Legal News | 14.04.22

Is the UK your forever home? The non-domicile tax status and your estate

You have no doubt seen in the news over the past week that Chancellor Rishi Sunak has been defending his wife Akshata Murty’s non-domiciled (non-dom) tax status – but what exactly does it mean to be a non-dom?

Domicile should not be confused with your residence – the country where you happen, or choose, to live. Despite being a resident in the UK, Ms Murty, has non-dom status which means she doesn’t need to pay taxes in the UK on the income she earns abroad.

Your domicile is the country that you officially consider to be your permanent home or with which you have a substantial connection. Your domicile of origin is your domicile at birth, which generally mirrors that of your father‘s domicile, if your parents were married at the time. However, it can change if you move abroad and do not intend to return – your domicile of choice.

One reason that the concept of domicile is particularly important in the UK is because of the inheritance tax consequences it will have upon death. Non-doms only pay inheritance tax on their UK based assets. Their remaining worldwide assets are exempt from UK inheritance tax.

If you are in the process of submitting an inheritance tax return for a non-dom, you will need to complete an additional schedule reporting the deceased’s domicile. This schedule will need to accompany your main application when it is sent to HMRC.

If you would like to know more about the effect your domicile may have on your estate’s inheritance tax bill, or you would like help with the inheritance tax return for a non-dom, please get in touch with your usual Wansbroughs contact or email the Private Client team at wealth@wansbroughs.com.