Tax planning and tax return services for non-domiciled individuals.
Domicile tax status
Your domicile status has an impact on your UK tax status as it could enable you to file your UK tax returns on the “remittance basis” if you are UK tax resident. This could be to your distinct advantage.
Your place of domicile is in broad terms your “homeland” i.e. where you have your long-term permanent home. It is 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.
Your domicile of origin will have been acquired at birth and will normally be your father’s domicile at that time. It is difficult to change a domicile of origin but this is possible if you acquired a new domicile of dependency as a child or a domicile of choice in later life.
If you are non-domiciled you can file your UK tax return on the arising basis (reporting world-wide income/gains) or the remittance basis (reporting non-UK income/gains only if remitted to the UK). If you have been tax resident in the UK for 7 of the 9 previous tax years you will need to pay a Remittance Basis Charge (RBC) of £30,000 if you want to file your tax return on the remittance basis (unless your unremitted foreign income/gain totals less than £2,000 per year). If you have been tax resident for 12 of the 14 previous tax years the RBC increases to £60,000, and there is a further increase in the RBC to £90,000 if you have been tax resident for 17 of the 20 previous tax years.
For Inheritance Tax purposes only there are additional tests whereby you can be “deemed” to be domiciled in the UK, even if under the above criteria you are considered to be domiciled outside the UK.
Under new rules to be introduced in April 2017, anyone who is UK tax resident for more than 15 years out of the past 20 will also become deemed domiciled for other UK tax purposes, for example for income tax and capital gains tax purposes.
Overseas Workday Relief
If you claim the remittance basis on becoming a UK resident, for the first three tax years of your stay in the UK, the earnings received for duties performed outside the UK are taxed only to the extent that they are paid in or remitted to the UK. This is called “overseas workday relief”.
Individuals need to ensure they set up a compliant bank account outside the UK to receive their earnings in order to avoid the complex “mixed fund” remittance rules.
Temporary Workplace Relief
If you are seconded to the UK for not longer than two years, generous deductions may be available for certain travel and subsistence costs relating to your assignment, e.g. accommodation, utilities, groceries, etc.
Taxation of Personal Income
UK source investment income, which includes company dividends and interest, is generally taxable in the UK if you move here, regardless of your residence position. If you are non UK-domiciled, and you claim the remittance basis, you are taxed on foreign investment income etc. only to the extent that it is remitted to the UK- although please note that if you claim the remittance basis this will lead to the possible loss of certain UK tax allowances/reliefs unless the unremitted foreign income/gain totals less than £2,000 per year.
Please click here to download our Tax Residence and Domicile Guide which takes you through all the issues you need to understand in more detail.
Read our Top 10 Tax Tips for Expats moving to the UK via this link.