I’m resident overseas, but where am I domiciled?
UK domicile rules for tax planning
The formal definition of domicile is “the country that a person treats as their permanent home, or lives in and has a substantial connection with.”
However, domicile and residence are not the same.
It is entirely possible to have lived in the same country for many years, even decades, and consider it your “home”, but still be domiciled elsewhere.
This is because once you acquire a domicile, you retain it until you replace it with another.
Unfortunately, relinquishing domicile is incredibly difficult, if not nigh-on impossible.
The reality is that many people die believing that they are domiciled overseas, only for it to be discovered when they pass on that, technically in the eyes of HMRC, they have never left home.
Five kinds of domicile
There are 5 different types of ‘domicile’, which are as follows:Domicile of Origin
This is your initial domicile, the one which you acquired at birth.
It doesn’t depend on citizenship or where you were born; rather, you acquire your father’s domicile (or mother’s, if your parents were unmarried at the time of your birth).
For example, if you were born in the US and your parents had UK domicile at the time, then you would have dual US/UK citizenship, but your domicile would be the UK.
Domicile of Dependency
Until the age of 16, a child is considered a dependent and their domicile will change along with that of their parent’s.
Domicile of Choice
After the age of 16, it’s possible to acquire a new domicile.
However, as mentioned at the outset, this isn’t an automatic or straightforward process.
Should you try to do so, the onus is on you to provide evidence that you have “abandoned” your domicile of origin and that you have physically moved to and now reside in the new locality.
You must also show intent to remain in your chosen domicile permanently.
Some of the factors that HMRC will consider when determining your “intent” are:
- The amount of time that you spend in one location versus another;
- Location of your partner/spouse and children;
- Location of your principal residence;
- Where you are registered to vote (As things stand, once someone has been outside the UK for 15 years, they are unable to vote in UK elections. There are currently ongoing discussions regarding scrapping this rule. This is a potential trap for those who have succeeded in changing their domicile from the UK);
- Location of the banks where you maintain accounts;
- The permanence of your work assignments in a location;
- Where your driver’s license was issued;
- Where your vehicles are registered;
- Where you maintain your professional licenses or qualifications;
- Location of your real property and investments; and
- Location of your social ties.
If you retain significant ties with your domicile of origin, it is highly unlikely that you’ll be able to acquire a domicile of choice.
HMRC is extremely uncompromising in this matter.
The UK uses the Statutory Residence Test (SRT) to determine whether you are a UK resident for tax purposes. Check your status now . . .
Deemed Domicile
In the UK, if someone not originally UK domiciled, i.e. “non-dom”, has been resident for 15 of the previous 20 tax years, they then become deemed UK domiciled for all tax purposes.
Elected Domicile
Someone not of UK domicile, who is married to a UK domicile person can elect to be treated as a UK domicile for Inheritance Tax (IHT) purposes.
While there is a potential benefit in doing this, it also means that their entire estate, including non-UK assets, is then potentially liable to UK IHT.
You can read more about how IHT works when a spouse is non-domiciled here.
Conclusion
Knowing your domicile status is key to any financial plan.
Hoping that it will all “work itself out” is not a strategy here.
As with all tax planning matters, if in doubt, you should seek the advice of a qualified tax adviser to ensure you are not doing something wrong — whether unwittingly or otherwise.
❓ Frequently Asked Questions
What is the legal definition of domicile?
Domicile refers to the country a person treats as their permanent home or has a substantial connection with. It determines their legal and tax obligations.
Is domicile the same as residency?
No. Domicile and residency are separate concepts. You can be resident in one country and still domiciled in another, especially for UK tax purposes.
What is a ‘domicile of origin’?
This is the domicile you are born with, typically based on your father’s domicile at birth (or your mother’s if your parents were unmarried).
How does ‘domicile of dependency’ work?
Until age 16, your domicile will follow that of your parent or legal guardian. Any change in their domicile applies to you as a dependent.
What is required to acquire a ‘domicile of choice’?
You must physically reside in a new country and clearly demonstrate your intent to remain there permanently. HMRC will assess various factors including property, social ties, and voting status.
How does HMRC evaluate intent to change domicile?
They consider factors like time spent in each country, where your family lives, where you’re registered to vote, and where your primary assets and social ties are located.
What is ‘deemed domicile’ in the UK?
Non-doms who have been UK tax residents for 15 of the previous 20 tax years are treated as UK domiciled for all tax purposes.
What is ‘elected domicile’ for UK Inheritance Tax?
A non-UK domiciled spouse of a UK domicile can elect to be treated as UK domiciled for IHT purposes, potentially subjecting their global estate to UK tax.
Can you have more than one domicile?
No. Legally, you can only be domiciled in one jurisdiction at a time, although you may have ties to several countries.
Why is domicile important for UK tax planning?
Your domicile status affects your liability for UK Inheritance Tax and other tax obligations. Assuming you’re non-dom without evidence can lead to major financial consequences.
Ross is a qualified Chartered Financial Planner and Pension Transfer Specialist.
He has been a cross-border financial adviser for 25 years and specialises in helping British expats manage their finances with clarity and peace of mind.
If you would like to have a no strings chat with him, please get in touch.
