Non-domicile or non-dom status can confer significant tax advantages in the UK, but only if very strict rules are followed.
This allows many of the wealthiest families living in the UK to avoid UK taxation because the bulk of their income is abroad.
Non-dom status is now restricted to 15 years residence in the UK, but it allows people to move out for 5 years, before returning to the UK as a non-dom for a further 15 years.
What are the costs?
Being a non-dom does incur charges, but these are usually offset by the tax savings.
- The Government levies £30,000 on those who have been living in the UK for at least 7 of the previous 9 tax years.
- This rises to £60,000 for those who have lived in the UK for 12 of the previous 14 tax years.
How does the system work?
Non-dom status applies to those who are tax resident in the UK, but who are considered to have their permanent home outside the UK and are able to demonstrate this to HMRC.
As residents in the UK for tax purposes, non-doms will usually not be tax resident in their country of domicile and therefore not liable for tax in either country on their worldwide income. Tax liability in respect of the country of domicile would generally be restricted to income and gains arising from sources within that country.
- Non-doms do not pay UK tax on their foreign income or gains if they amount to less than £2,000 in the tax year.
- Non-doms have to specifically apply for a tax exemption on foreign income of more than £2,000.
In the latter case, tax exemption has to be reported to HMRC via a Self Assessment return
Working home and away and Foreign Workers’ Exemption
You can gain Foreign Workers’ Exemption if your job means you work both in this country and abroad.
In this case, you do not have to pay tax on foreign earnings even if you bring these into the UK, if it is less than £10,000.
For help and advice on non-domicile tax matters, contact our expert team today.