If you are a non-resident UK resident with a permanent residence outside the jurisdiction, you will pay different tax than an ordinary resident. You can achieve a tax cut, which is the end goal for many nomadic capitalists. This article covers the non-domiciled tax environment in the UK.
You value tax savings. What annoys you is the Big Brother government and their mafia-like looting of your hard-earned income. You might therefore be pleasantly surprised to discover that non-dominant UK residents can benefit from UK tax law.
The United Kingdom is one of many countries where high net worth individuals can protect their assets.
Nomad Capitalist can suggest numerous jurisdictions where more of your earned money stays in your pocket. As part of a holistic action plan, we’ve been helping HNWIs become taxpayers around the world.
Keep reading to learn more about UK non-doms taxes, benefits and requirements.
Find out more about UK tax compliance with non-dom status in our definitive overview.
Country overview United Kingdom
The United Kingdom consists of the island of Great Britain, which is home to England, Scotland, and Wales, as well as Northern Ireland. London is the capital of England and the UK, and the population of the entire jurisdiction is tipped to reach 67.9 million by 2023.
The UK, an island nation, has always looked outward and has built a formidable international trading economy. The Industrial Revolution of the 19th century helped turn the nation into a superpower, but towards the end of the 20th century, the UK began its transition from an industrial economy to the more service-based economy it has today.
Non-resident UK residents do not pay tax on their offshore income and capital gains.
UK Non-Dom Status Benefits
You may not have to pay UK tax on foreign income if you are a permanent resident, or domiciled outside the UK. There’s more good news for non-doms. You are also protected against taxes if you realize foreign capital gains from rental income or shares.
Non-doms do not pay UK tax on their non-UK income and capital gains if they amount to less than £2,000 in the tax year, and they do not transfer them to a UK bank account, effectively leaving them in the country. In this case you do not need to inform the UK tax authorities.
Non-dom status can protect you from paying Inheritance Tax (IHT) on your worldwide assets.
Become a Nomad Capitalist client and we’ll smooth your way from UK tax resident to non-UK resident, directly impacting your taxable income and profits.
UK Non-Dom Status Requirements
Your place of residence is essentially your home country. Here you have your permanent address for the long term. It is the country with which you have the closest ties and the country where you plan to retire.
If that country is not the UK, but you are a resident of that jurisdiction, you are considered a non-dom for tax purposes. You can join the British nomination regime just like British Prime Minister Rishi Sunak’s wife, Akshata Murty. She is tax resident and her Indian citizenship justifies her non-dom status as it indicates an intention to return to her homeland in the future.
While Mrs Murty is well within her right to claim non-dominant status, from a legal point of view she has nevertheless chosen to pay UK tax on her foreign income in the future for obvious political reasons (and for the media spotlight).
You must alert the UK tax authorities if your worldwide income is £2,000 or more as non-dominant.
In a self-assessment tax return, you must declare foreign income or gains of £2,000 or more. You then need to decide whether you want to pay taxes on that, which you may be able to reclaim or pay the fees to access the tax base.
By claiming the withholding tax base, you will be taxed on any income or profits you bring into the UK, but you will lose tax-free entitlements for income tax and CGT. However, some dual residents retain the right to qualify. You must also pay an annual contribution relating to your years as a non-resident in the UK:
£30,000 if you have been in the UK for at least seven of the previous nine tax years £60,000 for at least 12 of the last 14 tax years.
Non-doms, like other UK residents, pay UK tax to the UK government.
Conclusion UK Non-Dom Status
Non-resident residents are residents of the UK who have their domicile outside the UK, such as in permanent residence. This gives them the potential right not to be taxed on foreign income. Nor are they liable for capital gains made abroad on their foreign shares or rental income.
Your place of residence is usually the country that your father considered to be his permanent residence when you were born. Still, it may have changed if you have moved abroad and have no intention of returning.
If you don’t bring your foreign income or profits into the UK or if they amount to less than £2,000 in the tax year, you don’t have to report them under the non-dominant rules.
However, you must report foreign income or profits of £2,000 or more or money you bring into the UK.
You can pay UK tax on it or claim the withholding tax base. The choice is yours. An annual fee must be paid. It is £30,000 if you have been in the UK for at least seven of the previous nine tax years or at least £60,000 for at least 12 of the last 14 tax years.
Those who have claimed non-dom status to keep more of their global income, such as Rishi Sunak’s wife, Akshata Murty, have landed themselves in the headlines for all the wrong reasons.
The remittance basis is also difficult to negotiate, which is where our specialist team of advisors come in.
Go where you will be treated best
Do you have to pay UK tax on your foreign income as a non-dominant resident of the UK?
We can help answer that question because non-dom rules are particularly problematic when applied to income from non-UK sources. Taxation in the UK is a complex subject and we can help you navigate it successfully.
Non-doms in the UK may not be around forever as there is considerable political pressure to eliminate it.
There are other countries where claiming non-dom status means your foreign assets, income and capital gains are taxed less. Cyprus, Malta and Ireland also offer a non-dom regime with a low tax system.
Malta also uses the non-doms tax base. They offer a flat rate of only 15% on income and profits originating from Malta and income transferred to Malta.
Capital gains carried forward are in some cases tax-free. Unlike in the UK, they do not impose an annual base fee.
So if you are looking for UK tax advice and/or a tax friendly jurisdiction in Europe with easy access to the UK market, become a Nomad Capitalist client and go where you are treated best.
UK residents with permanent residence or domicile outside the UK may be exempt from paying UK tax on foreign income.
UK Non-Dom Status Frequently Asked Questions
What does Non-Dom status mean in the UK?
Non-dom is short for non-domiciled person.
It describes a resident of the UK whose permanent home or domicile is outside the UK.
Non-dom is a tax status label rather than an adjective related to citizenship, resident, or nationality. However, these elements influence whether you qualify for the away from home regime.
How do you qualify for non-dominant status in the UK?
Non-doms can be those exempt from HM Revenue and Customs as foreign workers whose income from an overseas job is less than £10,000 per annum.
Their other foreign income (such as bank interest) is less than £100. All income is subject to foreign tax. The non-doms’ combined UK and foreign income must fall within the basic income tax rate.
We can help you with much more than non-dom tax. Our holistic plans cover everything from getting a UK passport to tax returns in general. We are the safe hands that can handle all your financial needs.