Your UK Tax Status has an Impact on the way you are Subject to UK Taxes.
Your UK tax status has an impact on the way you are subject to UK taxes, including income tax, capital gains tax (CGT) and inheritance tax (IHT).
Since 6 April 2013, the Statutory Residence Test has given a legislative framework to allow your UK residence status to be determined. This is important because, whilst UK resident taxpayers pay UK income tax and CGT on their worldwide income and gains, non-UK resident taxpayers only pay income tax on their UK source income, and pay CGT only on gains arising on UK residential property since 6 April 2015.
Before 6 April 2013 there was a complicated system of tax residence and ‘ordinary residence’.
Your domicile is your “homeland” i.e. where you have your long-term permanent home, being the country (or federal state) with which you have the closest personal, family, social and economic ties, and the country in which you have realistic plans to settle permanently in the future, e.g. on retirement or permanent migration. It can be difficult to demonstrate that you have changed your domicile, as you need to sever ties with your original domicile.
If you are not UK domiciled (a “non-dom”) it could enable you to file your UK tax returns on the “remittance basis” if you are UK tax resident, whereby you only pay income tax on your foreign income that is brought into the UK, which could be to your advantage.
Additionally, UK domiciled or ‘deemed domiciled’ individuals pay IHT on their worldwide estate, whereas non-doms are only subject to IHT on their UK estate.
Deemed domicile is currently where a taxpayer has been UK tax resident for 17 out of the past 20 years. This is to be changed to 15 of the past 20 years from 6 April 2017.
Tax Innovations can help you to determine your tax status, as well as providing advice on the tax consequences and options available as a result of your tax status, and ways in which you can ensure your tax status falls in the desired category.