An individual’s domicile and country of residence determine which of their income and gains are subject to tax in the UK. Domicile is a complex concept of general law and is based at least partially on case law. From April 2013, a statutory definition of residence has provided greater certainty for taxpayers (and the previous concept of ‘ordinary residence’ has been abolished). An individual’s residence and domicile position will depend on their particular circumstances, and determining residence and domicile can be complex.
Broadly, individuals who are resident and domiciled in the UK will pay tax in the UK on their worldwide income and gains as they arise.
Individuals who are not resident in the UK are only subject to UK tax on certain UK income and gains.
Individuals who are resident in the UK but domiciled elsewhere are subject to UK tax on their UK income and UK gains as they arise. It is possible for them to elect, however, to only pay UK tax on their non-UK income and their gains when they are brought into (or remitted to) the UK (the ‘remittance basis’). With some exceptions, those who claim the remittance basis lose their UK personal allowances and annual exempt amount for capital gains.
In addition, for those who wish to claim the benefit of the remittance basis, a £30,000 charge applies to those who have been resident in the UK for more than 7 out of the previous 9 years. There are higher charges for those who have been resident in the UK for 12 out of the previous 14 years, and 17 out of the previous 20 years. The tax charge is removed when non-domiciles remit foreign income or capital gains to the UK for the purpose of commercial investment in the UK.