Do you know where you are really domiciled?

It might not be where you think…

What is domicile?

The term ‘domicile’ might seem foreign to you, or you may simply equate it with your place of residence. However, domicile, from a legal perspective, is more intricate and carries significant implications for personal rights, obligations, and especially tax statuses.

Have you ever asked yourself ‘Where am I domiciled’?

Let’s explore what domicile truly means, and why it might not be where you think.

The term ‘domicile’ in law refers to a person’s permanent legal home, which they consider to have no genuine intention of changing. Not to be mistaken for residence (your current place of living), your domicile ties you to a legal jurisdiction, impacting various aspects such as marriage, wills, and taxation.

Understanding domicile isn’t complete without examining its four primary types: domicile of origin, domicile of choice, and deemed domicile and domicile of dependency. Each has unique rules and repercussions.

Domicile of origin: The starting point

Your domicile of origin is akin to your birth right, automatically assigned at birth. If your parents were married when you were born, you typically assume your father’s domicile. If not, you adopt your mother’s.

This domicile of origin sticks with you, regardless of where you roam. This is irrespective of where you were brought up or where you live now.

Ever wondered how your domicile can impact your finances and your legacy?

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Domicile of dependency

You acquire this domicile if your parent (who determined your domicile of origin) acquires a new domicile whilst you are under the age of 16.

Domicile of choice: A conscious shift

Then, there’s domicile of choice. This status is your right to sever ties with your domicile of origin and declare another place as your permanent home. However, it isn’t as easy as simply packing your bags and moving to sunny Spain, for instance.

To establish a domicile of choice, two primary conditions must be met:

  • residence and intention of permanent or indefinite residence

  • you need to live in a new place and have an undeniable intention to remain there indefinitely.

For example, if you moved to Spain and bought a property, changed your banking arrangements, registered with local doctors, and expressed the intention to remain there indefinitely, you could argue for Spain as your domicile of choice. However, it’s worth noting that the burden of proof falls on you. Authorities often view claims of changed domicile with scepticism, especially if it seems like a strategic move to avoid taxes.

And if you do wish to elect a new domicile of choice it’s important you ensure this is possible. You can seek a legal opinion on whether it is achievable and obtain an official legal domicile opinion. This can be held on file with your Will so as to avoid any challenges during the probate process.

Don’t be fooled into thinking that just because you have lived somewhere outside of your original domiciled country you can simply elect that to be your new domicile.

Finances can be moulded by your domicile

Get clarity on your domicile status today.

Deemed domicile: The imposed status

Finally, we come to deemed domicile – a concept particularly prevalent in the realm of tax law. Deemed domicile is not where your heart calls home, but where the taxman says you belong.

In certain jurisdictions, like the UK, you can be deemed domiciled for tax purposes if you were resident in the country for at least 15 of the past 20 years, or if you had your domicile of origin in that country and resided there at any point in the past three years.

This concept ensures that long-term residents can’t dodge their fair share of taxes by claiming a foreign domicile of choice. It’s essentially a legal assertion that says, “You’ve been here long enough; it’s time to pay up like a local.”


What about those who live in the UK but are domiciled elsewhere?

Non-domicile (non-dom), is a British tax status that dates back to colonial times. The current domicile rules have been part of the UK tax system since 1914. Non-dom status remains an important feature of the UK’s international tax system. Non-domiciled UK residents or ‘non-doms’, as they are popularly known, are individuals who live in the UK but claim tax on their permanent place of residence abroad.

But what does this mean for the Non Doms tax status?

Simply put, these individuals do not have to pay UK tax rates on their foreign income.

A person who is registered as non-domiciled with HM Revenue and Customs is tax resident in the UK but does not have to pay UK tax on income and capital gains earned overseas – including on company stocks or cash made from selling a second home – unless they bring their money into the UK or deposit it into a UK bank account.

However, it’s important to note that Non-doms still have to pay tax on money earned within the UK. Non-doms have to specifically apply for a tax exemption on foreign income meaning it is not an automatic designation for foreign-born residents or non-citizens.

If an individual is a UK resident but has a non-dom status, they can choose to be taxed on either the arising or remittance basis.

  • Arising basis – income is taxed in the year in which it arises or is received. It makes no difference whether such income is brought back to the UK or kept overseas (i.e. taxable on worldwide income and gains).
  • Remittance basis – Foreign income is only taxed in the UK if it is brought back (i.e. remitted) to the UK or is enjoyed in the UK.

UK-based income and capital gains will always be taxed on an arising basis for UK resident non-doms.

The remittance basis must be claimed annually on your tax return. If no claim is made, the arising basis applies automatically.

Individuals can opt in and opt out of the remittance basis on a yearly basis. This can be a good tax planning exercise as you will already know your income position for the tax year in question, allowing you to make an educated decision based on the full knowledge of liabilities arising in the UK.

Beware – Non-UK domiciled individuals can be treated as being deemed domiciled in the UK for tax purposes if certain conditions are met. This does not change the individual’s domicile under common law but rather their tax status in the UK. Anyone with ‘deemed domicile’ status will be taxed in the same way as an individual who is UK domiciled.

Non-doms will be classed as deemed domiciled for income tax, CGT and IHT purposes if they have been UK resident for tax purposes for 15 out of the last 20 tax years.

What’s the situation for inheritance tax for non-domiciled?

In simple terms, the estate of a non-dom would only be chargeable to UK inheritance tax in respect of UK assets. This can result in a potentially advantageous position where IHT is concerned.

Non-doms should also consider lifetime IHT planning opportunities available to mitigate their IHT position in the UK further. This is particularly relevant where they may be caught by the deemed domicile provisions in the future. This is a complex area where specialist tax advice is required.

There are also key differences with respect to the IHT allowances for Non-Doms.

Non Dom IHT

Non-doms remain entitled to the nil rate band (set at £325,000 per individual). However, they are not entitled to the full spousal exemption. UK residents and domiciled individuals can leave/transfer assets to spouses without incurring any IHT charges. This is limited to £325,000 for non-doms.

A crucial factor when it comes to tax

Determining your domicile for tax purposes

It’s important you understand your domicile status.

Domicile is a crucial factor in the UK taxation system because it impacts how an individual is taxed, particularly for income earned abroad, inheritances, and capital gains.

If you’re a resident in the UK but not domiciled in the UK, you can opt to be taxed on the ‘remittance basis’. This means you only pay UK tax on the income or gain you bring to the UK, rather than on your worldwide income and gains, Non-UK-domiciles are also only subject to IHT on their UK assets.

You might be an expat living abroad but you come from the UK. So where are you domiciled?

Individuals who are domiciled in the UK, even those that live abroad and have done so for many years, are still subject to IHT on their worldwide assets. So if you believe you may have an IHT liability, don’t think your beneficiaries will get away with not paying the tax because you live abroad. And certainly, where the intent of domicile of choice can’t be proved, you should seek advice on tax-efficient wealth transfer strategies.

One’s domicile can significantly influence financial affairs, often unnoticed.

This seemingly obscure term can wield considerable influence over your tax liabilities.

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Why your domicile matters

Your domicile, be it of origin, choice, or deemed, holds sway over many aspects of your life. Most significantly, it plays a key role in taxation. Different jurisdictions have varying tax laws, and your domicile can significantly affect your liability.

Additionally, your domicile impacts your legal capacity and rights. It can determine the law applicable to your marriage and the distribution of your assets upon death. Therefore, it’s crucial to comprehend where your domicile is truly situated and the implications it carries.

A key point to understand is that the common law concept of domicile is completely distinct from residence.

An individual must have a domicile but can only have one country of domicile at a time. By contrast, it is perfectly possible to be considered a resident of more than one country in a tax year or indeed a resident of no country.

Domicile may be challenged on death, Those claiming non-dom status should share any evidence of intentions with family members or others who may find themselves defending a domicile challenge.

It’s important to understand the legal concept of domicile.

What is your domicile status?

Often individuals mix up the distinctions of residency and domicile and they are inherently unique. There are clear distinctions and differences between domicile and residency. Your domicile is more than your residential address.

It’s a complex legal concept that traverses the boundaries of international law, taxation, and personal rights. It could very well be different from where you live or even where you think your home is.

What are the tests for domicile?

There is no formal process for agreeing your domicile status with HMRC, But you can seek clarity on what your domicile status is. And in some cases seek an official legal domicile of opinion for your records and for the avoidance of doubt.

Domicile is a complex area of law, particularly for inheritance tax purposes. If you’re looking to claim a change of domicile, or if there’s a significant amount of UK inheritance tax at stake, you should take expert advice that is specific to your circumstances.

Whether or not you have UK domicile status, there are tax planning arrangements available to reduce your liabilities to inheritance and other taxes and steps you can take to minimise unnecessary taxes for your heirs.

So, take a moment and ask yourself, “Do I know where I’m really domiciled?”

The answer might surprise you.

Jessica Cook LLB (Hons) Chartered MCSI
Private Client Adviser, Pensions Specialist

Meet Jessica Cook

It starts with a client’s life and ends with their investments, not the other way round. Helping people live rich and without regrets, rather than dying rich and with regrets. To help people improve their lives by bringing truth, understanding, and discipline to the choices they make every day.

I’m Jessica Cook, Wealth Adviser to international professionals and families across the globe. Featured in the 2022 Times Newspapers’ Guide to the UK’s top-rated Financial Advisers.

My background is law, and a former career with the Financial Times. I’m also a regular financial columnist for multiple publications.

Working in partnership at AES International as a Private Client Adviser means delivering the next generation of demonstrably beneficial services to our clients and creating positive change.

I work with absolute integrity and dedication to my clients’ needs. With an ongoing commitment to providing professional excellence in every aspect of the advisory role.

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Read more about the subject of domicile

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    Your domicile, often referred to as your legal home, holds significant implications for various legal matters, including taxation, inheritance, and jurisdictional matters. While your domicile is typically determined by your place of birth or origin, it is possible to establish a domicile of choice in a different location.

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Disclaimer: The content provided does not constitute advice nor does it constitute any offer or solicitation to offer a recommendation. It is for general purposes only and does not take into account your individual needs, and specific circumstances. The law of domicile is very complex. Advice should always be sought from a lawyer or practitioner with expertise in this area.