What Is Non Dom Tax Status And Why Does It Matter?


Non Dom Tax Status Explained

There is no fixed definition of domicile in UK tax legislation and domicile is distinct from nationality, citizenship and residence.

There are three concepts of domicile – 1) origin, 2) dependence and 3) choice – that you must work through to determine your domicile status.

Domicile of origin is acquired at birth and in practice, it is notoriously difficult to change the domicile that you are born with. Thus, British nationals working overseas will likely retain their UK domicile status and overseas nationals working in the UK will retain their non-domicile status.

To displace a domicile of origin, an individual must demonstrate that they have broken all links in that territory and acquired those links in a new territory. Should this be achieved, an individual will acquire a domicile of choice in the new territory.

An individual may be deemed as UK domiciled for taxation purposes, irrespective of their actual domicile, if the individual is classed as a long term resident or formerly domiciled resident.

Factors that impact your domicile position are as follows:

Location of birth
Parents domicile
Long term home
UK law

What is the relevance of a non dom status?

Your non dom status gives you access to the UK’s special tax regime ‘the remittance basis’ which enables you to exclude foreign incomes and gains from UK taxation and overseas assets are sheltered from inheritance tax.

UK domicile

You will pay tax on worldwide incomes and gains and your global estate will be assessable to inheritance tax.

Non-domicile

You can exempt foreign incomes and gains from UK taxation and only your UK estate will be assessable to inheritance tax.

If you are relocating to the UK, it is essential that you assess your domicile status, should you wish to exempt foreign incomes and gains from taxation using the remittance basis. Wealth/bank structuring advice should be explored to ensure the exemption benefits are retained throughout your period of residence in the UK.

If you are a British national relocating overseas, it is essential that you acknowledge that your worldwide estate will likely continue to be within the scope of inheritance tax and thus, advice should be explored if you are intending to make lifetime gifts or if you are considering how to allocate your estate upon death.

How can GTC help?

GTC can complete a domicile assessment to determine your domicile status.

If you are non-domiciled, GTC can assist with remittance basis planning to ensure that you structure your affairs correctly, to obtain and retain tax efficient benefits from using the remittance basis.

If you are UK-domiciled, GTC can assist with structuring your affairs through making lifetime gifts and utilising exemptions to reduce your inheritance tax liability.

Become a GTC client

Book a free discovery call with our team. We will collect background information to develop a greater understanding of the necessary steps to take to optimise your UK tax affairs.


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