Are you a UK resident that uses a non-domiciled status to reduce the amount of tax you pay? Or are you not usually a UK resident but are domiciled here for tax purposes? If so, you may tax on a remittance basis and the way you pay may be about to change.
Usually, UK residents pay tax on an arising basis, which means tax is paid on earnings during the year in which they are received. A remittance basis, however, means that an individual only pays tax on earnings that are brought into the UK. Anything left outside of the UK is left 'unremitted'.
If an individual is non-UK domiciled but resides in the UK, paying tax on a remittance basis comes at a cost; particularly for longer term residences. This cost comes in the form of an annual remittance basis charge, which has been increased to 60,000 GBPfor individuals who have lived in the UK for 12 years or longer. The charge for those who have been in the UK for 7 of the last 9 years remains at 30,000 GBP.
The changes to the way UK non-dom residents pay tax also included the end to the remittance basis for anyone entering their 16th year of UK residence. This means anyone falling into this category is liable to pay tax on an arising basis on all of their personal income and gains, regardless of whether it is brought into the UK or not.
The changes means favourable conditions are still available to shorter term non-dom UK residents, although longer term residents will be penalised as the option to pay tax on a remittance basis is withdrawn. The changes come into effect from April 2017 and will include all non-domiciled individuals, regardless of whether or not they are currently living in the UK.
There are still details to iron out on how the rules will be applied to countries with double taxation treaties that currently give favourable inheritance tax treaties to residents. Moreover, the government has made clear that it plans to bring all UK residential property in line with standard UK inheritance tax rules.
If you are concerned about anything you have read in this article it is suggested that you seek financial advice. Otherwise, if you would like further assistance or more information on this subject please contact us through the email link below