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Last updated: 20 Oct 2021
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The impact of the 2017 deemed domicile changes

After the deemed domicile reforms were introduced in April 2017, many believed the number of UK non-doms would decrease and for a time, the statistics did seem to indicate this. 
What were the April 2017 deemed domicile changes?

However, the fall had much to do with a change in classification of individuals following the introduction of deemed domicile for income and capital gains taxes purposes, and there remains much tax planning available in order to mitigate many of the resulting changes.

 

What were the April 2017 deemed domicile changes?

The deemed domicile rule change meant that previously non-UK domiciled individuals are now treated as UK domiciled (or “deemed domiciled”) for all tax purposes, if they are UK resident for 15 out of the last 20 tax years, or if they were both born in the UK with a UK domicile of origin. This means that they cannot claim the remittance basis unless they are within the deminimis amounts, so all of their worldwide income and gains are subject to UK tax rather than just the amount brought into the UK. 

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Rume Oshenye

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However, the fall had much to do with a change in classification of individuals following the introduction of deemed domicile for income and capital gains taxes purposes, and there remains much tax planning available in order to mitigate many of the resulting changes.

 

What were the April 2017 deemed domicile changes?

The deemed domicile rule change meant that previously non-UK domiciled individuals are now treated as UK domiciled (or “deemed domiciled”) for all tax purposes, if they are UK resident for 15 out of the last 20 tax years, or if they were both born in the UK with a UK domicile of origin. This means that they cannot claim the remittance basis unless they are within the deminimis amounts, so all of their worldwide income and gains are subject to UK tax rather than just the amount brought into the UK. 

The impact of the changes so far

The impact of the changes so far

The April 2017 policy reforms and Brexit created concerns that the wealthy would be deterred from living in the UK and that we’d see a significant decrease in non-doms here. HMRC has since estimated that there were 75,700 non-doms paying UK tax in 2019/20, down from 78,600 in the previous year. This represents a smaller decrease than that seen in previous years, which shows that the numbers are stabilising at a lower level, due to non-doms either becoming deemed domiciled in the UK or no longer paying tax in the UK. 

HMRC estimates that non-doms are liable to pay £7.853 million in UK taxes and National Insurance contributions (NICs) in the 2019/20 tax year in comparison to the £7.898 million paid in the prior tax year. Despite the decrease in the number of non-doms, this did not result in an overall fall in revenue to the exchequer, with those becoming domiciled continuing to pay tax in the UK and the tax received from new non-doms offsetting those that no longer pay tax in the UK. Further details on the HMRC report can be found here.

Are you approaching your 15th year?

Are you approaching your 15th year?

If you’re a non-dom, who is soon approaching your 15th year in the UK and are therefore thinking of leaving as a result of this, seek professional advice before you decide to jump ship. Becoming deemed UK domicile does not necessarily have to lead to a huge rise in your overall tax burden. With careful planning and the judicious use of Double Taxation Agreements, those coming up to their 15th year in the UK may be able to minimise potential liabilities on their overseas income or gains. 

Already reached your 15th year?

Already reached your 15th year?

If you’ve already reached your 15th year in the UK and are thinking of leaving, things are slightly more complicated as you will still be considered UK deemed domiciled for IHT purposes for up to six years after your departure. Your worldwide estate is potentially exposed to UK IHT in the event that you pass away during that six-year period, so you may wish to consider taking out a short-term life insurance policy to protect your beneficiaries.

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If you’re considering a move out of the UK, fill out the form below. Our experts will be in touch to help you review your situation and, if necessary, plan your departure taking into account any necessary tax liabilities to avoid unwanted surprises about your residence position.

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