Changes to the taxation of non-domiciled individuals

  • July 14, 2015
  • By Hunters Law

The Chancellor, George Osborne, announced significant changes to the taxation of non-domiciled individuals in his Budget on 8th July 2015.

Under existing legislation, UK resident and domiciled individuals are taxed on their worldwide income or gains.  The position is the same for UK resident but non-domiciled individuals (‘Non-Doms’) except that they are entitled to special treatment of their foreign income and gains.  If Non-Doms elect to be taxed on the remittance basis, they will not be subject to UK tax on their foreign income and gains unless they bring them to the UK.

A UK domiciled person is subject to inheritance tax (‘IHT’) on their worldwide estate, whereas a Non-Dom is only subject to IHT on assets situated in the UK, unless they become deemed domiciled by being UK resident for 17 out of the previous 20 tax years, in which case they are then subject to IHT on their worldwide estate.  Following criticism of these rules on the basis that long term UK resident Non-Doms benefit unfairly from their non-domiciled status, the government will consult on the following proposals with a view to draft legislation forming part of the 2016 Finance Bill and taking effect from 6th April 2017.

The government is proposing to treat Non-Doms, who have been resident in the UK for more than 15 out of the previous 20 tax years, as deemed domiciled for all tax purposes.  Therefore, from their 16th year of UK residence, Non-doms will be subject to UK tax on their worldwide income and gains, and to IHT on their worldwide estate.  They will no longer be able to elect to be taxed on the remittance basis.

Having become UK deemed domiciled, that status will only be lost after spending more than five years resident outside the UK.  After that time, the non-domiciled individual can spend up to another 15 tax years as UK resident without becoming deemed domiciled again.

A further proposal relates to individuals who have a UK domicile from birth, but who leave the UK and acquire a domicile of choice abroad.  The government is proposing to tax such individuals as UK domiciled when they become UK resident again in the future, irrespective of their domicile status under general law.  Trusts established by an individual while he was non-UK domiciled will also lose their favoured status while that individual is UK resident.

For more information, please contact the partner having responsibility for your affairs, or any partner in the Private Client Department here.

Related News

Apr 18, 2019
Daniel Watson examines the recently launched public consultation on the taxation of trusts in Bloomberg BNA
Mar 12, 2019
Whittaker v Hancock
Mar 12, 2019
Probate court fees
Feb 27, 2019
Vanina Wittenburg examines Capital Gains Tax relief for principal private residences in the Official Law Journal for the City of Westminster Law Society
Jan 18, 2019
The end of an era for swearing Oaths and more Probate changes ahead
Jan 14, 2019
The Taxation of Trusts: A Review
Dec 20, 2018
The Government is to restrict the availability of Capital Gains Tax relief for principal private residences from April 2020
Nov 09, 2018
Matthew Yates comments on probate fees to soar to a maximum of £6,000 in the FT, Mail Online UK and This Is Money
Nov 01, 2018
Daniel Watson examines the Law Commission’s latest guidance on e-signatures and implications for LPAs in Lawyer Monthly
Sep 27, 2018
Daniel Watson discusses the Law Commission’s recent consultation paper on the validity of e-signatures in New Law Journal

© Hunters Law LLP 2019 | Privacy NoticeLegal & Regulatory | Cookies Policy | Complaints Procedure

Hunters Law LLP is authorised and regulated by the Solicitors Regulation Authority (number 657218)