Non-Domiciled Foreigners in the UK

The UK tax code provides a preferential tax regime for those who are resident but not domiciled in the UK – often referred to as ‘non-dom’ status. Although considerable changes have been made to the rules in recent years, it remains a highly attractive regime for non-UK domiciled individuals coming to live in the UK.

The non-dom regime, which dates back more than 200 years, allows foreigners who are resident in Britain but ‘domiciled’ overseas, to pay UK tax only on their UK income and capital gains. They do not pay UK tax on their foreign income or gains, unless they are ‘remitted’ into the UK, while British residents pay UK tax on their worldwide income and wealth.

The foreign assets of non-doms are also exempt from inheritance tax (IHT), unlike UK-domiciled individuals who are liable for inheritance tax of 40% on their worldwide wealth.

For the first seven years, non-doms can claim their exemptions without a fee, although they lose their domestic personal tax-free allowances. But, after being non-domiciled for at least seven of the previous nine tax years, non-doms must pay a ‘remittance basis charge’ of £30,000 annually, which rises to £60,000 once they have been non-domiciled for at least 12 of the previous 14 tax year.

After being resident in the UK for 15 of the previous 20 tax years, non-doms are deemed to be UK-domiciled and lose their exemptions.

Non-doms who elect to settle permanently in the UK and lose their non-dom status should place their non-UK assets in an offshore trust before they are actually deemed domiciled, such that these assets will be ringfenced from IHT indefinitely.

Alternatively, existing non-doms can choose to become non-UK tax resident by increasing the number of days they spend outside the UK. Depending on their circumstances, this would allow them to retain a home in the UK and spend a limited amount of time in the country.

Sovereign can assist with advice on restructuring your assets or moving to other countries that have similar special tax regimes.

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