Domicile in the UK
Foreign Domicile in the UKAs of 6 April 2008 domicile rules in the UK changed for foreign non-UK domicile nationals resident in the UK and foreign non-UK domicile nationals working in the UK.
What has changed for Foreign Non-UK Nationals?
Previously, for foreign non-UK domicile nationals who were resident, you were only taxable in the UK on UK income received or foreign income remitted to the UK. In short, if you had foreign income that was not brought into the UK, it was not taxed in the UK. This has changed where foreign non-UK domicile nationals will now be subject to a residency test and will pay taxes on foreign income.
7 Year Rule:
If you are a foreign non-UK domicile national and have lived in the UK for 7 of the last 9 years you are deemed fully resident in the UK for income tax and capital gains purposes and therefore subject to tax in the UK on your worldwide income.
(Note: Inheritance Tax is different: As a foreign non-UK Domicile you will not be subject to UK inheritance on Non-UK assets until you have been resident in the UK for 17 of the last 20 years and become a domicile of choice).
A foreign non-UK domicile national can either pay taxes in full in the UK or can claim the "remittance basis" of taxation.
Remittance Basis Users (RBU):
If you are a foreign non-UK domicile national resident in the UK and claim the remittance basis, you are subject to the following rules:
- Income received by a foreign non-UK domicile national in the UK is subject to UK tax
- Foreign, overseas income remitted to the UK i.e. paid to a foreign non-UK domicile national is subject to UK tax
- Foreign, overseas income in total less than £2,000 per year and not remitted to the UK for a foreign non-UK domicile national is ignored
- If a foreign non-UK domicile national has Foreign, overseas income of more than £2,000 per year and it not remitted to the UK it is subject to a £30,000 tax charge (£50,000 with effect from April 2012)
The £30,000 Charge (£50,000 from April 2012)
If a foreign non-UK domicile national elects to be a Remittance Basis User RBU for the tax year, they are a Remittance Basis User RBU for that tax whole year.
A foreign non-UK domicile national is able to make an election and state that the £30,000/£50,000 tax charge is in respect of specified investments which means that if you remit ie. income is paid to you in the UK from those investments. they will not be taxed again in the UK.
If a foreign non-UK domicile national chooses not to make an election and not disclose which investments the £30,000/£50,000 charge relates to, any income remitted to the UK will be taxed and they are not allowed to offset the previously paid £30,000£50,000 charge against any new tax.
What income of foreign non-UK domicile national is not taxed?
- Interest Payments: If a foreign non-UK domicile national has foreign income that is used to fund interest payments on an overseas mortgage secured on a UK property, please note this is the interest only and not the capital
- Personal Effects worth less than £1,000 brought into the UK
- Assets for Repair brought to the UK for repair provided they are here for less than 9 months
- Works of Art brought to the UK for public display
For more advice on domicile in the UK contact our team.