Tax Domicile Planning

Understanding the differences between domicile and residence and knowing the tax implications is vital for understanding your tax liabilities and compliance obligations, both in the UK and in your current or intended country of residence. Receiving the correct advice on domicile planning can help investors to protect and grow their assets, while reducing instances of paying unnecessary charges or taxes that shouldn’t apply to your portfolio.

Domicile Explained

An individual is domiciled in the country which is considered to be their permanent home, or with which they have substantial connections. When you’re born, you acquire a ‘domicile of origin’ which is generally the country in which your father was domiciled at that time.

Your domicile of origin then stays with you, although in certain circumstances it can be replaced with a new ‘domicile of choice’. However, it is usually difficult to change your domicile of origin and so it is important to understand the UK domicile rules before making key domicile and residence decisions. Even if you move abroad and remain resident overseas for many years, it is unlikely that your domicile of origin will change, unless you take specific action.

Why Is Your Domicile Important?

For tax purposes, this is important when it comes to determining your tax liability, especially when it comes to inheritance tax. If you are UK resident, your domicile status will also be important for income tax and capital gains tax planning.

It is an important factor when determining how your individual estate should be passed on in the event of your death and is of particular importance if you own property or financial assets in foreign jurisdictions. The actual management of your estate will vary depending on each situation, but it’s important to have an understanding of the rules, whether you live abroad or have assets located abroad.

Making an assumption about your domicile status can have serious financial consequences but understanding where you are domiciled is not straightforward. It is vital you seek advice about your status from a qualified tax adviser to ensure you understand the tax implications and avoid the pitfalls.

Forth Capital Domicile Advice

If you are unsure about your domicile status and would like to clarify your situation, or would like UK inheritance tax advice, speak to a Forth Capital tax adviser.

Our tax advisers are all qualified Chartered Tax Advisers and members of the Chartered Institute of Taxation.