Number of non-doms falls to record low

The number of wealthy individuals who are domiciled abroad has fallen to its lowest level ever, prompted by a combination of tax changes and political uncertainty.

According to HMRC statistics, there were 78,300 non-domiciled taxpayers in 2017/18, contributing an estimated £7.5 billion in tax revenue.

In comparison, there were 90,500 people with this status in 2016/17, who paid a total of around £9.5bn in taxes.

HMRC said there were two main reasons for the decrease, each with a similar impact: individuals had either switched to domiciled status and continued paying tax in the UK, or had left the UK tax system.

Recent changes in tax legislation could go some way to explaining this shift, after new ‘deemed domicile' rules took effect in 2017.

Political issues like Brexit and speculation about future changes in government policy may also have had an impact.

What is a non-dom?

A non-domiciled taxpayer is a UK resident whose permanent home, or domicile, is outside of the UK.

Those with this status can choose to be taxed on the actual basis or the remittance basis.

The actual basis means individuals are taxed like any other UK-domiciled and resident taxpayer would be on their income and gains, wherever in the world they arise from.

Under the remittance basis, they will be taxed on income or gains they bring to the UK, but not on foreign wealth. However, they lose some tax-free allowances, and must pay an annual charge if they have been resident in the UK for a certain amount of time.

If an individual has lived in the UK for seven out of the last nine tax years, they are required to pay £30,000 a year to maintain their status under the remittance basis.

Those who have lived in the UK for 12 of the last 14 tax years must pay £60,000 per year.

Residence and domicile: what's the difference?

In broad terms, your domicile is defined as the country you consider your permanent home.

This is usually decided based on your father's domicile when you were born, so it's not necessarily your country of birth or the country you live in.

After the age of 16, you can change your domicile, but you must be able to prove to HMRC that this is your permanent home.

While you can only have one domicile at any given time, you might be resident in more than one country for tax purposes.

Residence is usually based on how many days in a tax year you spend in a certain country.

You're automatically resident if you spent 183 or more days in the UK during the tax year, or if your only home was in the UK and you spent at least 30 days there in the tax year.

Talk to us for help working out where you're resident or domiciled.

Deemed domicile

After new rules came in on 6 April 2017, people who were UK resident for tax purposes in 15 of the previous 20 tax years are ‘deemed domiciled' for UK income tax, capital gains tax and inheritance tax purposes.

Those caught in these rules will no longer be able to benefit from the remittance basis, and may need to pay gains on their worldwide income and gains.

Anyone who has been resident in the UK but domiciled elsewhere for a long time will need to review their position and look at how the change to the rules could affect them.

Get in touch to discuss your tax status.