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Definitions you Definitely Need to Know


‘Domicile’, ’Deemed Domicile’ and ‘Non-Domicile’

Which are you? And why does it matter?



Navigating the maze of inheritance tax, wills, and estate planning in the UK, or if you’re a Brit living or working abroad, can seem daunting. Yet, understanding these three keys can offer you the compass to chart a path through it. (And of course, I’m here to guide and help you on this journey. 😊)


‘Domicile’ is a legal concept that pinpoints your permanent home or enduring residence, independent of nationality or current residence. Inherited at birth, changing domicile can be as challenging as altering your fingerprints. This concept is pivotal as it impacts your liability to inheritance tax.


‘Deemed Domicile’ is a unique UK concept. It refers to those who, despite being domiciled elsewhere initially, are treated as domiciled in the UK for inheritance tax after residing there for 15 of the past 20 tax years. This means the UK has a claim on your worldwide assets for inheritance tax, a fact that demands careful estate planning.


‘Non-Domicile’, in contrast, is a blessing for those who are not domiciled in the UK for tax purposes. They enjoy certain tax advantages, primarily being liable for UK inheritance tax only on their UK-based assets, while their worldwide assets are safe unless remitted to the UK. They can leverage the UK tax system's "remittance basis" which taxes only the income and capital gains brought into the UK.


The divergence in these concepts carves out significant implications for UK citizens and expats.


Domiciled UK citizens face a worldwide inheritance tax liability, necessitating meticulous estate planning and tax-efficient strategies. Deemed domiciled individuals face a similar challenge, but with a wider scope and an urgent need to shield their worldwide assets from hefty tax liabilities.


Non-domiciled individuals, however, have a wider playing field. They can organise their assets and finances to trim their inheritance tax liabilities. By taking advantage of the remittance basis and keeping their foreign income and capital gains outside the UK, they can significantly reduce their tax obligations.


All these considerations underscore the need for professional advice. Expert advisors and experienced estate planners like me can guide you through this labyrinth. I can help you utilise tools such as trusts, lifetime gifting, and tax-efficient investments for optimal inheritance tax planning.


You might well need comprehensive estate plans that consider inheritance tax on your worldwide assets. This may involve structuring your estate through wills, trusts, and gifting strategies. With the right advice, you can leverage exemptions, reliefs, and allowances to minimise tax liabilities and align asset distribution with your wishes.


Deemed domiciled individuals should be particularly vigilant, considering the implications of their worldwide assets being subject to inheritance tax. Protecting their wealth could involve establishing trusts, taking advantage of gifting exemptions, and exploiting reliefs and exemptions.


Non-domiciled individuals can enjoy the remittance basis to minimise their tax exposure. They can avoid or reduce tax liabilities by smart planning, keeping foreign income and gains outside the UK, and even establishing offshore trusts or holding structures for effective tax planning and wealth preservation.


However, the UK tax rules are a moving target, complex and subject to change. So, staying updated with the latest legislation and seeking professional advice is essential to ensure your estate plans are compliant with the current tax regulations.


In short, understanding domicile, deemed domicile, and non-domicile is vital for UK citizens and expats considering inheritance tax and estate planning. With careful planning, expert advice, and a keen eye on the ever-changing tax landscape, you can protect your assets, minimise tax liabilities, and ensure your wishes are met.


For personalised advice on these matters, consider contacting me, an expert in inheritance tax planning and estate management. For £150, you can get a comprehensive personalised report, including a 10-minute one-to-one consultation. This report can provide valuable insights and guidance tailored to your needs.


Contact me to book your consultation and receive that detailed report to optimise your inheritance tax planning and estate management strategies. My expertise can empower you to make informed decisions that align with your financial goals.


Protecting your legacy for future generations is a priority. Don't miss out on the chance to benefit from expert advice, ensure your assets are safeguarded, and streamline your financial future. Reach out to me, ‘Sally - The Inheritance Guru’ on 07831 379562 or by emailing help@sallyherdman.com.

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