Accounting, Taxation and Business Planning
UK tax laws are complex, particularly when it comes to determining residence and domicile status, which directly affects your tax liabilities. Whether you live in the UK for most of the year, or you are a non-domiciled individual with ties to the UK, it’s crucial to understand how the rules work. As UK accountants and tax advisers, we can help you navigate these rules to ensure you're compliant and taking advantage of any available tax reliefs.
'We are able to navigate the complexities of residency and domicile tax laws, ensuring that your UK tax liabilities are managed efficiently and compliantly.'
UNDERSTANDING UK RESIDENCE AND NON DOMICILE:
What Does “Residence” Mean for Taxation?
Your residence status determines whether you are subject to UK tax on your worldwide income or just on your UK income.
The rules around UK residence are mainly based on the Statutory Residence Test (SRT), which considers factors like the number of days you spend in the UK, where your main home is, and your work and family connections.
Here’s a breakdown:
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UK Resident: If you are considered a UK resident for tax purposes, you are generally taxed on your worldwide income, including earnings from abroad.
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Non-Resident: If you qualify as non-resident, you are usually only taxed on your UK income and certain gains (e.g., income from property in the UK or earnings from UK employment).
The Statutory Residence Test looks at factors such as:
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The number of days you spend in the UK each tax year.
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Your ties to the UK (e.g., a home, family, or work).
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Whether you were a resident in the previous tax year.
If you are in the UK for 183 days or more in a tax year, you will generally be considered a resident. If you’re in the UK for fewer than 16 days, you will generally be a non-resident.
What Does “Domicile” Mean for Taxation?
Your domicile status is a separate concept from your residence and relates to your permanent home, typically the country where you have the strongest personal ties. In tax terms, domicile affects the extent to which you are taxed on your worldwide income.
There are three main types of domicile status for tax purposes:
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Domicile of Origin: This is usually the country where you were born, or the country of your father’s domicile at the time of your birth.
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Domicile of Choice: If you move to a new country and intend to make it your permanent home, you may acquire a domicile of choice in that country. However, this takes time and involves demonstrating your intention to settle there.
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Domicile of Dependency: This applies to minors (usually children under 16). If a minor’s father (or legal guardian) is domiciled in the UK, the minor will also have UK domicile.
How Domicile Affects UK Taxation?
UK tax law is primarily concerned with whether you're domiciled in the UK. Here's how it works:
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UK Domiciled: If you're domiciled in the UK, you are subject to UK tax on your worldwide income and gains, regardless of where you live or work. This means you must pay tax on income from overseas investments, foreign property, and any other international sources of income.
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Non-Domiciled (Non-Dom): If you're non-domiciled in the UK, the situation is different. Non-doms have the option to be taxed on a remittance basis, meaning you are only taxed on income and gains that are brought into (or “remitted” to) the UK. If you don’t bring foreign income into the UK, it may not be taxed here.
However, non-doms can face restrictions:
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If you've been a UK resident for 7 out of the last 9 tax years, you may be subject to the Remittance Basis Charge (RBC), which is a flat fee in addition to your tax liability. This charge is currently:
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£30,000 for those who have been UK residents for at least 7 out of the last 9 years.
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£60,000 for those who have been UK residents for at least 12 out of the last 14 years.
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£90,000 for those who have been UK residents for at least 17 out of the last 20 years.
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It’s also important to note that once you become deemed domiciled in the UK, the remittance basis no longer applies, and you will be taxed on your worldwide income.
Please note that the government introduced significant changes to these rules, which come into effect from 6 April 2025. Please contact us for further information on how these changed may affect you.
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What is self-assessment?Self-assessment is a system or regime by which Her Majesty’s Revenue & Customs (HMRC) assesses and collects direct tax in the UK.
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Should I complete a self-assessment tax return?Most people who pay income tax in the UK do not have to complete self-assessment tax returns. These are primarily employees whose tax is deducted at source under the Pay as you Earn system (PAYE). Self-assessment therefore applies to individuals such as the self-employed (sole traders) who earn in excess of £1,000, landlords that receive rental property income, individuals who receive income from savings, investments and dividends, foreign income, income from tips and commission and any other type of untaxed earnings.
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When are self-assessment tax returns due?The UK tax year starts on 6 April each year and ends on 5 April of the following year. Self assessment returns are due on the 31 January following the end of the tax year. For individuals who wish to submit paper returns, the deadline is 31 October following the end of the tax year.
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What are payments on account?Payments on account are amounts that some individuals are required to pay towards their estimated tax liability for the current tax year. They are calculated based on the previous tax years liability and are paid in two equal instalments of 50% each on the 31st January and the 31st July. These amounts are then deducted from the final liability for the year and a balance payment is usually made, together with a first payment on account for the following tax year.
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How do I get the ball rolling?As a starting point, you would need to register with HMRC in order to receive your 10 digit Unique Tax Payer Reference number (UTR). This number will enable you to submit your tax returns online by the 31st January deadline. If you are completing your own tax return, you would need to create an online account with HMRC once you receive your UTR number. Alternatively, if you need to help and support with getting your tax affairs complete and up to date then please get in touch for your free consultation.
How Can We Help?
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Understanding your residence and domicile status is crucial because it determines your tax obligations in the UK, and getting it wrong can lead to significant financial penalties. The rules are complicated, and small mistakes can be costly.
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As experienced UK accountants and tax advisers, we offer the following services:
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Residence and Domicile Advice: We’ll help you determine your tax residency and domicile status and explain how it impacts your tax liabilities.
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Tax Planning: We provide strategic tax planning advice, helping you minimise your UK tax exposure, including considering the remittance basis and other reliefs.
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Remittance Basis Guidance: If you’re a non-domiciled individual, we’ll explain how the remittance basis works and whether it’s the right option for you.
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Tax Compliance: We ensure your tax returns and filings are accurate and completed on time, avoiding costly penalties for late or incorrect submissions.
Get in Touch with Us Today:
Understanding your residency and domicile status is the first step in managing your tax liabilities effectively.
Whether you're becoming a UK tax resident/Non Resident or are non-UK domiciled, looking to mitigate your UK tax liabilities, we can guide you through the complexities of UK tax law to ensure you’re fully compliant and paying the right amount of tax.
Contact us today for a consultation and take the stress out of managing your residence and domicile tax responsibilities.