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Taxation of Resident, Non-UK Domiciled Persons

UK residents are generally taxable on both their worldwide income and their capital gains. However, resident ‘non-doms’ may elect to be taxed only on a “remittance basis”. That is, to be subject to UK income and capital gains tax on income and gains “remitted” into the United Kingdom.

What is the Remittance Basis Charge?

This election, however, is subject to a “Charge” for individuals who have been resident in the UK for more than seven years. The “Charge” is:

  • £30,000 for non-domiciled individuals who have been resident in the UK for at least seven out of the previous nine tax years, or
  • £60,000 for non-domiciled individuals who have been resident in the UK for at least twelve out of the previous fourteen tax years.

(Note: the Remittance Basis Charge is a “creditable tax” for US Income Tax purposes.)

Deemed Domiciled

Once an individual is resident in the UK for fifteen out of the last twenty UK tax years, they are considered deemed domiciled by the UK for the purpose of income, capital gains and inheritance taxes. For more information on establishing residency status, particularly for individuals resident less than the fifteen years, we recommend going through the three types of tests for establishing residency, here.

Inheritance Tax – be aware of the difference

UK-domiciled individuals are chargeable for Inheritance Tax (IHT) on their worldwide assets, whereas non-domiciled individuals are only liable to UK Inheritance tax on their assets specific to the UK.

Non-domicile tax status can affect spousal assets

It is the traditional assumption that the transfer of assets between spouses does not normally give rise to an IHT charge. However, where there is a transfer of an asset from a UK-domiciled spouse to a non-UK domiciled spouse, the limit is actually £325,000. This is another instance in which forward planning can play an important part for any family.

Did you Know?

  • Fact Seven

    Thanks to FATCA banks must disclose their American account holders to the IRS or local tax authority.
  • Fact Six

    The IRS is actively looking for non compliant US persons.
  • Fact Five

    It takes an average of 16 hours to do IRS Form 1040.
  • Fact Four

    There are over 500 IRS tax forms.
  • Fact Three

    Since 1916, illegal income has been taxable.
  • Fact Two

    US persons must file tax
    returns no matter where they live and work.
  • Text One

    7 million Americans abroad
    only 500,000 compliant