Residence or domicile status determines whether or not you pay UK tax - income tax, capital gains tax or inheritance tax.
So what are the rules and how might they affect whether or not you are liable to pay UK tax?
Under the law, anyone in the UK who has residence status pays tax. To be regarded as resident for tax purposes, you must be present within the UK for at least 183 days in any given tax year.
However, although you might not be UK resident with regard to a particular tax year, you will still be considered 'ordinarily resident' if you normally live in the UK.
So whether resident, or normally resident, you will pay income tax or capital gains tax on earned and unearned income. It doesn't matter if that income has been acquired in the UK or abroad. And you'll still be liable for tax even if it is not actually brought into the country. There's no escape!
Domicile status, on the other hand, is important mainly with regard to inheritance tax.
Everyone has a domicile of origin when they are born, which is the domicile of the father (or mother if the parents are not married).
If you decide to move to a different country, and to put down roots, you can change your domicile.
Domicile, therefore, is the country within which you have roots, even although you may choose to live in another country for a while.
So, if you are UK domiciled, you pay inheritance tax on assets anywhere in the world.
If you are not UK domiciled, then inheritance tax is only liable on assets held within the UK.
However, if you have lived in the UK for 17 of the previous 20 years, but are not UK domiciled, you will still be liable for inheritance tax.
