UK Resident and Long Term Resident v Domicile 2025

Over the last 30 years or so we have seen various tax statuses when United Kingdom ‘resident’ such as:

Ordinarily Resident – a term used meaning you have settled in the UK legally and voluntarily without restriction and has relevance now to a few areas in the UK such as immigration routes and accessing NHS care.

Habitually Resident – a term used for a person that must have taken up residence and lived in UK for a period e.g., 2 years (now only used to assess social housing rights).

Tax Resident – used to be a 183 days per year rule and an average 90 day per year rule over 4 years meaning you were subject to UK income and gains taxes, and this is now established via the Statutory Resident Test that started on 6 April 2013 to remove all confusion on whether you are tax resident.

Statutory Residence Test (SRT) see https://www.gov.uk/government/publications/rdr3-statutory-residence-test-srt/guidance-note-for-statutory-residence-test-srt-rdr3

• Automatic overseas tests - there are 3 tests to consider that may mean you are considered Overseas resident for UK taxes.
• Automatic UK tests - there are 3 tests to consider that may mean you are considered UK resident for UK taxes.
• Sufficient ties test – a points-based system based upon links with the UK if you fail both the Automatic Overseas and Automatic UK tests.
• Application of the SRT to deceased persons
• Split year treatment where you spent part of the UK tax year living overseas and part in UK.

Domicile – No, this does mean the property that you live in.  Domicile is a term peculiar to English Law.  Think of 'domicile' as your ‘homeland’. 

• UK Domiciles and Inheritance Tax - you are subject to Inheritance Tax on Worldwide assets.
• Domicile of Origin - you acquire your Domicile of Origin from your father at birth (if no father on your birth certificate, then your mother’s domicile us assumed).  If your father/mother’s domicile status changes before you reach 18 yrs old, you automatically take on your parent’s revised domicile status.  If you were born in the UK to a UK domiciled father, you are domicile of origin UK. 
• Domicile of Choice - you acquire a UK Domicile of Choice if you spent 17 of the last 20 years in the UK meaning that you are fully subject to UK taxes on your worldwide income, gains and worldwide assets for inheritance tax
• Non-UK Domiciles (but UK resident), you are also only subject to UK inheritance taxes on your UK assets until you become Domicile of Choice UK.
• UK Domiciles and Income Tax – you are subject to UK income tax on your worldwide income.
• Non-UK Domicile and Income Tax, you are subject to income tax on your UK income only although if you have lived in the UK for 7 of the last 9 years all your worldwide income may to be subject to UK income tax unless you opted (on day 1 of entering the UK) to become a Remittance Basis User (RBU). 
• Remittance Basis User – if you elected to be a Remittance Basic User, then
• If less than £2,000 of overseas income is remitted to the UK, then it is tax free.
• If more than £2,000 of overseas income is remitted to the UK, then it is fully taxable in the UK OR
• As a RBU and you have lived in the UK for 7 of last 9 years you can elect for a £30,000 annual tax charge meaning all non-UK income is not taxed in UK.
• As a RBU and you have lived in the UK for 12 of last 14 years you can elect for a £60,000 annual tax charge meaning all non-UK income is not taxed in UK.

Autumn Budget 2024 – Resident and Long-Term Resident

Originally prompted by the Conservative Spring Budget 2024 but now enhanced by the Labour Autumn Budget 2025:

• From 5^th April 2025 the current rules for UK resident non-domiciled individuals are abolished.  These are replaced by Long Term Resident rules.
• The Statutory Residence Test remains:  See https://www.gov.uk/government/publications/rdr3-statutory-residence-test-srt/guidance-note-for-statutory-residence-test-srt-rdr3

UK Resident - New Residence Based Foreign Income and Gains (FIG) Regime

Remittance Basis User (RBU) will be replaced with a new 4-year Foreign Income and Gains (FIG) Regime for individuals who become UK tax resident after a period of 10 consecutive tax years as non-UK resident.  Qualifying individuals will not pay tax on FIG arising in the first 4 tax years after becoming UK tax resident and will be able to bring these funds to the UK free from any additional taxes.

• After the 4-year FIG period ends, you will pay full UK income and gains taxes on worldwide assets as UK Resident.

Transitionary Rules - The government is introducing transitional arrangements for existing ‘non-doms’ currently claiming treatment as an RBU see: 

• An option to rebase the value of personally held foreign capital assets to 5 April 2017 (a change from Conservative proposals 5 April 2019 , as we assume to get lower rebased values capital values meaning more UK capital gains tax payable when sold).
• Overseas Workday Relief (OWR):  if you move to UK but still work/earn for some periods overseas, where you do not pay UK income taxes on overseas income. 
• OWR is being kept but reformed with relief extended to a four-year period and the need to keep the income offshore removed (so you can bring the overseas income into the UK).
• The amount OWR claimed yearly will be limited to the lower of £300,000 or 30% of your net employment income.
• The temporary 50% exemption for the taxation of foreign income for the first year of the new regime (2025-26) planned by the Conservative Government has been abolished by Labour (meaning more tax payable)
• A three-year Temporary Repatriation Facility TRF (previously set at two years by the Conservatives) to bring previously accrued foreign income and gains into the UK at a 12% rate of tax (increasing to 15% under Labour) meaning more money can be brought into the UK and taxed.
• The scope of TRF is also being expanded by Labour to include offshore structures and simplifying the mixed fund rules to encourage individuals to designate and bring into the (or repatriated i.e., treated, and taxed as if in UK) any accrued, as yet untaxed, foreign income and gains.  No doubt the attraction is more money coming into the UK with the incentive of being taxed at reduced rates of 12-15%.
• TRF will be available to
• Individuals who have been taxed on the remittance basis.
• Designated amounts will pay tax of 12% in tax years 2025 to 2026 and 2026 to 2027, with the rate rising to 15% in tax year 2027 to 2028.
• Any remitted ‘designated amounts’ will not otherwise be charged to UK tax.
• Individuals that designate investments under the TRF and have paid the TRF tax charge are not forced to bring funds into the UK, they can be repatriated (i.e., brought into UK) in future tax years.  No doubt designating now is being encouraged as you will only pay 12% and tax is then already deemed paid in full when you bring funds into UK.  Either way, tax will have been paid upfront (happy Labour) even if you do not bring the money into UK just yet.

Long Term Resident and UK Inheritance Tax

Previously, the Conservative government said it would consult on a residency-based regime for inheritance tax (IHT) and we speculated that this could mean by being non-UK resident, there will be no IHT on UK assets,  Sadly, this was not to be as Labour has replaced UK Domicile and Non-UK Domicile status from 6 April 2025 for IHT with:

‘Resident’ and ‘Long Term Resident’

Unused pensions funds (both in UK and overseas) will now be included in your estate for UK Inheritance Taxes if you are ‘Resident’ or deemed UK ‘Long Term Resident’: 

UK Resident: 

• If you are UK resident and lived in the UK for less than 10 years, only UK assets are subject to UK inheritance tax.
• If you are still UK resident and have lived in the UK for at least 10 out of the last 20 tax years, both your UK and worldwide assets (including pensions) will be included in your estate for UK Inheritance purposes.

Long Term Resident: If you have been UK resident for at least 10 out of 20 years and then you become non-resident and do not return to the UK before the chargeable event to tax (e.g., death) then you may fall into scope for both UK and non-UK assets being subject to UK inheritance Taxes as follows:

• If you have been resident in the UK for less than 10 years and you leave the UK, only UK assets and pensions will be included in the estate for UK Inheritance taxes.
• If you have been UK resident between 10 and 13 years of the last 20 years and then leave the UK both your UK and worldwide pensions and other assets will be included in your estate for UK Inheritance purposes for a further 3 tax years.
• If you have been UK resident for more than 13 years (of last 20yrs), each additional UK resident year will mean another year after you have been non-resident to be within scope of UK IHT for both your UK and worldwide pensions and other assets as follows:
• UK resident 14 years (of last 20yrs) means 4 further tax years as non-resident and still within scope of UK IHT rules on worldwide pensions and other assets as a ‘Long Term Resident’.
• UK resident 15 years (of last 20yrs) means 5 further tax years as non-resident and still within scope of UK IHT rules on worldwide pensions and other assets as a ‘Long Term Resident’.
• UK resident 16 years (of last 20yrs) means 6 further tax years as non-resident and still within scope of UK IHT rules on worldwide pensions and other assets as a ‘Long Term Resident’.
• UK resident 17 years (of last 20yrs) means 7 further tax years as non-resident and still within scope of UK IHT rules on worldwide pensions and other assets as a ‘Long Term Resident’.
• UK resident 18 years (of last 20yrs) means 8 further tax years as non-resident and still within scope of UK IHT rules on worldwide pensions and other assets as a ‘Long Term Resident’.
• UK resident 19 years (of last 20yrs) means 9 further tax years as non-resident and still within scope of UK IHT rules on worldwide pensions and other assets as a ‘Long Term Resident’.
• UK resident 20 years (of last 20yrs) means 10 further tax years as non-resident and still within scope of UK IHT rules on worldwide pensions and other assets as a ‘Long Term Resident’.
• On completing 10 consecutive years as non-UK resident you lose the status of ‘Long Term Resident’ and revert to only UK assets and pensions being included in the estate for UK Inheritance taxes.  (This aligns with the 10 consecutive years of non-residence required to be able to access the 4-year Foreign Income and Gains (FIG) regime should you then return to the UK.

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