profits tax in Hong Kong.
UK tax system - global taxation: Income and profits from UK or overseas sources are taxed.
UK tax residency definition
As long as you are a UK resident (Resident), you will be taxed globally.
To put it simply, as long as in the tax year, that is, between April 6 of each year and April 5 of the next year, if you have lived in the UK forFor 183 days or more, it belongs to "Tax-resident".
If you are not a UK resident,if onlyYou will also be considered a UK tax resident if you meet the following conditions:
1. Own, rent or reside in the UK for 91 days or more; reside for 30 days in the tax year.
2. Work full-time for more than 3 hours in the UK on 75% of the days in a year; at least 1 of these days is in the relevant tax year.
Everyone should pay special attention to the fact that even if you do not meet the above-mentioned residence requirements, you may become a tax resident regardless of how much contact you have with the UK, including family, accommodation, work or 90-day contact.Due to space limitations, more details are suggestedcontactUni Immigration's UK immigration consultants and UK tax consultants know how to deal with immigrating to the UK.
A comprehensive look at the 4 major British taxes
The UK not only implements global taxation, but also has higher tax rates than Hong Kong. The tax burden for Hong Kong residents immigrating to the UK is not light. Below, Uni Immigration will explain 5 types of UK taxes to help you learn more about the UK tax system and prepare your tax planning for immigrating to the UK in advance to avoid wasting years of savings.
Basically, as long as you immigrate to the UK, you will most likely become a tax resident, and you will have to pay income tax, asset appreciation tax, inheritance tax, national insurance tax, etc. Among them, asset appreciation tax and inheritance tax are the most important taxes for the tax arrangement of immigrants to the UK. However, Hong Kong people do not have a high understanding of these two taxes that are not available in Hong Kong, so they will be explained in detail below.
Comparison of Hong Kong tax rate and UK tax rate:
| income tax | corporate profits tax | property income tax | dividend tax | capital gains tax | inheritance tax | |
| Hongkong | 2~17% | 8.25~16.5% | 15% | / | / | / |
| U.K. | 20~45% | 19% | Rental income is included in personal income tax | 8.75~39.35% | 10~28% | Up to 40% |
UK Income Tax
After immigrating to the UK, in addition to personal income tax, once personal assets such as properties or stocks are sold, you will have to pay a capital appreciation tax of 10% to 28%.
As long as personal assets are sold in the UK or overseas, that is, non-owner-occupied properties, personal effects exceeding £6,000, non-ISA (Individual Savings Account) or PEP (Personal Share Plan) stocks and business assets, owner-occupied properties used for rental or commercial purposes or an area exceeding 5,000 square meters (nearly 5,400 square feet), you will be charged CGT.
For the 2022/23 tax year, the CGT exemption is £12,300. The CGT rate depends on your personal income tax band and asset class.
| capital gains tax | Personal income tax (Income Tax) tax brackets | Non-owner-occupied property tax rate | Other asset tax rates |
| Basic rate (first £37,700 after tax exemption) | 18% | 10% | |
| 高至額外稅率（>£50,000） | 28% | 20% |
To use a simple example, if you decide to immigrate to the UK before selling your property in Hong Kong, you may have to pay up to 28% capital gains tax, which almost gives a lot of "net worth" to the British government.
For example, Tony bought a unit for HK$3.5 million 10 years ago. After immigrating, he sold the property for HK$6.5 million and made a profit of HK$3 million (approximately US$320,000). Since the UK's capital gains tax is generally calculated based on the difference between the purchase price and the selling price of the property, rather than the market price at the moment of immigration, Tony may have to pay nearly HK$770,000 in capital gains tax (about a quarter of the property sales proceeds).
In addition to real estate, you may also have to pay a large amount of asset appreciation tax when selling assets such as stocks or bonds after moving to the UK. Therefore, if you plan to sell your property or cash out other assets for living expenses after moving to the UK, remember to do a good job in tax planning. Tax arrangements for immigrating to the UKcontactUni Immigration's UK immigration consultants and UK tax consultants will assist you with your tax planning for immigrating to the UK, so you will have no worries after immigrating to the UK.
Inheritance Tax
Even if you choose to hold property after moving to the UK and plan to pass it on to your next generation, your children may have to pay inheritance tax of up to 40% and deal with complex tax issues.
Hong Kong has abolished inheritance tax since July 15, 2005. Therefore, inheritance tax is also one of the British taxes that Hong Kong people are unfamiliar with. Under what circumstances will British inheritance tax be levied?
If the value of the assets left behind during your lifetime (including overseas assets) is less than £325,000 (equivalent to approximatelyHKD 3.04 million), there is no need to pay inheritance tax; when the tax exemption amount exceeds 325,000 pounds, the tax exemption amount is determined according to the status of the heir.
If the heir is a spouse, civil partner, charity, community amateur sports will not be taxed, and children (including adopted, foster and stepchildren) or grandchildren will need to pay inheritance tax if they receive an inheritance.
The standard tax rate is 40%, and the government will generally tax the excess. However, the actual tax rate still depends on the type of assets inherited, whether the heirs include charities, etc., before the actual tax rate can be determined.
Everyone should be aware that assets (including gifts) given away within 7 years before death may also be taxed by the government. The calculation method also depends on the relationship between the giver and the recipient, the value of the asset, the time of the gift, etc.
If you want to protect your children’s future life, you cancontactUni Immigration's UK tax consultants can learn more about UK inheritance tax, and plan and manage personal assets as early as possible to reduce relevant taxes.
National Insurance
National insurance is an important part of the British welfare system. Taxation provides citizens with unemployment assistance, retirement security and other benefits. As long as you are working and over 16 years old, you must pay, and the national insurance will be deducted directly from your salary. The following is a list of National Insurance rates payable by those employed on a salary of more than £242 a week:
| National insurance for employed persons | Weekly pay | tax rate |
| £ 242 ~ £ 967 | 13.25% | |
| £ 967 | 3.25% |
Handle UK tax planning well and immigrate to the UK with confidence
The British tax system is complicated, with numerous taxes and high tax rates. If you do not make proper asset arrangements and relocation planning before immigrating to the UK, you will pay millions of dollars in huge taxes at any time!
There is still a lot of information to share on asset arrangements, but everyone’s background and assets are different, making it difficult to explain everything. If you still have tax questions about immigrating to the UK, onecontactUni Immigration provides professional British immigration services and a professional team to formulate personalized asset arrangements, including establishing "clean capital" and separating it from other investment projects before moving to the UK, arranging the number of days to stay in the UK, making asset inheritance arrangements in advance, establishing overseas trusts, etc., and handling the tax planning for immigrating to the UK!