Where do you call home? Wills and non-dom status

 14 December 2023
Where do you call home? Wills and non-dom status

You may have heard a lot about “non-dom” tax payers (or non-tax payers) in the news. News stories about non-dom status are usually associated with some form of income tax planning, but your domicile (“dom”) also has major implications for who can inherit in your will and Inheritance Tax too.

It's a very complex subject so this is just a basic introduction to domicile under English and Welsh private international law. (So not applicable in Scotland and Northern Ireland.)

Your domicile of origin

If you were born in the UK and haven't changed your domicile, you may think you can relax. However, it isn't where you were born that decides your domicile, it is where your parents were living at the time of your birth (their domicile).

  • Your domicile will be that of your father at the time you were born, if your parents were married.
  • If your parents were not married, your domicile will be that of your mother. The same applies if your parents were separated and you lived with your mother.

Non-dom status could therefore affect people whose parents worked abroad when they were young, or who immigrated to the UK after their children were born. However, if your parent / guardian / person with legal responsibility for you when you are aged under 16 changes their domicile, yours changes too!

A domicile of choice

You can choose what domicile you want if you have “An intention to remain in a place permanently or indefinitely.” However, just saying you’d like to be domiciled without living in the UK for the 15 years or more required (see below) isn't always sufficient. You may need to make it “official” with the assistance of a solicitor.

Deemed domicile

This is the one that hits the headlines, as it's all about tax. It's also complex! Basically:

“In the UK there is the concept of deemed domicile for inheritance tax purposes by which a person who does not have a domicile in England & Wales under the general law may nonetheless be deemed domiciled in the UK for inheritance tax purposes.”

Domicile and residency

There is a difference between being a resident (residency) and having domicile. As the Coop Legal Services explains:

“Residence is where someone lives, whereas domicile is where someone lives and/or intends to remain. So if someone spends a lot of time at their property in Spain but still considers England to be their main home, then England will be their domicile.”

Domicile is also separate to any other requirements for people to remain in the UK, such as visas, work permits and indefinite leave to remain. Again, you should consult a specialist lawyer regarding any UK status issues.

Why is domicile important?

In a nutshell, different countries have different rules on inheritance. In the UK, you can choose who gets what, but that isn't the case elsewhere.

In general, your assets are divided into two categories: movable and immovable. Immovable indicates assets you can't take out of your country of domicile. So, if you own a house abroad, (property is deemed an immovable asset for obvious reasons), strict inheritance laws in that country may apply to that property if you are domiciled there. For example, you may not be able to leave your property to anyone who is not your spouse, as it has to go to your children.

IHT and domicile

Where you are domiciled usually affects how much Inheritance Tax you will pay. In general:

  • If you are domiciled in the UK when you die, your estate will pay Inheritance Tax on your assets worldwide such as property, bank accounts and investments.
  • If you are domiciled outside of the UK when you die, then UK Inheritance Tax will only be due on your UK assets.

Confused? Always consult a tax advisor or your accountant to check your IHT liabilities.

Choosing UK law

If you have assets in the EU, you can add a clause into your will asking that your will be governed by UK law as follows:

“I hereby declare that the dispositions of property contained in this will shall be governed by and take effect according to the law of England and Wales”.

How to change your domicile of origin

It’s all about intent and choice:

“If you were originally born in the UK or if you remain in the UK for more than 15 years, then you will be deemed to be domiciled in the UK … Generally, you must break your ties with the country of your domicile of origin. You do not necessarily have to become a UK citizen or passport holder but these factors will be taken into account … If you have a non-UK domicile of origin and you later acquire UK citizenship, then HMRC may take this as an indicator that you have acquired a UK domicile of choice.”

The Gov website statement is a little more straightforward:

“From 6 April 2017 you're UK domiciled if you're resident in the UK for 15 of the 20 years before the relevant year.”

Will writing and domicile

As you might have gathered, it's best to consult an expert will writer and a solicitor if you have concerns over your domicile status. Equally, if you want your will to be drawn up under the laws of your domicile of origin and that is not the UK, you should consult a solicitor who specialises in foreign law and/or a lawyer in that country.

Need help writing a new Will?

Contact us and talk to Paul Hammond, our resident will-writing specialist and a member of the Society of Will Writers

DISCLAIMER: The information and opinions in this article are for informational purposes only. They do not constitute any form of financial or legal advice and should not be relied on or treated as a substitute for specific advice relevant to your individual circumstances. In places we may refer to external websites for further information, but we are not responsible for the content of any external Internet sites.

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