What is domicile?
On this page we look at the concept of ‘domicile’ and how it applies to you for UK tax purposes. Please note that domicile will generally not be relevant to your UK tax affairs if you are non-resident or you are UK resident but have no foreign income or gains. It may, however, be relevant for inheritance tax purposes.
What is domicile?
Domicile is a general legal concept. You will generally be domiciled in the country where you consider your ‘roots’ are, or the country where you have your permanent home. It is not the same as nationality, citizenship or residence.
Every individual has a domicile, which they originally acquire at birth. It is not necessarily the country that you were born in, or are currently living in. It is only possible to have one country of domicile at any given time. You can be domiciled in a different country to where you are resident.
There are three main types of domicile, explained in Where am I domiciled?: These are domicile of origin, domicile of dependence and domicile of choice. In the UK, you normally self-assess your domicile status. If there is any question over your domicile status, a court can make a formal ruling on your domicile.
You can also have a ‘deemed domicile’ in the UK for tax purposes. There is more information on the page Where am I domiciled?.
You can find out more about domicile in HM Revenue & Customs’ (HMRC) RDR1 booklet on GOV.UK.
Why is domicile important?
It is important that you know where you are domiciled as it can affect your tax position. If you are resident but not domiciled in the UK, you may not have to pay UK tax on your foreign income and gains.
The following bullet points summarise your tax position in different situations:
- If you are UK resident and UK domiciled (or deemed UK domiciled): you pay UK tax on all of your worldwide income and gains as they arise, regardless of whether the income and gains arise in the UK or overseas. This is the called the arising basis of taxation.
- If you are UK resident and not domiciled in the UK: you pay UK tax on your UK-sourced income and gains on the arising basis. You can choose to pay UK tax on your foreign income and foreign gains on either the arising basis or the remittance basis of taxation (note that, if it does not apply automatically, choosing to be taxed on the remittance basis can carry a cost).
The table illustrates broadly how income and gains are taxed in the UK, depending on your residence and domicile status.
|UK Domicile Status||UK Residence Status||UK Income||UK Gains||Foreign Income||Foreign Gains|
|UK domicile||Resident||Arising basis||Arising basis||Arising basis||Arising basis|
|Non UK domicile||Resident||Arising basis||Arising basis||Arising basis or remittance basis||Arising basis or remittance basis|
⚠️ Note: This is the position under UK domestic law. There may be different treatment for particular types of income and gains under the terms of a relevant double taxation agreement.
There is more information on this topic on our page How are foreign income and gains taxed?.
Does domicile matter if I am working in the UK?
Domicile will not usually affect how you are taxed on your employment income if you do all of your work in the UK. This is because work carried out in the UK is considered to be UK-sourced income and UK-sourced income is (nearly) always taxable in the UK.
However, if you are UK tax resident, have some workdays for your employer that are outside the UK and you meet the conditions for ‘overseas workdays relief’ during the first three years of UK residence, then you may be eligible for some relief on income relating to non-UK workdays if this income is paid and retained overseas.
Domicile may affect the tax you pay on any other income or capital gains you may have which arise outside the UK if you are classed as UK resident.
Domicile will not be relevant to any income or capital gains you may have which arise outside the UK if you are non-resident, as non-residents are only taxable in the UK on UK-sourced income.
Why does domicile matter for inheritance tax?
Inheritance tax (IHT) is charged on transfers of assets by individuals. Your domicile affects the scope of IHT. UK-domiciled individuals are chargeable to IHT on worldwide assets, but non-UK domiciled are only chargeable to IHT on UK assets. IHT may also be payable on transfers of assets to a non-domiciled spouse or civil partner in certain circumstances.
Note that an individual may be deemed to have a UK domicile for inheritance tax in circumstances where they may not be deemed to have a UK domicile for income tax and capital gains tax purposes. For example, an individual will be deemed to be UK domiciled for inheritance tax purposes if they were UK domiciled at any point within the three years immediately preceding the transfer.
See GOV.UK for more information.