Non-domicile and declaring international income

At Price Bailey, our Personal Tax team has long-standing experience supporting and advising international individuals with their tax affairs to ensure they are fully compliant in the UK in relation to both UK and overseas income and gains.

If you are a UK resident and would like support declaring overseas income and gains, or claiming foreign tax relief, then our expert team can provide you with comprehensive and pragmatic advice tailored to your needs.

For those of you who are non-domiciled we are able to discuss your tax affairs to identify any tax planning that might be available. A non UK domiciled individual (or a “non-dom”) for tax purposes has options in how to fulfil their UK tax obligations on overseas income and gains.

Who is non-UK domiciled?

To be non UK domiciled, you need to look at your individual circumstances and take into account a variety of factors, such as were you born outside the UK, do you have family outside the UK, what were your parents domicile, do you still retain ties and a connection to your “home” country that is not the UK.

The tax impact of not being UK domiciled

As a non-domiciled individual who is UK resident for tax purposes, you have the option to either pay tax on your worldwide income and gains as they arise – this is known as the arising basis. 

If you chose the arising basis, you are entitled to UK personal allowance (which is tapered if your earnings are over £100,000) and the UK capital gains exemption.  You are also able to claim double tax relief on any foreign taxes suffered under the terms of the applicable tax treaty. 

Alternatively you can claim the remittance basis, which means you only pay UK tax on your foreign income or gains that are remitted into or enjoyed in the UK, for example by transferring offshore income to a UK bank account, UK income and gains will always be assessable as they arise.  There are comprehensive rules in place to determine if a remittance to the UK has been made.

The option to choose the arising basis or remittance basis is an annual one and so it is possible to switch between the type of claims in each tax year, depending on which option offers the optimum tax outcome.

How to claim the ‘remittance basis’

You need to make a formal claim for the remittance basis in writing to HMRC, and this is normally made via the self assessment tax return.  Whilst the remittance basis can offer tax savings to certain individuals, there are other factors to the claim to consider. 

For example, a claim to use the remittance basis will mean that you:

• lose you entitlement to UK personal tax allowance and annual exemption,
• pay an annual charge of £30,000 if you have been a UK resident for at least 7 of the previous 9 tax years, or 
• pay an annual charge of £60,000 if you have been a UK resident for 12 of the previous 14 tax years.
• If you do remit any non-UK income or gains to the UK these will be taxable, even if the remittance is made in a later tax year.

Automatic remittance basis

The remittance basis can apply automatically in certain limited circumstances, such as where a UK resident non-domiciled individual has unremitted income and gains of less than £2,000 in the tax year.

Coming to the UK

Individuals who are not UK resident for tax purposes but intend on moving to the UK or spending significant amounts of time in the UK may require detailed advice on the structure of their overseas assets and sources of income, to ensure they can use the remittance basis effectively.

Longer term residents

An individual who has been UK resident but non-domiciled for 15 out of the 20 previous tax years can no longer access the remittance basis, and must use the arising basis.  These individuals are referred to as ‘deemed domiciled’ in the UK.  Individuals who are approaching the 15 year limit may require detailed advice to ensure they are not adversely affected by becoming deemed domiciled.

In addition to advising on the appropriate basis for non-domiciled, we can also provide guidance on mitigating Inheritance Tax for non-UK domiciles and UK domiciled individuals.