This article is general information. It is not personal tax advice. Tax depends on your individual circumstances and the rules change frequently. When in doubt, consult a qualified UK tax adviser.
Topics
- Your MPF and overseas assets
- Self Assessment and payments on account
- Working for yourself: sole trader, company and IR35
- Residence, domicile and the new regime
- Making Tax Digital: the 2026 shift
- Protecting your wealth: CGT and IHT
Your MPF and overseas assets
Is my MPF taxable here, and what must I actually tell HMRC about money and property left behind in Hong Kong?
I withdrew my MPF after moving to the UK. Is the payout taxable by HMRC?
Generally, no. Under the UK–Hong Kong Double Taxation Agreement (DTA), pensions and similar remuneration — explicitly including a lump sum — from a recognised Hong Kong scheme such as the MPF are taxable only in Hong Kong. Because MPF benefits are exempt from Hong Kong salaries tax, the practical result is usually no tax on either side.
One caveat: HMRC updated its guidance on foreign lump sums in 2025, and the treatment can turn on the precise facts — when you became UK resident, how the payment is structured, and the size of the withdrawal. For a substantial MPF balance, confirm your position with an adviser before you withdraw.
I’ve seen reports of HMRC sending letters to Hongkongers about undisclosed overseas assets. Should I worry?
Those reports caused real alarm, but the context matters. HMRC routinely issues so-called “nudge letters” when its data suggests someone might have offshore income they haven’t declared. A letter is a prompt to check, not an accusation. Review your affairs to make sure any taxable overseas income — rent, interest, dividends — has been reported, and you have nothing to fear.
If my MPF isn’t taxable, must I still tell HMRC about Hong Kong rental income or bank interest?
Usually yes. Unlike the MPF lump sum, income from your Hong Kong assets — rent from a flat, or interest and dividends from HK accounts and investments — is generally taxable in the UK once you are resident here, and must be reported through Self Assessment if it exceeds your allowances. The important exception is the four-year exemption for new arrivals, explained next.
What is the “four-year foreign income exemption” I keep hearing about?
From 6 April 2025, the UK replaced the old “non-dom” remittance basis with a new four-year Foreign Income and Gains (FIG) regime. If you arrive in the UK having been non-resident for the previous ten tax years, you can claim a 100% exemption on your foreign income and gains for your first four years of UK residence — and you can even bring that money into the UK without a UK tax charge.
It is not automatic: you must claim it on your Self Assessment return for each year you want it to apply, and the window simply runs out after four years, after which worldwide taxation begins.
Does it help if I don’t intend to settle in the UK permanently?
Less than it used to. Before April 2025, a Hong Kong “domicile” could shelter your overseas wealth. Under the new rules, domicile no longer drives income tax, capital gains tax or inheritance tax — what matters now is your residence: how long you have actually lived in the UK. Your intentions still matter for genuine long-term planning, but they no longer decide your day-to-day tax bill. See Topic 4 for the full picture.
Key points
- Reporting is not the same as paying. Even where no tax is due — for instance under the four-year exemption — you may still have to disclose the income to HMRC.
- The interaction between the new regime and the DTA is genuinely complex; specific advice is essential if you hold a significant overseas portfolio.
Self Assessment and payments on account
In Hong Kong your employer largely handled tax for you. The UK expects you to register, report and pay proactively — and one feature, payments on account, catches almost everyone out in their second year.
I’m employed and pay tax through PAYE. Do I still need to file a return?
Not because of your salary alone. The old £150,000 income threshold for PAYE-only taxpayers was removed from the 2024/25 tax year, so a high salary on its own no longer requires a return. You must file, however, if any other trigger applies — for example:
- Self-employment income over £1,000 (gross);
- Rental income from property, UK or overseas, over £1,000 (gross);
- Dividends over the £500 dividend allowance;
- Savings interest above your Personal Savings Allowance;
- Untaxed overseas income, such as Hong Kong rent or interest (unless covered by the four-year exemption);
- Capital gains you need to report; or
- You want to claim the four-year FIG regime — which is done through Self Assessment.
I’ve started a small side hustle. At what point do I tell HMRC?
You must register for Self Assessment once your gross trading income exceeds £1,000 in a tax year — even if you made no profit after expenses. If you filed in the past but later stopped, you may need to reactivate your old record rather than register afresh.
What are the key dates for the 2025/26 tax year?
For the tax year that ended on 5 April 2026, mark these deadlines to avoid automatic penalties:
- 5 October 2026 — register for Self Assessment if it’s your first time;
- 31 October 2026 — deadline for paper returns;
- 31 January 2027 — deadline for online returns and for paying your tax bill.
What happens if I miss 31 January?
HMRC applies an automatic £100 penalty the moment the deadline passes — even if you owe nothing or have already paid. If the return is more than three months late, daily penalties of £10 a day begin to build, with further charges at six and twelve months. Interest also runs on any unpaid tax from 1 February.
I’ve heard about “payments on account.” What are they, and why was my second bill so much larger?
This is the feature that surprises people most. If your Self Assessment liability for a year (income tax plus Class 4 National Insurance) is more than £1,000, and less than 80% of your tax was already collected at source through PAYE, HMRC requires you to make advance instalments — payments on account — towards the following year. Each instalment is 50% of your latest bill, due on 31 January and 31 July.
Worked example
Suppose your first Self Assessment bill, for 2025/26, comes to £3,000 and is all due under Self Assessment. Paying it by 31 January 2027 triggers payments on account for 2026/27:
- First payment on account: £1,500 — due 31 January 2027
- Second payment on account: £1,500 — due 31 July 2027
So on 31 January 2027 you actually pay £3,000 (the 2025/26 balance) plus the £1,500 first instalment — £4,500 in one go. Plan your cash flow for that day.
If your income is expected to fall sharply in 2026/27 — you’ve lost a major contract, retired, or moved onto a company payroll — you can log into the Self Assessment portal and apply to reduce your payments on account so you don’t overpay.
Key points
- The £1,000 limits for self-employment and rental income are measured on gross income, before expenses — not your final profit.
- Registering means obtaining your Unique Taxpayer Reference (UTR), which can take up to ten working days to arrive by post — leave time.
- Don’t wait for HMRC. If you meet the criteria, the legal duty to notify by 5 October is yours; they may not contact you first.
- For higher earners, Self Assessment is now being replaced by Making Tax Digital — see Topic 5.
Working for yourself: sole trader, company and IR35
Especially relevant to IT professionals, consultants and freelancers. The choice of business structure — and the unfamiliar IR35 rules — can make a real difference to what you keep.
Should I register as a sole trader or set up a limited company?
It depends on your expected income, your appetite for risk and how much administration you’re willing to take on.
- Sole trader — the simplest structure, with the least paperwork. You and the business are one and the same legally, so you carry unlimited personal liability for its debts.
- Limited company — a separate legal entity that shields your personal assets (“limited liability”), but with heavier obligations: annual accounts at Companies House and a Corporation Tax return.
Which is better for saving tax?
A limited company can be more tax-efficient once profits reach a certain level (often cited at around £30,000–£50,000), because you can take a mix of a modest salary and dividends, which are taxed at lower rates and carry no National Insurance. As a sole trader, all profit is taxed as personal income — simpler, but the National Insurance position can be less favourable. The right answer is rarely just about tax; weigh it against liability and admin.
I keep hearing about “IR35.” Does it apply to me?
If you provide your services to a client through your own limited company (a “personal service company”), you must consider IR35. These rules test whether you are a genuine business-to-business contractor or, in substance, a “disguised employee”.
- Inside IR35 — you’re treated as an employee for tax, and the client or agency deducts tax and NI before paying you.
- Outside IR35 — you’re a genuine contractor and can pay yourself via dividends, which is usually more efficient.
This framework is often new to those from Hong Kong, where no equivalent categorisation exists.
What is an “umbrella company,” and when should I use one?
An umbrella company acts as an intermediary employer for contractors: it handles invoicing, deducts your PAYE tax and National Insurance, and pays you a net salary. It’s a common choice for people working “inside IR35,” or for anyone who would rather not run their own limited company.
Can I claim business expenses to reduce my tax bill?
Yes — but only where the cost is incurred wholly and exclusively for the business. Common claims include equipment such as laptops and software (under Capital Allowances), professional insurance, a reasonable share of home-office costs, and business travel. Keep accurate records and receipts for everything you claim.
Key points
- Choosing between sole trader and company is about legal protection as much as tax.
- For medium and large clients, it is usually the client who decides your IR35 status, not you.
- UK business structures and IR35 are intricate — an accountant’s advice early on can prevent costly mistakes and HMRC enquiries.
Residence, domicile and the new regime
A critical knowledge gap — made sharper by the April 2025 reforms, which retired the old “domicile” system that many newcomers were still planning around.
I live in the UK now — does that make me a UK taxpayer on everything?
Not necessarily, and the framework changed in April 2025. Tax residence — broadly, how many days you spend here under the Statutory Residence Test — determines whether and how the UK taxes you. The older concept of domicile, tied to where you regard your permanent home, used to sit alongside it. Most Hongkongers become UK tax residents quickly; what has changed is what residence now means for your worldwide income.
I’ve heard the “non-dom” rules have changed. What happened?
They were abolished. From 6 April 2025 the remittance basis — under which non-doms paid UK tax on foreign income only if they brought it into the UK — was replaced by the residence-based four-year FIG regime. For your first four years of UK residence (provided you weren’t resident in any of the previous ten tax years), you can bring foreign income and gains into the UK tax-free. After that, worldwide taxation applies in the normal way.
So what actually decides whether my worldwide income is taxed here?
Two things now: your residence, and whether you’re still inside the four-year FIG window. While you can claim FIG, your Hong Kong income and gains stay outside the UK net. Once the four years end (or if you don’t claim), you are taxed on your worldwide income and gains as they arise — including HK rent, interest and dividends, reported via Self Assessment.
Does my Hong Kong domicile still count for anything?
For income tax, capital gains tax and inheritance tax, no — these are now decided by residence, not domicile. The old “non-dom” planning that relied on a domicile of origin in Hong Kong no longer works for these taxes. Domicile still exists as a general legal concept (it can matter for matters such as succession and family law), but it is no longer your shield against UK tax. If your strategy still rests on being “non-domiciled,” it needs reviewing.
I may return to Hong Kong one day. What does that mean for tax on my HK assets?
For inheritance tax, the test is now whether you are a “long-term resident” — resident in the UK for at least 10 of the last 20 tax years. Until you reach that point, generally only your UK-situated assets are within the UK inheritance tax net; your Hong Kong assets sit outside it. Once you become a long-term resident, your worldwide estate is in scope. Topic 6 covers this in full.
Key points
- Residence is about days — a largely mechanical test of physical presence in the UK.
- The four-year window is precious. New arrivals should make the most of the FIG exemption before worldwide taxation begins.
- The reforms are recent and detailed; if your earlier plans assumed the old non-dom rules, revisit them with an adviser.
Making Tax Digital: the 2026 shift
This is no longer a future problem. From April 2026, many self-employed people and landlords must keep digital records and report to HMRC every quarter.
What is Making Tax Digital, and is it now mandatory?
Yes — from 6 April 2026, Making Tax Digital (MTD) for Income Tax is mandatory for many self-employed individuals and landlords. It replaces the single annual tax return with more frequent, digital reporting of your income and expenses throughout the year.
How do I know whether I have to join this year?
It depends on your total gross income (turnover before expenses) from self-employment and property combined:
- From 6 April 2026 — you must join if that income was over £50,000 in 2024/25;
- From 6 April 2027 — the threshold drops to £30,000;
- From 6 April 2028 — it falls again to £20,000.
HMRC should write to you if its records show you cross the threshold, but the duty to check and register is yours.
Does “gross income” include my salary from a full-time job?
No. Qualifying income for MTD is turnover from self-employment and property only. It does not include employment income taxed under PAYE, pensions or dividends.
What do I actually have to do under MTD?
Three things:
- Keep digital records of your income and expenses in MTD-compatible software (Xero, QuickBooks, Sage and others). Paper records alone no longer suffice.
- Send quarterly updates — a summary of income and expenses to HMRC every three months through your software.
- Make a final declaration after the tax year ends, by 31 January, confirming your overall position — replacing the old annual return.
When are the quarterly deadlines?
For 2026/27, the standard quarterly update deadlines are:
- Quarter 1 (6 April – 5 July): 7 August 2026
- Quarter 2 (6 July – 5 October): 7 November 2026
- Quarter 3 (6 October – 5 January): 7 February 2027
- Quarter 4 (6 January – 5 April): 7 May 2027
Key points
- A one-year deferral for new arrivals: if you complete the residence pages of your return — as four-year FIG claimants do — you are not required to use MTD until April 2027.
- Soft landing for 2026: HMRC has confirmed it won’t apply certain late-submission penalties in the first year while people adjust.
- No more HMRC portal: above the threshold, you can no longer simply type your annual totals into the website — you must use recognised software.
- The upside: real-time digital records give you a live view of your tax position and make cash flow easier to plan.
Protecting your wealth: CGT and IHT
The long-term questions that matter most — and where the residence “clock” quietly decides how much of your global wealth the UK can reach.
The 10-of-20 rule. Since April 2025, inheritance tax no longer turns on domicile. The test is residence: once you have been UK resident for 10 of the last 20 tax years, your entire worldwide estate falls within the 40% UK inheritance tax net. It is a far clearer line than the old domicile rules — but a stricter one.
If I sell my Hong Kong home after moving here, do I owe UK Capital Gains Tax?
Often not, thanks to Private Residence Relief (PRR), which generally exempts the sale of your only or main home. But if you lived in the UK for some years before selling, relief may cover only the period the HK property was genuinely your home, plus a final nine-month exemption. Any gain relating to a time it sat empty or let while you were UK resident may be taxable. Note too that, once UK resident and outside the four-year window, gains on overseas assets count even if the proceeds never leave Hong Kong.
What are the CGT rates and allowance for 2025/26 and 2026/27?
The annual tax-free allowance is £3,000 per person. Above that, the rate depends on your income band:
- Basic-rate taxpayers: 18%
- Higher- and additional-rate taxpayers: 24%
Since 30 October 2024, these rates apply to both residential property and other assets such as shares — the two were brought into line.
Is UK Inheritance Tax really 40% — on my whole estate?
Only the portion above your tax-free bands is taxed at 40%:
- Nil-Rate Band: the first £325,000 is tax-free for everyone;
- Residence Nil-Rate Band: a further £175,000 if you leave your main home to direct descendants (children or grandchildren);
- Couples: spouses and civil partners can combine allowances, potentially passing on up to £1 million tax-free.
How can I give money to my children now and reduce IHT later?
The main route is the seven-year rule. Most outright gifts are “Potentially Exempt Transfers”: survive seven years after making the gift and it falls entirely out of your estate. Die within seven years and it may be taxed, though “taper relief” can reduce the rate over time. Separately, you can give away £3,000 each tax year, immediately exempt.
Are my Hong Kong assets safe from UK Inheritance Tax?
It now depends on the 10-of-20 test. If you are not yet a long-term resident, generally only your UK-situated assets (a UK home, a UK bank account) are within scope, and your HK assets stay outside it. Once you become a long-term resident, your worldwide estate — including Hong Kong property and investments — is exposed at 40%. Even after leaving the UK, a residence “tail” of between three and ten years can keep you in the net, depending on how long you lived here. Long-term planning is essential.
Key points
- Keep records of value on arrival. For CGT, evidence of what your HK property was worth on the day you moved acts as your base cost for future gains.
- Gifts with reservation don’t work. You can’t give away your house yet keep living in it rent-free — HMRC still counts it in your estate.
- Use tax-free wrappers. Gains inside an ISA or SIPP are free of CGT, making them valuable planning tools.