Non-domicile Tax

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The UK non-domicile rules are a major extra tax relief available to expatriates (who were typically born overseas).

What is a UK non-domicile?

A UK “non-dom” is a person who is UK tax resident but was born outside the UK in nearly all cases.   His or her spiritual home will be a country other than the UK, and he/she would be looking to retire (and be buried) outside the UK.

What are the non-dom UK reliefs?

The tax reliefs are very generous, which is why the Conservative and Labour British political parties are proposing reforms and new restrictions.   These reforms are a case of Watch This Space but no changes are likely in 2024.

Let’s keep it simple when describing the tax reliefs.

Effectively in the first seven tax years in the UK, a non-domicile can claim a full exemption from UK tax on foreign investment and gains.  This may cost the loss of a personal allowance in some cases, but the benefits are still significant.

Non-domicile status can allow expatriates to claim 100% tax relief on income from non-UK workdays.  We will park that idea for now, however, and focus on the area of personal investments.

After seven tax years of UK residence effectively, a non-dom can still claim the same reliefs ( see above) but HM Revenue & Customs impose a £30,000 charge (aka the RBC) or fee, for making this claim.  This RBC charge increases to £60,000 after effectively 12 years of UK tax residence.

Why would you pay the RBC charge of £30,000?

This is not common but for some it can be cheaper to pay this, than to pay the UK tax on foreign investments.

How do you claim these non-dom tax reliefs?

On your UK self-assessment tax return after the end of each tax year.  It is often necessary to work out whether its is cheaper to claim the reliefs, or to pay the UK tax.  We carry out these calculations for our clients.

If it is not cost effective to claim these tax reliefs….?

It is still possible to reduce your UK tax bills but using foreign tax credits.  We will not elaborate too much further here, but the principle is as follows.  A US national is paid $10,000 in US dividends and interest and the US taxes those items.  As a UK taxpayer this American can claim tax credits here for US taxes already paid.

Examples of where we can help you as non-domiciles

A Parisian lawyer moved to live in the UK and he had significant French dividends and capital gains from the Netherlands.  Most likely he can claim non-domicile status and avoid UK tax on these items.

A US banker relocated to London and she owns three rental properties in the US.  Again, we can explore her non-domicile status and whether it is worth claiming a UK tax exemption.

An Indian wealthy expat moves to live in Cambridge, UK and she inherits a two rental properties and company shares in India.  She is a prime example of a client who can profit from UK non-domicile status.