Residence and Domicile (UK Tax Guide)

If you are thinking about (1) Coming to the UK to work as professional Contractor, OR (2) Planning to work as a professional Contractor abroad, you need to know how UK Tax Residence and Domicile will affect what you pay.

This section of the Tax Guide has been dedicated to Residence and Domicile Tax Issues. Please find detailed information on;

Are you a highly skilled expat Contractor? Would you like to maximise your contract income and work towards a visa extension or visa transfer? If so Commonwealth Contractors can help!

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Residence and Domicile Overview

UK tax law has 3 main concepts for dealing with ‘expats’ (i.e. those from outside the UK working in the UK, or those from the UK working abroad);

  • Residence (where you are living / working), AND
  • Ordinary Residence (where you usually live / work), AND
  • Domicile (your ultimate ‘home’ jurisdiction)

In this article all references to years are to UK tax years (6th April – 5th April) rather than to January – December calendar years.

What does the UK Charge Tax on?

The UK system will generally charge UK Tax on:

  • UK earnings wherever the individual is based – For example if Bon Jovi came to the UK to play a concert for a single day, then they would have to pay UK tax on their earnings for that day. A rare exception to this is that the International Olympic Committee (IOC) negotiated an exemption from UK income tax for Non-UK resident overseas athletes and others including media workers / reporters involved with making the games happen, in respect of earnings from the 2012 London Olympics.
  • Non-UK earnings for those that are Domiciled and Resident in the UK – For example if you are a UK national wholly based in the UK, then you have to pay tax on your worldwide earnings and do not limit your tax liability simply because you have earned some of the money abroad.

Where things get more complex is for expat workers. While the complexity can be frustrating, the system is generally much fairer than the US system which simply charges US income tax on the worldwide income of US nationals (and ‘Green Card’ holders) even if they never set foot in the USA from one year to the next.