Non-domicile and declaring international income
A non UK domiciled individual (or a “non-dom”), for tax purposes, has options on how to fulfil their UK tax obligations on overseas income and gains.
As a non-domiciled individual who is a UK resident, for tax purposes, you have the option to pay tax on your worldwide income and gains as they arise.
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.
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.
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.
At Boxwell, we can advise Individuals who are not UK residents for tax purposes but intend on moving to the UK or spending significant amounts of time in the UK.
An individual who has been a 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.