Simplifying UK Tax Residence Rules: What You Need to Know!

Navigating the intricate rules of UK tax residence (deemed domicile) can be challenging. Here's a breakdown to guide you through:

Deemed Domicile for UK Tax Residence

Understanding deemed domicile status is crucial for tax purposes. Generally, an individual becomes deemed domiciled for UK Tax Residence after meeting the 15 out of 20-year test. This status impacts various taxes, notably income tax and capital gains tax, and determines access to the remittance basis, a key consideration for tax planning.

Implications for Inheritance Tax

For inheritance tax (IHT), individuals classified as UK Tax Residents, "domiciled", or "deemed domiciled" are subject to UK IHT on worldwide assets. Non-domiciled individuals are only liable for UK situs assets.

Losing and Regaining Deemed Domicile Status

Taxpayers can shed their deemed domicile status by being non-resident for three complete tax years. This provision assists long-term residents wishing to avoid the new rules introduced in April 2017. Restarting the 15-year test for income tax and CGT requires being non-resident in the UK for six complete tax years before becoming a UK resident again.

Exceptions and Unaffected Individuals

Individuals who were not UK residents after April 5, 2017, remain unaffected by the new rules. Previous IHT deemed domicile rules, such as the three-year rule or the 17 out of 20 tax years rule, still apply.

Contact ASWATAX for Bespoke Tax Advice

These tax matters are complex. It's crucial to seek professional advice tailored to your specific circumstances. Our team specialises in these areas and is here to help.

Please reach out with any questions or concerns. Your financial well-being is our priority.