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New Non domicile tax rules 2025 1 год назад

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New Non domicile tax rules 2025
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New Non domicile tax rules 2025

On 27 November 2024 Tim Humphries and Tetyana Charlotte at ‪@RPGCCAdvisers‬ presented a webinar on the new UK Non-Domicile tax rules. The UK tax landscape is undergoing significant changes, particularly concerning the non-domicile and remittance basis regime. These changes are set to take effect from April 6, 2025, and will impact how residency and domicile status affect tax liabilities. Current Residency and Domicile Framework Under the current statutory residency tests, individuals are assessed based on several criteria to determine their residency status. These include the number of days spent in the UK, work commitments, and the presence of a home in the UK. Generally, spending more than 183 days in the UK results in being classified as a UK resident. Residency tests are categorized into overseas tests, UK residence tests, and sufficient ties tests. The overseas tests consider factors such as full-time work abroad and the number of days spent in the UK over the past three years. If these tests are not met, UK residence tests are applied, focusing on the duration of stay and work in the UK. Domicile is another critical concept, with domicile of origin being inherited from one's parents. A domicile of choice can be established by choosing to live indefinitely in a specific jurisdiction. However, proving a change in domicile from the UK is challenging. Deemed Domicile and Remittance Basis Individuals who have been UK residents for 15 out of the last 20 years are deemed domiciled in the UK. This status subjects them to inheritance tax on worldwide assets and limits the use of the remittance basis of taxation. The remittance basis allows non-domiciled individuals to pay tax only on UK-sourced income and overseas income brought into the UK. The remittance basis remains available until April 5, 2025. After this date, the system will transition to a residency-based approach, allowing those who have not been UK tax residents in the previous 10 years to claim the remittance basis for the first four years of residency. Upcoming Changes from April 2025 From April 6, 2025, the non-remittance basis system will be abolished, and the remittance basis will no longer depend on domicile status. Instead, it will be based on residency. Individuals who have not been UK tax residents in the previous 10 years can claim the remittance basis for the first four consecutive years of residency. The new system is more generous, allowing the remittance of income arising in those four years without tax liability, encouraging investment in the UK. Employment income is taxed based on where duties are performed, not where payment is made. Inheritance Tax Implications Inheritance tax is charged on UK-sited assets and worldwide assets if the individual is domiciled or deemed domiciled in the UK. The new rules will subject individuals who have been UK residents for 10 out of the last 20 years to inheritance tax on worldwide assets from April 6, 2025. This period is shorter than the current deemed domicile period of 15 out of 20 years. Planning Considerations Individuals should consider the temporary repatriation facility, which allows for the remittance of funds to the UK at reduced tax rates for a limited period. This facility provides an opportunity to bring money onshore without incurring full income or capital gains tax rates. Additionally, the ability to rebase assets to their value as of April 5, 2017, offers potential tax advantages for those who meet specific criteria. This change allows for a more favorable calculation of capital gains tax on overseas assets. Conclusion The upcoming changes to the UK non-domicile and remittance basis regime present both challenges and opportunities. Understanding the implications of these changes is crucial for effective tax planning and compliance. Individuals should assess their residency and domicile status and consider strategic actions to optimize their tax position under the new rules.

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