What’s my domicile?

With U.K. Inheritance Tax receipts hitting a whopping £4.8bn in the 2016/17 tax year, Domicile is a hot topic for British Expats all over the world.

Domi-what I hear you say…



1.The country that a person treats as their permanent home.

According to the Oxford English Dictionary, DOMICILE is defined as “the country that a person treats as their permanent home, or lives in and has a substantial connection with”. 

But what does that mean, in plain English? And why do I need to know how Domicile relates to me?

Well, research has recently shown that British expats do not understand the basic differences between residency, tax-residency and where they’re domiciled, which can leave their loved ones facing huge tax bills in the event of unforeseen or tragic events.

When you are born, you are automatically assigned the same domicile as your father. This is known as “domicile of origin”.  Unless there are exceptional circumstances, this won’t change, even if you leave the country in which you are domiciled to live overseas in another country for a considerable time. One can try to acquire a new domicile, known as “domicile of choice”, but it is extremely difficult to do so, and the burden falls on the individual to prove their new domicile, before Her Majesty’s Revenue & Customs (H.M.R.C.) make the final decision when you move on to pastures new.

In order to no longer be U.K domiciled, H.M.R.C. states that all links with the U.K. must be cut and one must have no intention of returning to the U.K.

In the last 10 years, IHT receipts have grown by 38%, from £3.5bn in 06/07 to £4.8bn in 16/17.

However, the research has shown that almost 75% of U.K. expats around the world still have assets (such as property) in the U.K. In addition to this, 4 out of 5 people surveyed said they may return to the U.K. in the future.  In plain English, these people are still domiciled in the U.K.

The reality is that many people will die believing that they are domiciled in the country that they have moved to, only for it to be discovered when they pass on that, according to H.M.R.C., they have never “left home”.

So again, how does this affect me?

Well, as most British expats are still U.K. domiciled, when they die H.M.R.C. will apply Inheritance Tax, at a rate of 40% (above the NRB threshold) to their WORLDWIDE ASSETS, not just their assets that are based in the U.K., which is another common misconception.

When a U.K. domiciled person dies, and before probate can be granted, Inheritance Tax must be paid by the beneficiaries (which could be a considerable amount of money) before the inheritance can be taken.

As for residency, as far as U.K. tax is concerned, this is actually more clear cut; if you are present in the U.K. for more than 183 days in any year, then you will be liable for U.K. tax. No ifs or buts.

So whether you like it or not, if you were born in the U.K., then you can pretty much take it for granted that you will always be saddled with your U.K. domiciliary. Misunderstandings, complacency or ignorance are no defence against U.K. tax rules.

But it isn’t all doom and gloom; there are ways to mitigate one’s affairs and that is where Northern Cross Wealth Management can help.

Sound financial planning and ensuring your financial affairs are in order sooner rather than later is of vital importance, and a meeting with a qualified advisor is a good way to start.

Leave nothing to chance, ensure your finances are future-proofed.

Contact Northern Cross Wealth Management today.

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