Residence and domicile for tax purpose
United Kingdom source income is generally subject to UK taxation whatever the citizenship and place of residence of an individual, or the place of registration of a company. This means that the UK income tax liability of an individual who is neither resident nor ordinarily resident in the United Kingdom is limited to any tax deducted at source on UK income, together with tax on income from a trade or profession carried on through a permanent establishment in the UK and tax on rental income from UK real estate.
- Individuals who are both resident and domiciled in the United Kingdom are additionally liable to taxation on their worldwide income and gains.
- Individuals who are resident but not domiciled in the United Kingdom (a “non-dom”), foreign income and gains have historically been taxed on the remittance basis, that is to say, only income and gains remitted to the United Kingdom are taxed
- UK domiciled individuals who are not resident for three consecutive tax years are not liable for UK tax on their worldwide income, and those who are not resident for five consecutive tax years are not liable for UK tax on their worldwide capital gains.
Meaning of Resident & Domicile
- Anyone physically present in the UK for 183 or more days in a tax year is classed as “resident” for that year.
- “Domicile” here is a term with a technical meaning. Roughly, an individual is domiciled in the United Kingdom if they were born there, or if the UK is their permanent home; they are not UK domiciled if they were born outside of the UK and do not intend to remain permanently.
- A company is resident in the United Kingdom if it is incorporated there or if its central management and control are there (although in the former case a company could be resident in another jurisdiction in certain circumstances where a tax treaty applies).
- Double taxation of income and gains may be avoided by an applicable double tax
Tax year / Fiscal Year
- Corporate Taxes: A company’s accounting year, which has some relevance for corporation tax purposes, can be chosen by the company and often runs from 1 April to 31 March, in line with the fiscal year.
- Personal Taxes: The British personal tax year runs from 6 April to 5 April in the following year