Leaving UK Tip 3 Not Tax Resident or Domiciled

Published / Last Updated on 30/08/2023

Many people leave the UK without thinking about their tax residency and domicile position.

Domicile – for inheritance tax

  • Domicile is something peculiar to English Law (and those countries that adopted the UK legal system).  Think of Domicile like your homeland.  You acquire your Domicile of Origin at birth from your father but if there is no father named, from your mother. 
  • If you were born to a UK domiciled father (whether you physically born in the UK or not), you are immediately Domicile of Origin UK.  This means that on death your worldwide assets are subject to UK inheritance taxes.
  • If you were born overseas to a foreign father (whether in UK or not), you acquire your father’s domicile.  If your father has been living in the UK for 15 of the last 20 years, then your father is deemed Domicile of Choice UK and you would assume the same domicile.  Again, you are subject to inheritance taxes on worldwide assets.
  • If you leave the UK where you are already Domicile of Origin UK, you cannot lose your Domicile of Origin UK unless you leave the UK with the permanent intention to live overseas in your new country and have severed economic ties with the UK and set up home, work, child education, funeral plans, wills etc in your new country.  You then have a Domicile of Choice immediately in your new country and will only be taxed on death in the UK for assets in the UK rather than worldwide assets.  Care should be taken here because if you keep a property in the UK then HMRC may claim that you always intended to return and there are still UK Domicile and subject to inheritance tax on worldwide assets.

Tax Residency – for income tax

Tax residency cannot be just assumed.  You cannot live in Spain and assume you are not still tax resident in the UK because you still file tax returns in the UK.  You cannot assume you have spent 183 days in Spain and assume you are no longer tax resident in the UK.    In one example, a client was living and working permanently overseas but his wife still lived in the UK in their jointly owned marital home and their children were being educated in the UK.  The client involved had a home and bed in the UK and returned for ‘holidays and periodic visits and stayed for too many days and was therefore considered UK tax resident despite only spending a few weeks a year in the UK.  This came from new rules in 2013 where HMRC issued a new Statutory Residence Test with 3 levels to test and see if you are:

  • Automatic Overseas Resident Test
  • Automatic UK Resident Test
  • Sufficient Ties Test – if none of the above two tests apply, then sufficient ties are the final level of testing with a number of days in UK and points scoring system.

See: https://www.gov.uk/government/publications/rdr3-statutory-residence-test-srt/guidance-note-for-statutory-residence-test-srt-rdr3

As you can see from the above both your domicile and tax residency position need to be reviewed early when planning to leave the UK.

Find out about our Leaving the UK Service:  Leaving UK

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