What Is A Non-Dom When It Comes to Taxes?

22 April 2022|Related :

Chancellor Rishi Sunak’s wife, Akshata Murthy, has recently come under the public eye after it was revealed that she has a ‘non-dom’ status as a taxpayer. But what exactly is a non-dom and how can one gain this status? Allow us to explain.

What Does a Non-Dom Status Mean?

Non-domicile, or non-dom, is a British tax status that allows a UK resident, who’s permanent home is outside the UK, to only pay tax on their UK income.

This means that they do not have to pay any tax to the UK on money they have made elsewhere so long as this money isn’t paid into a UK bank account. For very wealthy individuals, this poses an opportunity for great savings in countries with lower-taxes which are entirely legal.

Can Anyone Become a Non-Dom?

There are two ways in which you can become a non-dom:

Domicile of Origin

If you were born outside of the UK, or if your father (or mother if your parents were unmarried) is from a different country, you can become a non-dom.

Domicile of Choice

If you are over 16 and choose to permanently live in another country other than the UK, you can become a non-dom.

Akshata Murty holds the non-dom status because her father is Indian and she was also born and grew up in India.

However, it is entirely possible for you to be born, educated and work in the UK and still choose to become a non-dom afterwards.

What are the Rules of Holding a Non-Dom Status?

If you are non-dom and choose to not pay tax in the UK on your overseas earnings, you must instead pay a substantial annual charge of:

  • £30,000 if you have been in the UK for at least seven of the last nine tax years.
  • £60,000 if you have been in the UK for at least 12 of the previous 14 tax years.

The non-dom rules underwent a change in 2017, stopping those who had been a resident in the UK for 15 out of the previous 20 years from claiming the status.

Those born in the UK, who’s domicile of origin is the UK and who have been resident in the UK for at least a year since 2017 also cannot claim the status.

In order to claim the status, a non-dom earning more than £2,000 a year from foreign earnings must provide evidence to the UK tax authorities about their background, lifestyle and future intentions.

Those who earn less than £2,000 from foreign earnings and don’t bring the money into the UK don’t have to do anything.

How Long Has the Non-Dom Status Been Available?

This may come as a surprise, but it has been possible to become a non-dom for over 200 years. The status was originally introduced back in 1799, allowing individuals with foerign property to protect it from wartime taxes.

Need Support With Taxes?

At Ryans, we offer help with both personal tax planning and business tax planning, helping you to make sure you’re making the most of any tax relief whilst also staying fully compliant with HMRC’s many strict rules and regulations, including maintaining a non-dom status.

Get in touch with a member of our team today to discuss how we can help you.

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