The impact of the deemed domicile rules

The impact of the changes so far

The April 2017 policy reforms and Brexit created concerns that the wealthy would be deterred from living in the UK and that we’d see a significant decrease in non-doms here and, indeed, there was a notable downward trend in the number of non-doms living in the UK (dropping from 65,300 in 2017/18 to 54,300 in 2020/21). However, this trend has now ceased as the 2021/22 tax year saw a slight increase in the overall number of non-domiciled taxpayers living in the UK, up to 55,200. 

HMRC estimates that non-doms/deemed domicile’s combined tax and National Insurance Contribution (NIC) liabilities totalled around £12.4billion for the tax year ending 2022 - the largest liability since figures began (2008). Further details on the HMRC report can be found here.

Are you approaching your 15th year?

If you’re a non-dom who is soon approaching your 15th year in the UK and are thinking of leaving because of these rules, seek professional advice before you decide to jump ship. Becoming deemed UK domicile does not necessarily have to lead to a huge rise in your overall tax burden. With careful planning and the judicious use of Double Taxation Agreements, those coming up to their 15th year in the UK may be able to minimise potential liabilities on their overseas income or gains. 

Already reached your 15th year?

If you’ve already reached your 15th year in the UK and are thinking of leaving, things are slightly more complicated as you will still be considered UK deemed domiciled for a period after your departure. Your worldwide estate is potentially exposed to UK IHT if you pass away shortly after leaving the UK, so you may wish to consider taking out a short-term life insurance policy to protect your beneficiaries.

Potential further changes to the taxation of non-doms

The taxation of non-doms has received increased media attention in 2023, with the Labour party stating that they would look to abolish non-domicile status should they win the next election. 

At the date of writing, there are no official proposals or government consultations to change the taxation of non-doms, but it remains a regular point of discussion, indicating new rules could be seen in the short or medium term. 

If you’re considering a move out of the UK, please fill out the form below. Our experts will be in touch to help you review your situation and, if necessary, plan your departure taking into account any necessary tax liabilities to avoid unwanted surprises about your residence position.