Foreign savings question

There's three types of tax: income tax, dividend tax and capital gains tax.

You don't incur tax by building up savings. You incur tax from income due to interest on those savings, or capital gains or dividends from investments.

So if you've built up savings by paying in from your salary which you already paid tax on, there's no need to worry about paying more tax on it.

However if you've been earning interest on top of the amount you saved, you should have been declaring that to HMRC (assuming you're resident in the UK). If you haven't, there may be some tax to pay on the interest. The same goes if you didn't declare the salary income to HMRC in the first place.

It gets substantially more complicated if the foreign tax regime does things in a different way to the UK (eg you paid tax there, and there is or isn't a double taxation treaty between there and the UK).

One other thing to add, if you pay a foreign cheque into a UK GBP bank account it will probably hit you with both transfer fees and a terrible exchange rate. There are cheaper places to exchange money which could save around 2.5% of the amount in fees.

You have several different aspects to worry about:

Tax: the fixed rate bond maturing is income. That should be declared to HMRC. If you're a UK taxpayer (or this income would push you over the threshold) they you'll need to pay tax on that. Most probably that's at your normal tax rate (eg 20%, but just on the income you received not on the whole deposit).

Back tax: if you haven't been paying income tax on past interest (when the money was in your name and you were a taxpayer) you ought to have paid tax on that.

Tax is due irrespective of the country the money is in
(As I mentioned in my edited post, it gets somewhat more complicated if the local regime deducted their own tax). Unless you have it in an 'interesting' country, they'll communicate your holding to HMRC anyway, so you can't hide it away. Better to own up sooner rather than later.

Exchange rate movement: is it better to keep it in one currency than another? The answer is nobody knows for sure. But be aware that there could be significant movement between currencies (eg once GBP1=EUR1.55, then =EUR1.02, now =EUR1.35). If you have bills to pay in GBP, it would be rather awkward if your EUR was suddenly worth half what it was before. But maybe you'd be pleased if it was worth double.

Currency exchange/transfer: see http://www.moneysavingexpert.com/banking/foreign-currency-exchange for more info (though the MSE 'best buys' aren't actually very accurate)

International tax is complicated and I'm merely an amateur, so don't take my word for it. However, to the best of my knowledge:

You don't need to show proof of the original amount, at the first instance. You just declare the income on your Self Assessment form (if you don't fill one in, it's easy to register and not that complicated to do the form for most people). If HMRC investigate they'll ask for more details. Do you have or can you get those records in case they ask? It only matters the period it was in your name - if it was in your relatives name then that doesn't concern you.

In the UK, a fixed rate savings bond might last for 5 years, typically interest is credited annually but you can't access it until the end of the term. That means each year's payment counts against that year's allowance, rather than earning nothing for 4 years and then a big lump in year 5. There are a few accounts that roll up interest into the final year, but they're rare. If HK works similarly, it may be that it remains within your threshold if you look at each year in turn.

Repeating what I said about only tax on interest/growth rather than money paid in, you may already have paid some tax to the HK government. Here is where it gets complicated as you need to know how double taxation works between HK and UK (which I don't). However (AFAIK) there's nothing special about 16 in UK tax. Children still pay tax if they have enough income, however typically they don't earn enough so are within their personal allowances. That may be the case for you too.

So I'd guess there may be some tax to pay, but perhaps less than you think. I'd just have a chat with HMRC and see what they say. They'll find out sooner or later anyway.

Particularly if the sums are substantial, it may be worthwhile to find a tax advisor who understands HK/UK tax. That's got to be more reliable and give you more peace of mind than random people on the internet.