Hong Kong Inheritance Tax: What UK Expats Need to Know About UK IHT

However, moving to Hong Kong does not automatically remove exposure to UK Inheritance Tax (IHT). For UK expats, previous UK residence and the location and nature of their assets can determine whether part or all of an estate remains within the UK IHT regime.

This article explains how Hong Kong’s inheritance tax position interacts with UK Inheritance Tax (IHT), including the long-term residence rules, the post-departure IHT tail and the treatment of UK assets. It also considers the practical steps involved in coordinating an estate plan across both jurisdictions.

Is There Inheritance Tax in Hong Kong?

There is no inheritance tax in Hong Kong. Hong Kong historically operated Estate Duty, but it was abolished for deaths occurring on or after 11 February 2006.

Consequently, there is no Hong Kong inheritance or estate tax imposed on the transfer of assets at death. Hong Kong also does not operate a general gift tax or a general capital gains tax.

The absence of a general capital gains tax does not mean that every gain falls outside Hong Kong taxation. Where buying and selling assets amounts to a trade or business rather than the disposal of a capital investment, the resulting profits may be subject to Profits Tax.

The main succession-related expenses therefore revolve around administration, so you should account for:

• Probate fees
• Asset valuation
• Legal fees

Income-generating assets can also remain subject to ordinary taxation after they have been inherited.

Hong Kong’s absence of estate or inheritance tax can be an important consideration for internationally mobile families. If you hold substantial assets in Hong Kong and have beneficiaries residing there, the transfer on death does not itself attract Hong Kong Estate Duty.

However, this does not exempt you from UK IHT. Hong Kong’s approach to taxing income and profits and the UK’s approach to inheritance tax are separate regimes, and favourable local taxation does not necessarily mean that your worldwide estate falls outside the UK IHT net.

Hong Kong’s Territorial Taxation Framework

Hong Kong operates a territorial approach to taxation. Broadly, its Profits Tax regime focuses on profits arising in or derived from Hong Kong rather than automatically taxing worldwide profits simply because an individual or business is resident there.

For example, a person carrying on a trade, profession or business in Hong Kong may be liable to Profits Tax on profits sourced in Hong Kong, while foreign-sourced profits can fall outside the charge, subject to the applicable rules and, for certain entities and income, Hong Kong’s foreign-sourced income exemption regime.

This territorial principle is one of the features of Hong Kong’s tax system that can make it attractive to internationally mobile individuals. It should not, however, be confused with the rules governing UK IHT.

Since 6 April 2025, the UK has used a residence-based framework to determine whether an individual’s non-UK assets fall within the scope of IHT. This means that becoming resident in Hong Kong, or benefiting from Hong Kong’s territorial tax system, does not by itself remove UK IHT exposure.

For UK expats, the key question is therefore not simply where you live when you die. Your history of UK tax residence can determine whether assets held in Hong Kong and elsewhere remain within the UK IHT net.

Hong Kong vs UK: How the Inheritance Tax Position Differs

How UK Inheritance Tax Applies to Expats in Hong Kong

To understand the full impact of the UK’s tax framework, you must familiarise yourself with:

1. Long-term residence criteria
2. Post-departure IHT tail period
3. Taxation of UK-situs assets
4. Treatment of unused pensions

Long-Term Residence Criteria

From 6 April 2025, the UK replaced the previous domicile-based framework for determining the IHT treatment of non-UK assets with a long-term UK residence (LTR) regime.

Generally, you are a long-term UK resident for IHT purposes if you have been UK resident for at least 10 of the 20 tax years immediately preceding the tax year in which the relevant chargeable event, including death, occurs.

If you are considered a long-term UK resident, your non-UK assets can fall within the scope of UK IHT at death. This includes assets held in countries that do not impose local estate or inheritance tax, meaning your Hong Kong assets may be included.

Transitional provisions can apply to some individuals who became non-UK resident around the introduction of the new regime, so people who left the UK before or during the 2025/26 tax year should establish which rules apply to their circumstances rather than relying solely on the general 10-out-of-20 test.

The standard IHT rate on death is 40%, subject to available exemptions and reliefs. The standard nil-rate band is £325,000. A further residence nil-rate band of up to £175,000 may be available where a qualifying residence passes to direct descendants, although this allowance is subject to conditions and is tapered for estates worth more than £2 million.

UK tax residence for each relevant year is determined under the statutory residence test (SRT). For expats who continue to spend time in the UK or retain family, accommodation or working ties there, establishing residence accurately is therefore an important part of the LTR and IHT analysis.

Given the scope and effects of the LTR regime, it is critical to assess your residence history rather than assuming that favourable local Hong Kong taxation means your wealth can be transferred free of UK IHT.

How Long Can UK Inheritance Tax Apply After Moving to Hong Kong?

Being a Hong Kong resident at the time of a chargeable event, such as death, does not automatically relieve you of UK taxation. The tax treatment of your non-UK estate can still depend on your previous UK residence history.

After leaving the UK as a long-term UK resident, you may remain within the UK IHT regime for a “tail” period during which IHT can continue to apply to your non-UK assets. The tail period can last between three and ten tax years, depending on how long you were UK resident before relocation.

For instance:

The full progression increases by one year for each additional year of UK residence from 14 years onwards, up to the maximum ten-year tail.

Once the required period of consecutive non-UK residence has passed, non-UK assets can generally fall outside the scope of IHT under the LTR rules, subject to the nature and ownership of the assets and any other applicable rules.

A return to UK tax residence during the relevant period can interrupt the required period of consecutive non-UK residence. This is a significant consideration for expats who maintain UK ties and frequently travel between the UK and Hong Kong.

A visit to the UK does not, by itself, restart the tail period. The relevant question is whether your circumstances cause you to become a UK tax resident for that tax year under the SRT. For this reason, UK travel, accommodation, family and working arrangements should be considered together rather than focusing solely on the number of days spent in the country.

UK Assets That Can Remain Subject to Inheritance Tax

UK-situs assets are generally within the scope of IHT regardless of whether you are a long-term UK resident. The LTR regime is particularly important in determining whether non-UK assets are brought within the UK IHT net.

It is therefore important to understand the concept of situs, especially its distinction from an asset’s physical location. While the two terms frequently overlap, an asset’s legal situs for IHT purposes can differ from its geographical location.

A representative example is UK residential property. Utilising an offshore structure to hold UK residential property was historically capable of providing protection from IHT in some circumstances, but anti-enveloping rules now bring interests deriving their value from UK residential property within scope in relevant cases. Offshore ownership should therefore not be assumed to remove UK residential property from the IHT net.

For sophisticated cross-border estates, the interaction between residence, asset situs and ownership structures should be considered as part of the wider estate plan.

Treatment of Unused Pensions

From 6 April 2027, most unused pension funds and pension death benefits will be included in an individual’s estate for IHT purposes under reforms enacted in Finance Act 2026.

The treatment of overseas pension arrangements is more nuanced. Relevant overseas pension interests can fall within the UK IHT regime where the deceased is a long-term UK resident, but the position depends on the legal classification of the scheme and the statutory rules applying to it. A Hong Kong pension should therefore be assessed according to the type of scheme rather than assumed to be automatically inside or outside the UK IHT net.

Relevant pension property in UK-established schemes can also remain within the scope of IHT even where the member is not a long-term UK resident, subject to the statutory exclusions, exemptions and reliefs.

There are important exclusions and exemptions within the new regime, including qualifying death-in-service benefits and, in appropriate circumstances, benefits passing to a surviving spouse or civil partner.

The inclusion of most unused pension funds and death benefits from April 2027 means that pension arrangements should no longer be considered separately from an estate plan. For UK expats in Hong Kong, existing pension holdings, beneficiary nominations and the treatment of overseas schemes should all form part of the wider cross-border review.

How to Plan Your Estate Across the UK and Hong Kong

Hong Kong’s absence of estate or inheritance tax does not reduce the need for a cross-border estate plan, which should account for:

1. Reporting requirements
2. Ongoing UK IHT exposure
3. Coordinated succession

Reporting Requirements

Besides reducing the potential tax burden on your estate, the lack of inheritance tax in Hong Kong simplifies reporting significantly. For deaths occurring on or after 11 February 2006, there is no need to file Estate Duty affidavits or accounts with the Inland Revenue Department, nor are Estate Duty clearance papers required when applying for a grant of representation.

Estate administration requirements still remain, including obtaining the appropriate local Grant of Representation where required.

Obligations towards the UK may be more involved. Depending on the estate, these can include:

• Paying IHT by the end of the sixth month following the month of death, where tax is due
• Completing Form IHT400 where full estate details must be reported to HMRC
• Completing the applicable probate or confirmation process in the relevant part of the UK

Where an IHT400 is required, it generally needs to be submitted within 12 months after the end of the month in which the death occurred, subject to the applicable rules, and the relevant IHT steps must be completed before the probate process can proceed. In England and Wales, HMRC normally provides the information needed to proceed with the probate application after the relevant IHT requirements have been met; Scotland and Northern Ireland have different procedures.

Failing to adhere to the applicable deadlines can result in interest on unpaid tax and financial penalties for late filing. It is therefore important to understand which reporting requirements apply to the estate and plan the administration process accordingly.

You should also account for any reporting obligations that arise once assets are inherited. Hong Kong’s framework may be relatively straightforward from an estate-tax perspective, but inherited assets can still produce taxable income or profits depending on how they are held and used.

Ongoing UK IHT Exposure

Even if you are currently liable for IHT only on UK-situs assets, you should monitor your exposure continuously for matters such as:

• Residence changes in the context of the LTR regime
• Changes in the UK IHT scope
• Updates to the applicable exemptions and reliefs

For instance, HMRC historically provided 100% Business Property Relief (BPR) for qualifying property. From 6 April 2026, the 100% rate is subject to a £2.5 million allowance covering qualifying business and agricultural property, with qualifying value above the available allowance generally receiving 50% relief.

The inclusion of most unused pension funds and death benefits from April 2027 is another notable change and illustrates why estate plans should be reviewed as tax legislation develops.

Consequently, you should either monitor such changes directly or through an adviser who can assist in adapting your estate plan accordingly.

Although residence changes are particularly important to monitor, ownership of UK assets should not be overlooked. UK-situs assets can remain within the IHT regime after your exposure on non-UK assets has ended, so their role in your wider estate should be reviewed alongside your investment, succession and tax objectives.

Coordinated Succession

Cross-border estates can create practical administration issues even where Hong Kong Estate Duty is not payable. A will prepared in one jurisdiction may still require additional probate steps before assets located in another jurisdiction can be administered.

For UK expats with substantial assets in both Hong Kong and the UK, it may therefore be appropriate to consider coordinated wills covering the two jurisdictions. Whether separate wills or a single cross-border will is preferable will depend on the assets involved and the individual’s circumstances.

Where separate wills are used, each should comply with the applicable law and clearly identify the assets it is intended to govern. It is also critical for each will’s revocation clauses to be worded carefully so that one will does not inadvertently revoke the other.

Pension beneficiary nominations and other assets passing outside the will should be reviewed at the same time. A carefully drafted will cannot achieve the intended succession plan if pension nominations or ownership arrangements point in a different direction.

Besides wills, you should also consider the structural aspect of your estate. This is especially true if you are a UK LTR or may be considered one at the relevant time, because different ownership structures can materially affect the taxation of your estate.

Trusts require particular care. Under the post-6 April 2025 IHT regime, the treatment of non-UK assets held in trust can depend on the settlor’s long-term UK residence status at the relevant time. A Hong Kong discretionary trust should therefore not be assumed to shelter non-UK assets from UK IHT simply because the trust and its assets are outside the UK.

For HNW families, wills, pension arrangements, beneficiary designations, trusts and the ownership of UK and non-UK assets should therefore be reviewed as parts of the same cross-border estate plan rather than in isolation.