Everything You Need to Know About Domicile and Residency for Income Tax

Understanding domicile and residency is crucial for anyone living, working, or earning income in the UK. Your tax status can have a major impact on how much tax you pay, especially if you have foreign income, international assets, or spend time abroad.

At Black & White Accounting, we help individuals and businesses navigate the complexities of UK tax law, ensuring you remain fully compliant while maximising tax efficiencies. Here’s your comprehensive guide to domicile and residency for income tax and what it means for you.

What is Residency for UK Income Tax?

Residency determines where you pay tax on your income. The UK Statutory Residence Test (SRT), introduced in 2013, is used to assess whether you are a UK tax resident for any given tax year.

The HMRC Statutory Residence Test (SRT)

The SRT is based on a combination of:

✅ Automatic UK Tests – You are a UK tax resident if:

• You spend 183 days or more in the UK in a tax year.
• You have a home in the UK for at least 91 days and spend 30+ days in that home.
• You work full-time (35+ hours per week) in the UK for 365 days.

✅ Automatic Overseas Tests – You are not a UK resident if:

• You spend fewer than 16 days in the UK (if you were a UK resident in any of the last three years).
• You spend fewer than 46 days in the UK (if you were not a UK resident in the last three years).
• You work full-time abroad, spending fewer than 91 days in the UK (and less than 30 days working in the UK).

✅ The Sufficient Ties Test – If you do not meet automatic tests, your residency is determined by ties to the UK, such as family, accommodation, work, or time spent in the UK in previous years.

What is Domicile and Why Does It Matter?

Your domicile is different from your residency and determines whether you are liable for UK tax on your worldwide income or just your UK income.

✅ Domicile of Origin – This is usually the domicile of your father when you were born. ✅ Domicile of Choice – You can change your domicile by permanently settling in another country. ✅ Deemed Domicile – Introduced in 2017, individuals who have been UK residents for at least 15 of the last 20 years are considered UK-domiciled for tax purposes, meaning they must pay tax on worldwide income.

Why it matters? Domicile status impacts Inheritance Tax (IHT) and the ability to claim the remittance basis of taxation, which affects how foreign income is taxed.

If You Are UK Resident and UK Domiciled:

✅ You are taxed on worldwide income and gains. ✅ You must report foreign investments, rental income, and overseas earnings to HMRC. ✅ You are liable for Inheritance Tax (IHT) on worldwide assets.

If You Are UK Resident but Non-Domiciled (Non-Dom):

✅ You can choose the remittance basis, meaning foreign income is only taxed if brought into the UK. ✅ The remittance basis charge applies if you’ve been UK resident for:

• 7 of the last 9 years: £30,000 annual charge.
• 12 of the last 14 years: £60,000 annual charge. ✅ After 15 years, you become deemed domiciled, meaning you are taxed on worldwide income.

If You Are Non-Resident:

✅ You only pay UK tax on UK-based income (e.g., UK property rental income). ✅ You do not pay UK tax on foreign earnings or foreign investments. ✅ You may still be liable for UK Inheritance Tax if domiciled in the UK.

How Have the Rules Changed Over Time?

📌 Pre-2013 – Residency rules were more subjective and open to interpretation. 📌 2013 – Introduction of the Statutory Residence Test (SRT) to standardise UK tax residency. 📌 2017 – Non-domicile reforms:

• Non-doms living in the UK for 15+ years deemed UK-domiciled.
• Non-dom tax benefits removed for UK residential property held in offshore structures.
• Offshore trusts changes affecting long-term UK residents.

📌 2024 & Beyond – HMRC has increased scrutiny on non-doms and UK expatriates, making tax planning more essential than ever.

Other Important Considerations

✅ Split Year Treatment – If you move to/from the UK, the tax year may be split between UK and non-UK residency. ✅ Double Taxation Agreements (DTAs) – If you pay tax abroad, you may avoid double taxation through a DTA between the UK and another country. ✅ Foreign Income Disclosure – HMRC is cracking down on undeclared offshore income, so full transparency is key. ✅ Inheritance Tax (IHT) on Non-Doms – If you’re non-domiciled but have UK assets, they may still be subject to IHT.

How Black & White Accounting Can Help

Domicile and residency rules are complex, and mistakes can be costly. At Black & White Accounting, we help individuals and businesses navigate these rules efficiently. Here’s how we can assist:

✔️ Residency & Domicile Assessments – Ensuring you understand your tax status and any obligations. ✔️ Tax Planning for Non-Doms & Expats – Helping minimise tax liability legally. ✔️ Remittance Basis Advice – We guide you through whether the remittance basis is right for you. ✔️ Double Taxation Relief Claims – Ensuring you’re not taxed twice on the same income. ✔️ Inheritance Tax Planning for Non-Doms – Protecting your wealth from unexpected IHT bills. ✔️ HMRC Compliance & Disclosures – If you need to declare offshore income, we can help you do it correctly.

Know Your Tax Status & Plan Ahead!

Your residency and domicile status can have a huge impact on your tax obligations. The rules are constantly evolving, and the penalties for getting it wrong can be severe. Whether you’re an expat, a non-dom, or someone spending time abroad, strategic tax planning is essential.

📞 Get in touch with Black & White Accounting today—let’s ensure you’re paying the right amount of tax (and not a penny more)!