How non-domiciled status affects family members of the status holder

International law firm Antwort Law specializes in comprehensive advice in the field of tax planning and regulation in the UK. One of the most interesting and complex issues in this area is non-domiciled status and its impact on family members of the status holder. In this article, we will look at various aspects and examples to help you better understand how being a non-homeowner can affect your family.

Non-domiciled status is a special tax regime available in the UK for persons who live in the country but are not permanent residents (domiciled). The status allows you to avoid paying taxes on foreign income received outside the UK and not transferred into it.

However, it is important to understand that non-dom status is not a visa or residence permit, but a tax status that is determined by a number of factors such as place of residence, future intentions and origin.

Impact on spouses

Example 1: One of the spouses is domiciled, the other is a resident. If one of the spouses has domicile status and the other is simply a resident, then their tax obligations will differ. The domicile will be subject to tax on worldwide income, while the non-dom will be able to take advantage of tax advantages and optimize the taxation of foreign income.

An example is the situation with the wife of British Prime Minister Rishi Sunak, Akshata Murthy, who, as an Indian citizen, has non-dom status, while Rishi Sunak himself is domiciled and resident in the UK, which creates specific tax conditions for both spouses. With a stake of around 0.93% in Infosys, a company founded by her father, Naryana Murthy, she received around £11.6 million in dividends in 2021. Non-dom status is estimated to have saved her approximately £4.4 million in tax, which she would have paid at the 38.1% rate for ordinary UK residents.

Example 2: One of the spouses is non-domestic, the other is non-resident

If one spouse has non-dom status and the other is a non-resident, an interesting situation arises. A non-resident is essentially a resident in another jurisdiction where they will deal with taxes, which can create complex tax structures and require special advice to determine the optimal tax liability in different countries.

Impact on children

The first thing to determine is whether children must file tax returns, because children are not always required to do so. If children are dependent on non-domestic parents, they may be exempt from some tax liabilities.

Previously, there was a charge known as the Remittance Basis Charge, which non-doms had to pay after a certain period of residence in the UK. However, for children, an article was provided that exempted them from this payment if several conditions were met (The Exemption for Minors). At the moment, the situation with the exemption of children from payment may vary.

Dual residence

In cases where dual residency arises, the situation becomes even more confusing. For example, if a person is a resident of two different countries, it is necessary to determine where and what taxes must be paid. In such cases, we step in as a consulting legal company and analyze each case individually, determining optimal tax obligations and strategies to minimize the tax burden.

Thus, non-dom status can significantly affect the tax obligations of family members, but each situation is unique and it is important to consider all aspects and consult with professionals to avoid troubles and optimize the tax burden. Antwort Law is ready to help you navigate the complex issues surrounding non-dom status and ensure your business and finances remain stable in the changing tax landscape. Contact us for professional help and advice.

Lidia Ivanova

International lawyer
Antwort Law