UK Taxation

HM Revenue and Customs (HMRC) is the governmental department in UK (equivalent to Inland Revenue department in Hong Kong) which is responsible for administering and collecting taxes in the UK. The core tax categories are income taxes, property taxes, capital gains, UK inheritance taxes, and Value Added Tax (VAT).

From 11 February 2006 Hong Kong did not have estate duty anymore. You are reminded that UK do have inheritance tax and the standard tax rate is excessively high. The standard UK inheritance tax rate is 40%.

Inheritance law in the UK applies to all residents on all of their worldwide assets. If you are a non-resident who owns property in the UK, inheritance law will also apply to some of your estate.

Inheritance tax applies to the estate of deceased UK residents and on the UK property of someone who lived overseas. Such property may include real estate, and other chattels. UK inheritance tax is payable on the net value of the estate, plus on any lifetime gifts made in the last seven years of the deceased’s life.

Tax free threshold is £325,000

40% tax rates is applied to the portion of the estate above £325,000.

Reliefs and exemptions from UK inheritance tax

Spouses/civil partners, charities.

Gifts given during the deceased’s lifetime up to a period of seven years before death.
50–100% tax relief is available on some business assets.

Tax rate on the estate can lessen to 36% if at least 10% of the estate is left to charity.

If the main home is left to children or grandchildren, there is a tax-free threshold of up to £2,000,000 on this property.

Gifts made within different years before the death of the of the deceased’s life will trigger different inheritance tax rates.

Less than three years: 40%

Three to four years: 32%

Four to five years: 24%

Five to six years: 16%

Six to seven years: 8%

More than seven years: 0%

Automatic Exchange of Information (AEOI)

UK is a signatory country to the mechanism, which allows the sharing of information about financial accounts and investments between tax authorities of different countries. Hong Kong is also a signatory jurisdiction.