Non-Dom status is a term used to describe individuals who are not domiciled in the United Kingdom for tax purposes. This means that they are not considered to be permanent residents of the UK and are therefore not subject to UK tax on their foreign income and gains, unless they choose to be.
The UK residency status test is used to determine an individual’s residency status for tax purposes. The test takes into account a number of factors, including the number of days spent in the UK, the individual’s ties to the UK, and their intentions for the future. If an individual spends more than 183 days in the UK in a tax year, or has significant ties to the UK, they will be considered a UK resident for tax purposes.
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If an individual is a Non-Dom and chooses to be taxed on the remittance basis, they will only be taxed on their UK income and gains, as well as any foreign income and gains that they bring into the UK. This means that they can avoid paying tax on their foreign income and gains that are kept outside of the UK.
However, there is a 7-year charge for Non-Doms who have been resident in the UK for 7 out of the previous 9 tax years. This charge is designed to discourage individuals from using Non-Dom status as a way to avoid paying UK tax on their foreign income and gains. The charge is currently set at £30,000 per year, but may be higher for individuals who have been resident in the UK for longer periods of time.
In conclusion, Non-Dom status can be a useful tool for individuals who have significant foreign income and gains, but it is important to understand the UK residency status test and the potential tax implications of choosing to be taxed on the remittance basis. The 7-year charge for Non-Doms is also an important consideration for those who are considering using Non-Dom status as a way to avoid paying UK tax. It is always advisable to seek professional advice before making any decisions regarding tax planning.