UK Tax Planning for Non-Doms
What is a non-dom? Why does it matter?
Non-dom is an abbreviation for an individual who is not domiciled in the UK. These individuals are usually from the overseas with no significant connections to the UK.
For a long-time, individuals who were born in the UK to non-dom parents were able to claim exemption from UK inheritance tax based on their non-dom status. All they had to do was to point to their non UK domiciled status.
Several generations of overseas persons born in the UK were able to successfully point to their overseas domicile to avoid UK taxation. This is no longer the case and it is no longer possible to do so.
Nevertheless, non-domiciled status is still very useful to claim a preferential treatment under UK tax rules.
This is the usual timeline where it is possible to claim preferential treatment under UK tax rules based on foreign domicile
UK tax rules start applying at different intervals depending on the length of your residence in the UK. UK tax residence is assessed in accordance with the UK Statutory Residence Test.
The first 3 years
During the first three years in the UK, overseas individuals are able to protect their overseas income from being taxed in the UK as long as this income is not brought into the UK and enjoyed in the UK.
This is a very useful tool for individuals who are relocating from overseas to the UK and they still retain job contracts overseas while they start their work duties in the UK.
This offers a three year transition from overseas to the UK. It is referred to as the overseas workday relief.
In order to successfully claim this exemption, one has to plan their UK tax exposure in advance. It is useful to have separate contracts for work duties performed overseas and in the UK.
You are under the duty to complete your self assessment if you are looking to claim this relief.
The first seven years
During the first 7 years as you relocate to the UK, you are able to protect your overseas income and gain from being taxed in the UK, if you:
- Do not bring this income or capital gains to the UK and / or you do not enjoy it in the UK. The enjoyment of income usually relates to buying valuables overseas with such income and bringing it to the UK in a shape of tangible assets and/ or valuables;
- Are able to limit your income gained in the UK to only be taxed in the UK.
After the initial seven years, you will become liable to pay UK tax on worldwide income and capital gains, if you do not choose to pay an annual lump sum of £30,000 for the privilege of not having to pay UK tax on your worldwide income and capital gains.
This remittance basis charge is levied after the first 7 to 9 years of residence in the UK.
The remittance basis charge increases to £60,000 a year until non-domiciled individuals are brought in line with the UK tax rules that apply to UK domiciled and non-domiciled individuals equally.
Deemed domiciled – residence in the UK for 15 out of 20 years
Overseas individuals who are not otherwise domiciled in the UK are treated as domiciled after 15 years of continuous residence in the UK.
This is especially true for the purposes of the UK inheritance tax.
Relocating to the UK Next Steps
It is important to have the appropriate UK tax planning in place before you choose to relocate to the UK for any length of time.
There are useful legal structures that can be utilised in order to protect overseas assets from UK taxation. Therefore, you should be setting up an appointment with a qualified UK tax adviser who has expertise in working with overseas individuals without any delay.
You are considering relocating to the UK and you want to protect your worldwide wealth from excessive taxation as you take on residence in the UK, schedule a consultation with me.
Book a call with me to discuss your Global Wealth Strategy and necessary onshore and offshore legal arrangements to protect your global wealth. You may submit your enquiry here.
You will be first guided to a payment page when you choose “book a call” option. After making the payment, you will be able to choose the most convenient date and time for our Zoom meeting. You can report a payment issue here.
Saule Voluckyte, M.A.E.S, LL.B, FAIA
I have been working exclusively with UHNWI in Mayfair, London since January 2008. I built specialist knowledge and expertise required to serve ultra high net worth individuals investing, operating and relocating to the UK or Switzerland.
Within the industry, I am the single adviser who is able to traverse the different areas of expertise and bring a comprehensive approach across: global structuring, UK immigration, international taxation and FOREX to develop their global wealth strategy, while they build, grow and expand their wealth worldwide.
Previous experience as one of the senior advisors for the government, made me a go-to person when delicate and uncomfortable scenarios involving heads of state need to be handled with care and preserve privacy.
Contact a family office specialist to discuss your needs.
As somebody who specializes in tax, wealth management of ultra high net worth individuals’ assets and legal requirements for high net worth families, my sole purpose is to help you protect your family’s legacy.
Should you have a specific enquiry on how to start your own family office, please book a call below.
If your specific enquiry is about how to invest, operate or relocate to the UK or Switzerland and you are looking to align your UK immigration, tax, overseas wealth concerns and benefit from favourable currency conversions and other bespoke services to UHNWI.
Submit your enquiry using this form