UK Tax Residency and Domicile

Statutory Residence Test

Part One Questions

Question 1

  • Oliver spent 15 days in the UK in 2024/25 and was a UK tax resident in 2021/22.
  • Answer: Oliver is not a UK tax resident in 2024/25 because he meets the first automatic overseas test: he was a UK tax resident in one of the previous three tax years and spent less than 16 days in the UK in 2024/25.

Question 2

  • George arrived in the UK in 2024/25 and spent 150 days there, having one UK tie.
  • Answer: George's tax residence is determined by the sufficient ties test because he doesn't meet any automatic overseas or UK tests.
  • He is conclusively not a UK tax resident because, as an arriver, he spent between 121-182 days in the UK in the tax year but does not have at least two UK ties.

Question 3

  • Kevin was born in Iceland to Swedish parents on holiday. At 14, his parents moved to Canada and acquired a domicile of choice there.
  • Answer: d) Kevin has a domicile of dependency in Canada because he is under 16.

Question 4

  • Mark was born in Ireland and had a UK domicile of origin. He moved to the USA in 2022, acquiring a USA domicile of choice. He was UK tax resident from April 6, 2001, until his departure on April 6, 2022.
  • In 2024/25, Mark returned to the UK for family reasons and became a UK tax resident.
  • Answer: b) Mark is not UK domiciled (due to his USA domicile of choice) but is deemed UK domiciled for income tax/CGT under rule 1 (long-term resident).
  • He was a UK tax resident in 15 of the 20 tax years prior to 2024/25 and is a UK tax resident in 2024/25.

Question 5

  • Vernon was born in the USA and has a USA domicile of origin but works in the UK and is a UK tax resident. He has lived and worked in the UK since July 2002 but intends to return to the USA.
  • He received a significant dividend from shares in a US company in June 2024 and used half the amount for a UK holiday home.
  • Assume Vernon is not automatically entitled to the remittance basis.
  • Answer: Under common law, Vernon has a USA domicile of origin and is not UK domiciled. However, he is deemed UK domiciled for income tax/CGT purposes in 2024/25 under rule 1 (long-term resident) because he has been a UK resident for 15 of the 20 tax years prior to 2024/25 and is a UK tax resident in 2024/25.
  • Vernon cannot elect to use the remittance basis for the foreign dividend because he is deemed UK domiciled for income tax/CGT purposes in 2024/25. The full amount is subject to UK income tax in 2024/25.

Part Two Questions

Question 1

Determine whether the following individuals are/are not UK tax resident in 2024/25 giving reasons for your answer:

  • (a) Janet: Spends 10 days in the UK in 2024/25. She was previously UK tax resident in 2021/22.
    • Janet is not UK tax resident in 2024/25 as she meets the first automatic overseas test, in that she was UK tax resident in one or more of the previous three tax years and spent fewer than 16 days in the UK in 2024/25.
  • (b) Paul: Comes to the UK in July 2024 and stays until March 2025, renting an apartment in Belfast. Paul was not UK tax resident in any previous tax year.
    • Paul is UK tax resident in 2024/25 as meets the first automatic UK test in that he was present in the UK for at least 183 days in 2024/25.
  • (c) Victor: In 2024/25, Victor works full time in Paris. He spends his summer holidays (three weeks in July 2024) in the UK, working five hours per day. He was previously UK tax resident in 2023/24.
    • Victor is not UK tax resident in 2024/25 as he meets the third automatic overseas test, in that he works full time overseas and visited the UK for fewer than 91 days, with the number of days in 2024/25 on which he worked for more than three hours in the UK being less than 31.
  • (d) Christine: Comes to the UK in mid-November 2024. She buys a house in the UK on 1 February 2025, which she lives in as her home. This house is her only home and she stays in the UK for a number of years. Christine has never had an overseas home and was not UK tax resident in any previous tax year.
    • Christine is UK tax resident in 2024/25 as she does not meet any of the automatic overseas tests but she meets the second automatic UK test. Christine had a home in the UK for more than 90 consecutive days (of which at least 30 days fall in the tax year), and spent more than 30 days in the home in 2024/25 and had no home overseas.
  • (e) Terry: Spends 35 days in the UK in 2024/25. He was previously UK tax resident in 2020/21.
    • Terry is not UK tax resident in 2024/25 as he meets the second automatic overseas test, in that he was non-UK tax resident in all of the previous three tax years and visited the UK for fewer than 46 days in 2024/25.

Question 2

  • Margaret comes to the UK on 22 November 2024 and begins full-time employment (eight hours per day) from 1 December 2024 to 30 November 2025. During that time she had 25 days holiday. Determine whether Margaret is UK tax resident in 2024/25 giving reasons for your answer.
  • Answer: Margaret is UK tax resident in 2024/25 as she meets the third automatic UK test, the working full time in the UK test.
    • She carries out full-time work in the UK for a period of 365 days with no significant break (i.e. at least 31 days) and all or part of that 365-day period falls within the tax year.
    • More than 75% of the total number of days in the 365-day period when more than three hours per day are worked are in the UK.
    • At least one day in the tax year is a day on which she works more than three hours in the UK.

Question 3

  • Ned lost his full-time job in the UK in March 2024. He remained unemployed in the UK and moved to Italy on 1 September 2024 and started work full time the next day. He was UK tax resident in all previous tax years prior to 2024/25. He purchased an apartment in Italy shortly after he arrived, which he lives in as his home. Ned did not return to the UK during the remainder of 2024/25 and returned to the UK permanently on 10 April 2025, when he started a new full-time job. Ned does not have a home in the UK. Is Ned UK tax resident in 2024/25?
  • Ned has 148 UK days in 24/25
    • Automatic UK test 1 à < 183 UK days à not met
    • Automatic overseas test 1 -3à >90 days in the UK à not met
    • Automatic UK test 2 à no UK home in 24/25à not met
    • Automatic UK test 3 à no UK work in 24/25 à not met
  • Answer: Ned is UK tax resident in 2024/25 by meeting the sufficient ties test
    • he spent between 121 and 182 days in the UK; and
    • he has one UK tie, the 90-day tie, having spent more than 90 days in the UK in one or both of the previous two tax years.

Question 4

  • Maria was unexpectedly born in France when her British father and mother were on holidays. Her parents were married at the time of her birth. Maria and her parents have always lived in the UK. What is Maria’s common law domicile?
  • Answer: Maria’s domicile of origin is that of her father, the UK, as her parents were married when she was born. Thus, she takes on her father’s domicile

Question 5

  • In 2024/25, Maria in question 4, who is now 25 years old, emigrates to China permanently and severs all ties with France. What is Maria’s common law domicile as a result?
  • Answer: Maria’s domicile of origin in the UK will be displaced with a domicile of choice in China if she can show on a balance of probabilities that she has left the UK to set up a settled presence in China.
  • Evidence of having acquired a domicile of choice in China would have to be produced; otherwise, she would continue to retain her domicile of origin in the UK.

Question 6

  • Sofia was born in Italy and has an Italian domicile of origin but works in the UK and is UK tax resident. She has lived and worked in the UK since July 2019 but has always intended to return to Italy in the future. What is Sofia’s domicile position in 2024/25?
  • Answer: Under her common law domicile, Sofia has an Italian domicile of origin and is not UK domiciled.
  • Sofia is also not deemed UK domiciled for income tax/CGT, as she has not been a UK tax resident for 15 of the 20 years prior to 2024/25 under rule 1, nor does she meet the conditions for deemed UK domicile under rule 2.

Question 7

  • Shane was born in the UK and had a UK domicile of origin. In 2017, he emigrated to the USA to marry his long-term girlfriend, acquiring a USA domicile of choice. Shane’s employer seconded him to the UK on 6 April 2024. As a result, Shane is a UK tax resident in 2024/25. What is Shane’s domicile position for tax purposes in 2024/25?
  • Answer: Under his common law domicile, Shane has a USA domicile of choice and is not UK domiciled.
  • However, as he was born in the UK, had a UK domicile of origin, and is a UK tax resident in 2024/25, he is deemed UK domiciled for income tax/CGT purposes under rule 2 in 2024/25.

Question 8

  • Sofia in question 7 earned £10,000 of bank interest in Italy in 2024/25, which she retains in her Italian bank account. She also earned £5,000 of UK bank interest. Consider the UK Income Tax implications of these transactions. You should assume that Sofia is not automatically entitled to the remittance basis and is an additional rate taxpayer.
    • Italian bank interest: As Sofia is not UK domiciled nor deemed UK domiciled for income tax/CGT purposes, Sofia can elect to use the remittance basis for this foreign income. As she did not remit any of the interest to the UK in 2024/25, none of this will be subject to UK income tax in 2024/25.
    • UK bank interest: Although Sofia is not UK domiciled nor deemed UK domiciled, the remittance basis is not available for this income as it is UK source income. The interest will be subject to UK income tax in 2024/25. As an additional rate taxpayer, Sofia is not entitled to a personal savings allowance.

Question 9

  • If Shane receives dividends from an Australian company on 30 January 2025, and he does not remit any of the income to the UK, can Shane elect to use the remittance basis? You should assume that he is not automatically entitled to it.
  • Answer: As Shane is deemed UK domiciled for income tax/CGT purposes, he cannot elect to use the remittance basis for this foreign income, even if he does not remit any of it to the UK. The full amount will be subject to UK income tax in 2024/25.

Deemed Domicile

  • Long-Term Resident: The individual has been a resident in the UK for at least 15 of the 20 tax years immediately before the relevant tax year.
    • The individual is not deemed UK domiciled under this rule if: they are not UK resident for the relevant tax year; and there is no tax year beginning after 5 April 2017 and preceding the relevant tax year in which the individual was UK resident.
  • Formerly Domiciled Resident: The individual:
    • was born in the UK,
    • had a UK domicile of origin, and
    • was resident in the UK in the relevant tax year.
  • Key Implications for IT/CGT: If UK resident but not UK domiciled or UK deemed domiciled can access the remittance basis of taxation.
  • Common law domicile includes
    • Domicile of origin
    • Domicile of choice
    • Domicile of dependence
  • Deemed domicile (IT/CGT)
    • Long term-resident
    • Formerly domiciled resident
  • Overseas income/gains taxed when remitted to the UK. Loss of personal allowance and annual exemption.

Pensions Example

  • Matthew has an annual income of £350,000 (after pension contributions).
  • He paid £1,500 per month in 2024/25 into an occupational pension scheme. His employer contributed £500 per month.
  • Matthew has no unused annual allowance from previous tax years.
  • Calculate the annual allowance charge, if any, that Matthew will be required to pay in 2024/25.
    • In 2024/25, total contributions to Matthew’s pension scheme were £24,000, being (£1,500 (employee) + £500 (employer) = £2,000 x 12 months).
    • Matthew’s annual allowance must be tapered as his adjusted income exceeds £260,000.
      • Adjusted income = Net income + employee pension contributions + employer contributions = 350,000 + 18,000 + 6,000 = 374,000
      • Tapered annual allowance: (\&pound374,000 - \&pound260,000) = \&pound114,000
      • \&pound114,000/2 = \&pound57,000
      • \&pound60,000 - \&pound57,000 = \&pound3,000
      • Minimum → £10,000 tapered annual allowance.
    • Matthew’s contributions of £24,000 are in excess of his annual allowance of £10,000. Matthew is therefore subject to an annual allowance charge for 2024/25 on the £14,000 excess which is taxed at his marginal rate of income tax of 45% resulting in an annual allowance charge of £6,300.