Non-domiciled status - the facts

20 May 2022

The last few weeks have seen a flurry of stories and commentary in the media on the subject of tax and domicile. These have included the UK tax status of Russian oligarchs, Rishi Sunak’s wife, Sajid Javid and South African billionaires. The Labour Party has also recently gone on record to say that if elected it would abolish non-UK domiciled (non-dom) tax status for individuals and introduce ‘a modern scheme… to attract [genuinely short-term resident] top international talent’. All of these cases and the resulting commentary raise questions about how and where individuals should be taxed, but much of the discussion suffers from not really understanding what domicile means for UK tax purposes.

Now that the dust has settled a little, it’s worth going back to basics to consider these questions, so that we can all hopefully make well considered judgments.


Let’s start with the most basic question of all – what does domicile mean? The answer to this is both simple and complicated. Under general international law, a person’s domicile is the country they treat as their permanent home. It is only possible to have one domicile at any time, and it is perfectly possible to live in one country but to be domiciled in another if you are only living there for a temporary or fixed period.

This is where the definition begins to get slippery. I might claim that I consider Australia to be my permanent home, and that I intend to retire there. Does that mean I am Australian domiciled even though I have never set foot in Australia? Not surprisingly, it doesn’t. To be domiciled in a country a person must have a real connection to it, either by acquiring a ‘domicile of origin’ at birth, or actually living there and obtaining a ‘domicile of choice’.

Domicile of origin

Everybody acquires a domicile of origin at birth. Under UK law a person’s domicile of origin is the same as their father’s domicile at that time if their parents were married, and their mother’s if they were not. This can get complicated quickly, especially with modern families, and an individual’s domicile may not be what they expect. For example, if my grandfather was domiciled in France, my father may have retained a French domicile even if he has lived his whole life in the UK, provided he genuinely considers himself French and, say, plans to retire there. I could therefore have a French domicile of origin because of family history going back two generations.

Domicile of choice

This is where a domicile of choice comes in. For UK tax purposes a person acquires a new domicile if they settle in a new state ‘permanently or indefinitely’. In my example, my father may not have acquired a UK domicile of choice if he has always intended to retire to France, since his period of residence in the UK would be expected to be limited until the time when he stops working. This sounds like a very easy condition to meet but it is a question of fact, and it is not enough just to make an unsupported statement. If my father speaks French, owns a French holiday home and visits family there every year, he may have a strong case. If he has not visited France in 40 years and has no clear plan about when he will move there, the position could be very different. Even if a person does have a strong case, this can change at any time based on what they actually do: if my father retires but stays in the UK, his domicile status may well be affected. And to be clear, whilst a person’s domicile generally follows that of their father (or mother) during childhood if it changes, thereafter it is determined independently and could theoretically revert to their domicile of origin.

Domicile of dependency

The domicile of children and women married before 1 January 1974 can also be affected by a ‘domicile of dependency’ based on a husband’s domicile being acquired by their wife from the date of marriage. This subject is complex and worth an article of its own, so for now let’s just note that the concept exists and move on.

Tax implications

The UK taxation treatment of non-doms is subject to reams of legislation, regulations and case law. Rather than try to summarise it all, let’s try to understand the big picture.

Why tax non-doms differently?

In simple terms, UK tax legislation aims to tax long-term residents on their global wealth, and short-term residents only on their UK income and gains and foreign wealth that they bring to the UK. There are various reasons for this, from the pragmatic (non-doms can arrange to pay no UK tax at all by managing the time they spend in the UK, and some tax for the Exchequer is better than none) to the moral (if I make my fortune in Germany as a German national and happen to die while living in the UK for a year, is it fair that the UK tax authority should take 40 per cent of the value of my estate?). Where the boundaries are set is ultimately a political decision, and there is no obvious single right answer.

How are non-doms taxed?

In most cases, anyone who has been UK tax resident for at least 15 of the last 20 tax years is taxed in the UK as if they were UK domiciled. Individuals who have been resident for a shorter period are, by default, taxed on their income or capital profits in the same way as UK domiciled individuals, but can make a claim on an annual basis for the ‘remittance basis’ to apply instead. Under this system, non-doms are taxed on their UK income and gains as they arise, but in return for losing their annual personal allowance and capital gains exempt amount, foreign income and gains are only taxed if they both:

  • arise while the individual is UK resident and claiming the remittance basis; and
  • are brought to, received in, used in or deemed to be used in the UK.

This means that a German national can bring the fortune he made in Germany to the UK tax-free at any time, to the extent that it arose before he arrived, but any new income and gains generated on assets remaining outside the UK while he is a UK resident remittance basis user are only taxed in the UK if he brings them to or uses them in the UK.

Once a person has been UK resident for more than seven of the previous nine tax years, they generally need to pay an annual fee to qualify for the remittance basis, and once they have been resident for 15 of the previous 20 tax years the remittance basis generally ceases to be available. Any income or gains ‘sheltered’ by the remittance basis rules are taxed if they are later remitted to the UK.

Inheritance tax rules work differently because, in general, tax is only payable on death. The general principle is the same though – if a non-dom dies when UK resident, UK tax will only be charged on their UK assets, but once they have lived in the UK for at least 15 of the previous 20 tax years, all their worldwide assets are potentially subject to UK inheritance tax.

These already complex rules have exceptions for those domiciled in India, Pakistan, Italy and France, due to the way longstanding UK arrangements with those countries work, and may also be modified for other territories with which the UK has a double tax agreement.

Offshore trusts

There are also UK tax rules that allow foreign assets held in trust by any non-dom to remain untaxed on death after the end of the 15-year residence period. Similar rules allow foreign income and gains made by offshore trusts to qualify for a type of remittance basis protection as well.

This provides a way for wealthy non-doms to extend the advantages of non-dom status, potentially indefinitely. These rules, some of which are very old and others quite recent, are pragmatic in origin. The political calculation is that the UK benefits more by encouraging non-doms to remain here in the long term and spend money than it would by removing all tax advantages and risk them taking their wealth elsewhere.

Standing back

It’s easy to get caught up in the details of individual cases and to lose track of the big picture when it comes to domicile. Ultimately our thoughts on the current system will be influenced by our wider view of the world, but it is important to recognise that the UK tax system is a balancing act. Taxing non-doms like all other UK residents could drive wealth-creators away and can be fundamentally unfair in many cases. Not taxing non-doms at all may have economic benefits but may be difficult to stomach ethically. The current UK tax system certainly is not perfect, but it is an attempt to balance all of these issues, and we should think hard before demanding radical changes in any direction if we want to avoid a much less suitable or fair alternative.

For more information please get in touch with Andrew Robins, or your usual RSM contact.