Meaning of 'domicile' and how it affects your tax

This guide will help you understand the meaning of 'domicile' and how it affects the tax you have to pay on your worldwide income and capital gains. It also looks at the meaning of 'deemed domicile' for UK Inheritance Tax.

On this page:

Understanding domicile

Domicile is not the same as nationality or residence. Your domicile is decided under general law, which means it must be interpreted according to previous rulings of the courts.

Questions of domicile can be complex but broadly speaking you have your domicile in the country that is your 'real' or permanent home which, if you have left, you intend to return to.

You cannot be without a domicile, and you can only have one domicile at a time.

There are three types of domicile:

  • domicile of origin
  • domicile of dependence
  • domicile of choice

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When you need to consider domicile

If you have foreign income or foreign capital gains then you need to consider your domicile, as it will have an effect on the amount of Income Tax or Capital Gains Tax you have to pay.

You may also need to consider your domicile for the purposes of Inheritance Tax.

If your circumstances are complicated you may need to consult a professional adviser.

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Domicile of origin

Everyone acquires a domicile of origin at birth. This is usually the country that your father considered to be his real or permanent home at the date of your birth. If your parents were not married when you were born, your domicile of origin comes from your mother.

Your domicile of origin will continue until you acquire a new domicile - therefore if you have a domicile of origin outside the UK, then this is likely to still apply unless you intend to remain in the UK permanently or indefinitely.

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Domicile of dependence

If you are legally dependent on another person, for example because you are a child, you will automatically have the same domicile as the other person - so if their domicile changes, yours will too.

In addition, if you are a woman and you were married before 1974 you automatically acquired and retain the same domicile as your husband. But if you were a US national married to a man domiciled in the UK, you retained your US domicile for UK tax purposes.

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Domicile of choice - changing your domicile

After the age of 16 (earlier in Scotland), you can change your domicile. To do this you will need to settle permanently in a country other than your previous country of domicile. You may be asked to provide evidence of this.

If you change your domicile you have a 'domicile of choice'.

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Deemed domicile for Inheritance Tax

'Deemed domicile' is a concept that applies only to Inheritance Tax. Even if you are not domiciled in the UK under general law, you may still be deemed domiciled in the UK and therefore liable to pay Inheritance Tax.

You can find out more about deemed domicile in the guide below.

HMRC Inheritance Tax: Customer Guide

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Deciding your domicile

If you complete a Self Assessment tax return you may be required to declare whether or not you are domiciled in the UK. HM Revenue & Customs (HMRC) might not agree with your decision and will expect you to be able to explain how you reached it. If you have no foreign income or foreign gains you do not need to tell HMRC about your domicile as it will not be relevant to the Income Tax and Capital Gains Tax that you have to pay.

Where to get help

HMRC provides guidance to help you decide your domicile status, but cannot make the decision for you - read more in parts 1 and 5 of the RDR1 - Residence, domicile and the remittance basis Guidance notes by following the first link below.

If you need further help on deciding your domicile status you may need to seek professional advice.

RDR1 - Residence, domicile and the remittance basis

Download HMRC technical guidance on domicile

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Having different residence and domicile

It is quite possible to live or work temporarily in one country, but be domiciled in another. For example, you may be resident in the UK but 'domiciled abroad' if all of the following apply:

  • you spend most of the time in the UK
  • you were born abroad and your father (or mother if your parents were not married) was not UK domiciled when you were born or while you were a child
  • you have strong links to the country in which your father was domiciled
  • you do not intend to remain in the UK permanently or indefinitely

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Effect of domicile on your UK tax

Your domicile status may affect what Income Tax and Capital Gains Tax you pay in the UK if both of the following apply:

  • you are a UK resident and are not domiciled in the UK
  • you have foreign income or foreign capital gains

If these apply, you will be taxed as normal on your UK income and UK capital gains, but you'll be able to choose how you are taxed on your foreign income and capital gains ' either on the 'arising basis' or on the 'remittance basis'. You can find out what these terms mean by following the links below.

Paying tax on the remittance basis - an introduction

Meaning of residence and how it affects your tax

Effect of domicile on Inheritance Tax

Your domicile status may also affect what Inheritance Tax you pay. Find out more in the guide below.

HMRC Inheritance Tax: Customer Guide

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