Residence, Domicile, and UK Tax

Introduction

Your UK tax bill depends not just on what you earn, but where you're resident and domiciled for tax purposes. These two concepts determine whether you pay UK tax on worldwide income or only UK-source income, and they're governed by complex rules that changed significantly from 6 April 2025 onwards.

What is tax residence?

Tax residence determines your connection to the UK for tax purposes in a given tax year. If you're UK resident, you're liable to UK tax on your worldwide income and gains. If you're non-UK resident, you normally pay UK tax only on UK-source income.

Your residence status is determined by the Statutory Residence Test, which looks at factors including:

• The number of days you spend in the UK during the tax year
• Your ties to the UK (such as family, accommodation, work, and time spent here in previous years)
• Whether you work full-time in the UK or abroad

The test is detailed and automatic in some cases. For example, you're automatically UK resident if you spend 183 days or more in the UK in a tax year. Conversely, you're automatically non-resident if you spend fewer than 16 days in the UK (or fewer than 46 days if you weren't UK resident in the previous three tax years).

What is domicile?

Domicile is a separate legal concept from residence. Your domicile represents the country you consider your permanent home—the place you intend to return to eventually, even if you live elsewhere temporarily.

There are three types of domicile:

Domicile of origin: This is normally the domicile your father had when you were born (or your mother's if your parents weren't married). It stays with you unless you acquire a different domicile.

Domicile of dependence: Children under 16 take their father's domicile (or mother's in some cases). This can change if a parent's domicile changes.

Domicile of choice: You can acquire a new domicile by moving to another country and intending to remain there permanently or indefinitely. This requires both physical presence and a clear intention to make that country your permanent home.

Domicile is notoriously difficult to change. HMRC examines your intentions closely, looking at factors like where you own property, where your family lives, where you're buried (through cemetery plots or will provisions), and your long-term plans.

What is deemed domicile?

Even if you're not domiciled in the UK under general law, you can be treated as "deemed domicile" for tax purposes. This means you're taxed as if you were UK domiciled.

You're deemed domiciled in the UK if:

• You were born in the UK with a UK domicile of origin and you're now UK resident, or
• You've been UK resident for at least 15 of the previous 20 tax years

Once you're deemed domiciled, you're taxed on your worldwide income and gains, with limited exceptions.

How residence and domicile affect your tax

The combination of your residence and domicile status determines your UK tax liability:

UK resident and UK domiciled (or deemed domicile): You pay UK tax on your worldwide income and gains, wherever they arise.

UK resident but non-UK domiciled: Until 5 April 2025, you could claim the remittance basis, meaning you paid UK tax only on UK income and foreign income or gains you brought ("remitted") to the UK. Foreign income and gains left abroad weren't taxed in the UK, though this came with certain conditions and charges for long-term residents.

Non-UK resident: You normally pay UK tax only on UK-source income (such as UK rental income or UK employment income). You don't usually pay UK tax on foreign income or capital gains, with some exceptions.

The foreign income and gains regime (from 6 April 2025)

On 6 April 2025, the remittance basis was replaced by the foreign income and gains regime. This new regime offers relief for individuals who become UK resident after a period abroad.

If you become UK resident in the 2025/26 tax year or later, and you haven't been UK resident in any of the previous 10 tax years immediately before your arrival, you can claim relief under this regime. When you claim this relief, you won't pay UK tax on eligible foreign income and gains for up to four tax years.

This is a significant departure from the remittance basis rules. The new regime is time-limited and based on a period of prior non-residence, rather than domicile status. It's designed to attract individuals returning to (or arriving in) the UK after an extended period abroad.

How residence affects employment income

Your residence status also affects how your employment income is taxed, particularly if you work partly in the UK and partly abroad.

If you're UK resident and your employment duties are performed both in the UK and abroad, you're taxed on your worldwide employment income. However, specific rules determine what portion of your earnings relates to overseas duties, which may receive different tax treatment depending on your domicile status and whether you claim the foreign income and gains regime.

If you're non-UK resident, you're taxed only on employment income for duties performed in the UK.

Why this matters for business owners and landlords

If you're a UK resident company director receiving income from overseas subsidiaries, or a landlord with foreign property, your residence and domicile status directly affects whether that income is taxable in the UK.

Similarly, if you're considering moving abroad or returning to the UK after time overseas, understanding these rules is essential for tax planning. The interaction between residence, domicile, and the new foreign income and gains regime can significantly impact your tax position.

Getting your residence and domicile status wrong—or failing to consider deemed domicile—can result in unexpected tax bills or compliance issues with HMRC.

Sources

• Residence, domicile and the remittance basis: RDR1
• Check if you can claim the 4-year foreign income and gains regime
• Employment, residence and domicile issues (Self Assessment helpsheet HS211)

This article provides general guidance based on current HMRC rules. For advice specific to your situation, speak to your accountant.