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The 2017 deemed domicile reforms brought significant changes for non-domiciled taxpayers in the UK. These reforms increased the scope of UK taxation on income and capital gains, but they have not deterred many non-doms from staying in the UK.
What Changed in 2017?
The deemed domicile rules were introduced for individuals who:
- Were born in the UK with a UK domicile of origin and became UK resident in the 2017/18 tax year or later (Condition A).
- Had been a UK resident for at least 15 of the 20 tax years immediately before a relevant tax year (Condition B).
These changes subjected more individuals to UK taxation, including global income and capital gains, and affected their inheritance tax position.
Increased Tax Contributions
According to HMRC, deemed domiciled taxpayers now contribute over £3 billion annually in taxes and National Insurance. Those under Condition B have seen their tax bills increase significantly since becoming deemed domiciled, with around £1 billion in additional revenue collected in both the 2018/19 and 2019/20 tax years.
Non-Doms Staying in the UK
Despite higher tax liabilities, many non-doms have chosen to remain in the UK. Between 9,800 and 15,600 individuals became deemed domiciled and stayed, with their numbers rising yearly since the policy change. Additionally, around 17,000 new non-doms continue to come to the UK annually, claiming the remittance basis of taxation.
Formerly UK-domiciled taxpayers affected by Condition A were 27% more likely to stay in the UK after the reforms. However, some mobility trends emerged. Non-domiciled taxpayers on the remittance basis were 4-5% more likely to leave, while deemed domiciled individuals under Condition B were 10-12% more likely to leave in the year ending 2018 compared to 2015.
Other Factors Influencing Mobility
While tax policy plays a role in migration decisions, it is not the primary factor. Family ties, age, job opportunities, and cultural and social connections often weigh more heavily; understanding these factors can help you make informed decisions.
Frequently asked questions (FAQs) 2017 Deemed Domicile Reforms
1. What does it mean to be deemed domiciled in the UK?
Deemed domicile means that you are considered a UK resident for tax purposes, even if you are not officially domiciled in the UK. This status applies if you meet certain conditions, such as being born in the UK with a UK domicile of origin or residing in the UK for 15 of the last 20 tax years. Once deemed domiciled, your global income and capital gains are subject to UK tax rules.
2. How have the 2017 reforms impacted non-domiciled taxpayers?
The reforms have increased the tax liabilities of non-doms by bringing more individuals under UK tax rules for global income and gains. While some have chosen to leave the UK, many have stayed despite the changes. Those affected by Condition B have contributed significantly more in taxes, helping generate additional revenue for the government.
3. Why do non-doms stay in the UK despite higher taxes?
Taxes are one factor, but people often decide to stay in a country because of family, job opportunities, and social connections. The UK’s strong economy, good quality of life, and access to global markets also help keep non-domiciled individuals.
4. What steps can non-doms take to manage their tax liabilities?
Non-doms can manage their tax position by restructuring assets, using exemptions, and planning for inheritance tax. Consulting an expert helps ensure compliance with UK tax laws while minimizing liabilities, especially after the 2017 reforms.