Introduction

UK resident, non-UK domiciled individuals may be eligible to pay tax on the remittance basis of taxation. Where this applies, most foreign income and gains are only subject to UK taxation if they are remitted to (brought into) the UK. In some cases the remittance basis applies automatically. In other cases, it must be claimed if it is to apply. Individuals who have been UK resident for a specified number of tax years must pay a remittance basis charge if they claim the remittance basis.  

Non-UK domiciled individuals are only within the scope of inheritance tax on UK situated assets, and on certain foreign assets that derive value from UK residential property. 

Individuals are deemed to be UK domiciled in some circumstances. This results in the remittance basis is generally being unavailable and the individual’s worldwide assets being within the scope of inheritance tax. 

This note provides a high-level overview of the tax position of UK resident non-UK domiciliaries.  

The remittance basis 

Where the remittance basis applies, UK source income and gains are taxable as they arise, but most types of foreign income and gains are only chargeable if they are remitted to the UK, whether this is in the tax year they arise or a later tax year. 

If the remittance basis does not apply the arising basis applies instead, under which worldwide income and gains are taxable. 

Claiming the remittance basis 

Deciding whether or not to pay tax on the remittance basis is an annual decision. There is no minimum period over which the remittance basis must apply. 

The remittance basis applies automatically if, in a given tax year, a UK resident, a legally non-UK domiciled individual: 

• Has less than £2,000 unremitted foreign income and gains in the tax year, and/or;

• i) Has not made any taxable remittances to the UK; ii) has no UK gains and UK source income of at most £100 taxed investment income, iii) is not deemed UK domiciled and; iv) either, was UK resident in 6 or fewer of the preceding 9 tax years, or is under 18 throughout the tax year. 

If the remittance basis does not apply automatically, it can be claimed by UK resident non-UK domiciled individuals, provided the individual is not deemed UK domiciled. An individual is deemed UK domiciled if he or she:  

• Was UK resident in at least 15 of the previous 20 tax years (‘long-term UK residence’), and/or; 

• Is UK resident, was born in the UK and has a UK domicile of origin (‘formerly domiciled residents’). 

Effect of claiming the remittance basis 

As noted, claiming the remittance basis means that most foreign income and gains are only chargeable if and when they are remitted to the UK. The points below should also be borne in mind. 

Personal allowances

Personal allowances are lost if the remittance basis is claimed. These include the capital gains tax annual exemption and income tax personal allowance, to the extent it is available. The personal allowance is tapered for individuals with income in excess of £100,000, and is nil for individuals with income of at least £125,140 (this threshold is frozen until 5 April 2028). 

Remitted dividends and interest

Depending on the individual’s income level, dividends taxable on the arising basis are taxable at rates of 0%, 8.75%, 33.75% or 39.35% and interest that is taxable on the arising basis can potentially be taxed at 0% up to a set limit. Dividends and interest taxable on remittance are taxable at rates of 20%, 40% or 45% (19%, 20%, 21%, 42% or 47% for Scottish residents in 2023/24). The different tax rates may mean that it would be preferable to opt out of or not claim the remittance basis.

Foreign capital losses

Remittance basis claimants can only claim relief for foreign capital losses if an election is made, though making an election results in all losses being relieved in a set order which may not be preferred. If no election is made foreign capital losses cannot be claimed, even in tax years in which the arising basis applies, until and unless the individual becomes legally or deemed UK domiciled.  

The amount of the Remittance Basis Charge (RBC)

The RBC is payable by individuals who claim the remittance basis and meet the following resident requirements:  

• If the individual was UK resident in 7 of the previous 9 tax years, the RBC is £30,000. 

• If the individual was UK resident in 12 of the previous 14 tax years, the RBC is £60,000. 

Deciding whether or not to claim the remittance basis 

A number of factors should be taken into account when deciding whether or not to claim the remittance basis, including: 

• The total tax liability for the year if worldwide income is taxed on the arising basis, compared to (broadly) UK source income, remitted foreign income and gains and, where relevant, the RBC if the remittance basis applies. 

• The likelihood that funds will be remitted and therefore taxable in any event on remittance. 

• Any pertinent overseas tax considerations. 

• Compliance, taking into account what must be disclosed on tax returns depending on whether the arising or remittance basis is claimed, and bearing in mind that HMRC could request additional information in the event of an enquiry. 

Overseas companies and trusts

In some cases, individuals may have interests in foreign companies or have established or be able to benefit from trusts. This can result in income tax and/or capital gains tax liabilities, potentially even if no funds are received from the trust or company. 

UK resident individuals are often chargeable on income and gains made by trusts which they have established. A specific regime applies to trusts settled by non-UK domiciled individuals who are not formerly domiciled residents, whereby taxation may be restricted based on the extent to which the individual benefits from the trust provided certain conditions are met. This regime can continue to apply after an individual becomes deemed UK domiciled due to long-term UK residence, provided no further funds are settled on trust.