NOTE: In March 2024, the Chancellor Jeremy Hunt announced significant changes to the non-domicile tax regime. The remittance basis of taxation was abolished and replaced with a residence-based regime in April 2025. For more information on these changes, please refer to the official Government brief. If you require additional support on how these changes affect you, do not hesitate to get in touch.

 

The non-domicile regime was a British tax status that dated back over 200 years to colonial times,  the domicile jurisdiction was a part of the UK tax system since 1914. Numerous changes and restrictions have been applied over the years, but non-dom status remained an important feature of the UK’s international tax system.

The ‘non-domicile’ regime was an important concept in the UK taxation system, impacting how individuals were subject to various forms of taxation from overseas earnings such as income tax, capital gains tax (CGT) and Inheritance tax (IHT). An individual with non-dom status was able to choose to only pay UK tax on money earned within the UK; money earned abroad was not subject to UK taxation.

This article explores non-domicile status and outlines the tax reliefs under the old remittance-based system that were, until recently, available for non-doms residing in the UK, including the remittance basis of taxation and Overseas Workday Relief.

Table of Contents

Non-Domiciled Status

What is a non-domiciled individual?

A non-domiciled individual or ‘non-dom’ is a UK individual whose permanent residence, home, or domicile is outside the UK. This individual’s tax status was not determined by their nationality or citizenship but by the individual’s domicile.

Criteria to be non-domiciled in the UK

Under the old system, to obtain non-domiciled status in the UK, an individual had to demonstrate to HMRC that their domicile was outside the UK. This was often complex especially if an individual had significant ties to the UK, such as family connections, UK birth rights or property here. 

How long can a non-domicile stay in the UK?

An individual’s non-domicile status lasted for a maximum of 15 out of 20 years of UK tax residence; after this period, an individual would automatically become a UK domicile and were unable to make use of any taxation advantages.

How does non-dom status affect UK tax obligations?

In the UK, non-domicile status significantly influenced an individual’s tax responsibilities. Individuals with ‘non-dom’ status could avoid UK tax on their foreign income and gains, provided they were not brought into the UK.

If foreign income was below the £2,000 tax income threshold, it was tax-exempt unless remitted to the UK. The £2,000 income threshold was particularly relevant for lower-income households, as obtaining the non-dom status could lead to substantial tax savings on earnings abroad.

Those earning above the £2,000 threshold had to report any foreign income to HMRC via a self-assessment tax return. The individual could pay UK tax on these earnings or opt for the remittance basis of taxation.

Claiming non-dom status enabled individuals to substantially reduce potential Inheritance Tax (IHT) and Capital Gain tax (CGT) obligations. Non-domiciled individuals only had to pay IHT and CGT on UK assets, not assets disposed of or transferred abroad. Individuals seeking to dispose of foreign assets, transfer capital or sell foreign businesses could gain significant tax benefits, depending upon the tax obligations of the country in which those assets were held.

The Remittance Basis Of Taxation for Non-Doms

The remittance basis of assessment was an alternative tax treatment available to non-domiciled individuals in the UK until April 2025. If a non-dom opted to be taxed on the remittance basis, they agreed to pay tax on any foreign income or gains only if they were brought into the UK. Income and gains retained outside the UK were not subject to UK taxation under this rule.

If no claim was made, the default full UK taxation position would be taken on any earnings sourced from the UK or abroad.

The main advantage of the remittance basis was that it aimed to limit the UK tax liability on foreign income, which was particularly beneficial for non-doms with substantial income or assets abroad.

Claiming the Remittance Basis of Taxation

An individual could apply for the remittance basis of taxation year-by-year by submitting their self-assessment tax return. The individual would specify their choice in the relevant section.
Claiming the remittance basis sometimes meant giving up certain tax allowances.

Although the remittance-basis system has been abolished, there are still lingering tax implications for previous non-domiciled individuals, so we suggest speaking to one of our qualified accountants for professional advice.

The Implications of Claiming Remittance Basis of Taxation

Loss of Personal Allowance

The 2023/24 UK personal income allowance provided a £12,570 tax-free allowance on UK taxable income. If individuals chose to claim a remittance basis of taxation, they forfeited their right to this personal income allowance. However, it was still possible for some dual residents to obtain this.

Capital Gains Tax

The capital gains tax allowance for the 2023/24 tax year was £6,000. Opting for the remittance basis forfeited this exemption. While high-income taxpayers, whose CGT was 28% for residential property and 20% for other chargeable assets during the 2023/24 tax year, may not have felt a substantial impact, standard-rate taxpayers often faced increased tax liabilities due to this loss.

Remittance Basis of Charge

An individual who chose to opt for the remittance basis of taxation was additionally subject to an annual charge based on the time they had been a UK resident. HMRC defined this as an annual charge of £30,000 for individuals who had been a UK resident for more than seven of the last nine tax years or £60,000 for those who had been in the UK more than 12 of the previous 14 tax years.

Record Keeping

Maintaining accurate records was vital when claiming the remittance basis of taxation. It is still essential to track overseas income or gains that haven’t been taxed in the UK. We offer professional bookkeeping services that can ensure records are kept in a clear and HMRC-compliant manner.

Overseas Workday Relief

Under the old system, the Overseas Workday Relief (OWR) was a tax relief available to UK non-domiciled individuals who had employment income from working both inside and outside the UK. The OWR was issued under specific criteria and enabled individuals to pay UK income tax only on their employment income that related to their UK workdays.

Any income from non-UK workdays fell outside the scope of UK income Tax and was not taxed under UK income tax rates (assuming any non-UK income wasn’t transferred to the UK).

Overseas Workday Relief was able to significantly reduce the UK income tax liability for those who qualified. It was intended to make the UK an attractive destination for international professionals and encourage foreign investment.

Overseas Workday Relief Eligibility Criteria

Under the old system, obtaining Overseas Workday relief was sometimes a complicated process. To be able to claim, individuals needed to meet the following criteria:

  • Perform some or all of their work duties outside of the UK.
  • Be classed as a non-domiciled individual and be taxed on the remittance basis,
  • Pay any foreign-earned income into a separate foreign bank account.
  • Must have had non-UK resident status for the three tax years preceding the current year and be a UK tax resident in the year they claimed OWR.
  • Keep accurate and transparent records to prove that foreign earnings have not been remitted to the UK.

Offshore Banking

For non-domiciled individuals who looked to claim Overseas Workday Relief, all foreign earnings should have been paid into a non-UK overseas bank account. There was a risk that overseas income or gains could be taxed if brought into the UK; by keeping overseas income in an offshore bank account it was easier to prove that income had not been remitted and thus remained free from UK taxation.

To be eligible, the bank account had to have been in the individual’s name and contain no more than £10 at the beginning of the tax year to ensure clarity on the funds that were subject to tax. It was advised that a separate bank account should be opened each year to highlight that no income had been remitted to the UK.

Claiming Overseas Workday Relief

To claim Overseas Workday Relief under the old remittance-based system, it was important that an individual could provide proof that they had worked outside the UK and held the correct documentation to support their eligibility. This included banking documentation, UK self-assessment tax forms and travel documents.

Overseas Workday Relief still exists under the new residence-based system. Our team of accountants are specialists who can help guide you on the most tax-efficient strategy for working in the UK and help ensure that you keep suitable records to benefit from OWR. So get in touch.

Conclusion

To conclude, the intricacies of non-domicile status and associated tax rules in the UK were very complex and still hold implications for previously non-domiciled individuals. Whether you need help navigating the new residence-based system, or have historic tax obligations to consider, we encourage you to contact us. We can offer the guidance you need to ensure full compliance and help you make a decision that will optimise your tax position.