Residence, domicile and the remittance basis

Born in the UK?

If you are UK born and bred, then unless you have taken alternative action you will be treated as a UK resident and domiciled and therefore taxable on all your worldwide income.

Born outside the UK?

  Spend < 183 days in the UK Spend > 183 days in the UK
Born outside of the UK Still possible to be a UK Resident but must complete the Statutory Residency Tests. Considered Tax Resident in the UK – no further tests are required.

Statutory Residency Tests

The Statutory Residency Test is made up of three different tests which allow you to work out your residence status for a tax year and considers the amount of time you spend in the UK, work in the UK and the connections you have in the UK. Each tax year is looked at separately, so you may be considered resident in the UK one year but not the next or vice versa.

If you are considered non-UK resident, you then have two options available for what information you want to declare:

  • Remittance Basis
  • Arising Basis

Remittance Basis

Under the remittance basis, you pay UK tax on UK income and gains for the tax year in which they arise, but you only pay UK tax on foreign income and gains if and when they are brought (or ‘remitted’) to the UK. The remittance basis can help to prevent double taxation.

It is important to note that if you are non-domiciled and have small amounts of unremitted foreign income and capital gains (that is, less than £2,000 per UK tax year), then the remittance basis will automatically apply.

Please note that, except in some select circumstances, claiming the remittance basis also means that you will not be able to claim UK tax allowances such as the Personal Allowance or Annual Exemption for Capital Gains Tax.

The remittance basis can also apply automatically if you have very limited UK income and providing you meet all the conditions for a particular tax year you can use the remittance basis without making a claim, losing your allowances and without paying the remittance basis charge.

The remittance basis charge is payable by individuals who both claim the remittance basis and who meet the minimum residency requirements. It is paid each year when preparing the self-assessment return until you are deemed domicile.

The remittance basis charge has two levels of charge:

  Resident in the UK for 7 out of the previous 9 years. Resident in the UK for 12 out of the previous 14 years.
Non-Domiciled £30,000 £60,000

Arising Basis

Of course, you do not have to claim the remittance basis and you could choose to use the ‘arising basis’.

Arising basis applies if you are resident and domiciled (or deemed domiciled) in the UK, you will pay UK tax on your worldwide income and gains for the tax year in which they arise.

Should any of this income have already been taxed offshore, subject to any double taxation treaties with that particular country, you would be able to claim double tax relief in the UK against any tax that has already been paid on that income overseas.

If you have any queries on the deemed domicile rules, remittance basis charge and the statutory residence test then please contact us on 01474 853856 or email enquiries@a4g-llp.co.uk.