Education

What is non-dom?

Non-dome status is a controversial subject that usually considers taxes paid by wealthy foreigners living and often working in the UK, but can also refer to British citizens living abroad. Despite the controversy, it is completely legal under English law.

It’s not cheap to get a non-dome status, and it’s only for a carefully selected group of very wealthy individuals, as it relies on plaintiffs to get a fair amount of money from foreign sources.

But what exactly is a non-dome? How can I be one? And why would everyone choose to have non-DOM status?

We will look at these questions as we explore one of the most controversial tax loopholes in the UK tax system.

What is a non-dome?

“Non-domicile” is an abbreviation for “non-domicile individual”. The term refers to a resident of the United Kingdom whose official permanent home (their place of residence) is outside the United Kingdom.

When it comes to taxation, people with non-domicile tax status only have to pay taxes on the money they earn in the UK. You don’t have to pay taxes on money you earn outside the UK unless you deposit it in a UK bank account.

Now let’s dive in and see why everyone chooses to claim non-DOM status.

Why do people claim non-DOM status?

Many wealthy individuals have multiple sources of income from different parts of the world. For these individuals, non-domicile status provides an opportunity to save a lot of money on taxes if they formally reside in another country with significantly lower taxes.

You have a full-time job in the UK and you own a house that lives here all year long, but you were born in the United States, have American citizenship, and claim non-dome status. Let’s say you are. We also invest our stock in an American company that generates more income than a full-time job in the UK, and that income is stored in an American bank account.

In this scenario, you would pay the full income tax on your UK employment income, but you would pay the US capital gains tax rate each time you sell your shares.

This is true even if you didn’t have a job to make money in the UK. And for some people, claiming non-dome status means that they can avoid paying taxes altogether.

Therefore, one of the main reasons someone chooses to claim non-DOM status is to save a lot of money on tax invoices.

However, some British people claim non-dome status because they can claim to be British if they actually live in another country.

How to claim non-dom status

In the UK, there are two ways to claim non-DOM status. You can be:

  • Origin. This is for people who were born in another country or whose father came from another country. It’s not important for someone whose mother is from another country.
  • The place of residence of choice. This is for people over the age of 16 who have chosen to leave the UK and live in another country. In that case, you must be willing to live in that country and stay there indefinitely.

but, The rules for non-DOM status changed in 2017.. Under the new rules, you cannot claim non-DOM status if you have lived in the UK for 15 of the last 20 years, or if any of the following conditions apply:

  • You were born in the UK
  • Your hometown was in the UK
  • You have lived in the UK for at least a year starting in 2017.

Of course you can still Pay UK taxes on foreign income Not everyone who is eligible to claim non-dom status does so.

Do non-domes have to pay for their position?

Being non-dome can save millions of taxes on wealthy people, but there are still fees they have to pay to the UK government for their status. The annual charges for non-domes are as follows:

  • £ 30,000 if you have lived in the UK for at least 7 of the last 9 tax years.
  • £ 60,000 if you have lived in the UK for at least 12 of the last 14 tax years.
  • If you have a foreign income of less than £ 2,000 a year and you don’t bring that money to the UK, you don’t have to pay anything.

As we have already seen, non-domes still have to pay full tax on UK income.

Why are non-domes controversial?

Many believe that people living in the UK and making a lot of money definitely use the services provided by taxes (roads, street lights, hospitals, emergencies) and should pay taxes here. Because non-dome status is a very controversial subject, services etc.

Also, in a more general sense, it is seen as a further means by which wealthy people can avoid the taxes that non-wealthy people have to insist on.

The non-dome subject was recently in the limelight when it was revealed Wife of the Minister of Finance Claiming non-dome status, she avoided paying millions of pounds of tax on her income from her father’s company in India.

How many non-domes are there in the UK?

The latest figures from the UK tax authorities on non-domes date back to the end of the 2020 tax year, when there were 75,700 people claiming non-dome status in the UK. This is a slight decrease from the previous year when the UK total was 78,600.

Over 40% of UK income earners in the £ 5 to £ 10 million income group have non-DOM status..

Most non-domes in the UK are from USA, India, Australia, South Africa, Canada, and Western European countries.. However, since 2001, the number of non-domes from China and Russia has increased.

overview

A non-dome is a resident of the UK who considers his home to be in another country and receives foreign income that does not pay UK taxes. They still have to pay the UK government to get their position, but non-dome remains a very controversial subject in the UK.

What is non-dom?

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