22 October 2022

Domicile and Residence

In tax there are two concepts that determine the extent of your exposure to tax on your worldwide income, your capital gains and ultimately your accumulated wealth. These are known as domicile and residency.

The concept of ‘domicile’ might best be simplified as the country where you are likely to return to after a period of absence, either at the end of your travels or your expat journey.

Some expats might develop a view to never return to the country from where they originally came, such as the UK, but often their ties and links to their home country will lead to them being deemed to still be of UK domicile. In this case exposure to UK tax will remain and usually in the form of inheritance tax.

The concept of ‘residency’ differs from domicile as this refers to the tax jurisdiction where you are often physically present other than for temporary or transitory purposes. Your exposure to income tax and capital gains is usually determined by where you reside. But for those foreigners resident in the UK, of a non-UK domicile, there is in some cases the opportunity for your worldwide income and gains to be assessed on a remittance-only basis rather than be obliged to declare the total earned.

In terms of income derived from UK land and property, however, bear in mind that there will always be exposure to income tax and capital gains tax in the UK no matter where you reside. This is a compliance matter in UK tax law that is often overlooked by expats and can lead to a number of problems.

Wherever you are on your expat journey, if you want to discuss these issues and more, schedule a free introductory consultation. It really is a pleasure to clarify these matters for you and to keep you up to date you with your compliance needs.