UK Residency and Domicile |
Residency and Domicile
Your residence and domicile status will determine how you are taxed in the UK.
Individuals who are resident and domiciled in the UK are subject to UK tax on their worldwide income and gains.
For a US citizen resident in the UK who continues to report their worldwide income in the US, there is a UK/ US double taxation agreement in place which can help to eliminate double taxation should the UK also tax the same income.
Non-UK resident and/ or non-UK domiciled individuals are subject to special rules which mean foreign sources of income and gains may not be taxable in the UK. To the extent a US citizens foreign income and gains are not taxable in the UK, then they will likely pay US tax (albeit possibly at a lower tax rate e.g. top rate of UK income tax is 45% vs. 37% top rate US income tax).
Residence
The UK has a Statutory Residence Test (SRT) which came into effect 6 April 2013. It is set out in UK tax law and is used to determine your UK tax residence position.
You are likely to be UK tax resident if:
Even if you do not meet one of these tests then you may still be UK tax resident depending on how much time you spend in the UK during a tax year (or over a number of years) and the number of connections you have to the UK. Generally, the more time you spend in the UK, the less connections are needed for you to be regarded as UK tax resident.
You are considered a UK tax resident for an entire tax year although there may be the ability to split the tax year during years of arrival or departure. If you are considered a dual resident (i.e. a tax resident of the UK and another country at the same time), it may be possible to use a treaty to tie break your residence so you are not regarded as a UK tax resident.
The SRT can be very complicated in determining an individuals residence position.
Your residence and domicile status will determine how you are taxed in the UK.
Individuals who are resident and domiciled in the UK are subject to UK tax on their worldwide income and gains.
For a US citizen resident in the UK who continues to report their worldwide income in the US, there is a UK/ US double taxation agreement in place which can help to eliminate double taxation should the UK also tax the same income.
Non-UK resident and/ or non-UK domiciled individuals are subject to special rules which mean foreign sources of income and gains may not be taxable in the UK. To the extent a US citizens foreign income and gains are not taxable in the UK, then they will likely pay US tax (albeit possibly at a lower tax rate e.g. top rate of UK income tax is 45% vs. 37% top rate US income tax).
Residence
The UK has a Statutory Residence Test (SRT) which came into effect 6 April 2013. It is set out in UK tax law and is used to determine your UK tax residence position.
You are likely to be UK tax resident if:
- You spend more than 183 days in the UK during a tax year; or
- Have a home in the UK but do not have a home overseas; or
- If you work full time in the UK over a 365 day period (not a tax year).
Even if you do not meet one of these tests then you may still be UK tax resident depending on how much time you spend in the UK during a tax year (or over a number of years) and the number of connections you have to the UK. Generally, the more time you spend in the UK, the less connections are needed for you to be regarded as UK tax resident.
You are considered a UK tax resident for an entire tax year although there may be the ability to split the tax year during years of arrival or departure. If you are considered a dual resident (i.e. a tax resident of the UK and another country at the same time), it may be possible to use a treaty to tie break your residence so you are not regarded as a UK tax resident.
The SRT can be very complicated in determining an individuals residence position.
Domicile
Domicile for UK tax purposes, is a general legal concept that is distinct from nationality, citizenship or residence. It is the country to where you consider your roots are, where you intend to return (if not living there) or your permanent home.
An individual usually acquires a domicile at birth although it is not necessarily the country they were born in or are currently living in. It is only possible to have one domicile at any given time and the three main types are:
With effect from 6 April 2017, an individual who is not UK domiciled will become “deemed UK domiciled” and subject to UK income and inheritance tax on their worldwide income and assets if:
UK tax services are provided by Jaffe UK Services Ltd, a Jaffe & Co group company, company number 11588450.
Domicile for UK tax purposes, is a general legal concept that is distinct from nationality, citizenship or residence. It is the country to where you consider your roots are, where you intend to return (if not living there) or your permanent home.
An individual usually acquires a domicile at birth although it is not necessarily the country they were born in or are currently living in. It is only possible to have one domicile at any given time and the three main types are:
- Domicile of origin (acquired at birth and normally your fathers domicile at that time)
- Domicile of dependence (may affect an individual until they are 16 yrs old or a wife married before 1 Jan 1974)
- Domicile of choice (once an individual reaches 16 yrs of age they can take steps to acquire a domicile of choice although this can be quite a difficult task)
With effect from 6 April 2017, an individual who is not UK domiciled will become “deemed UK domiciled” and subject to UK income and inheritance tax on their worldwide income and assets if:
- Non-UK domiciled but were born in the UK with a UK domicile of origin; or
- Have been UK tax resident for 15 out of the previous 20 tax years.
UK tax services are provided by Jaffe UK Services Ltd, a Jaffe & Co group company, company number 11588450.
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