07 April 2022

Akshata Murty: What is non-dom status?

07 April 2022

Rishi Sunak’s wife, Akshata Murty, has revealed she is treated as non-domiciled for UK tax purposes because of her Indian citizenship.

The PA news agency looks at what a non-dom is and whether she is right to link the place of her birth and citizenship with her tax status in the UK.

A non-dom tax status typically applies to someone who was born overseas, spends much of their time in the UK but still considers another country to be their permanent residence or “domicile”.

In Ms Murty’s case, she would need to be claiming that the UK is not her permanent residence.

Citizenship of an individual living in the UK is irrelevant when it comes to non-dom status as it is possible for a UK citizen, or someone born in the UK, to claim they are a non-dom.

According to Home Office guidance: “A person can change nationality without it affecting their domicile, or could acquire a change of domicile whilst retaining their original nationality.

“The fact that a person has acquired a new nationality can be a relevant factor in showing a change of domicile, but is not conclusive, depending upon the reasons for the change. If a person gives up their former nationality it may suggest a change of domicile.”

Status is not given automatically because an individual must apply for the exemption in their tax status when filling out their UK tax return.

According to the Government, a person’s domicile is usually the country where their father considered his permanent home when the individual was born.

In Ms Murty’s case, she was born in India, so she ticks the first box for claiming she is not domiciled in the UK.

Others can also inherit their domicile from their parents, meaning they can still be born in the UK but have non-dom status.

When evaluating someone’s domicile, the taxman will consider a number of factors, including permanent country of residence and how long an individual intends to stay in the UK.

When it comes to tax, the rules state that you do not pay UK tax on foreign income or gains if they are less than £2,000 a year and you do not bring them into the UK.

If you earn more than £2,000 from overseas or bring any money into the UK you must pay UK tax on it – although this may be claimed back.

Or you can pay an annual charge, depending on how long you have been in the UK.

The charges are £30,000 if you have been in the UK for at least seven of the last nine tax years, or £60,000 for at least 12 of the previous 14 tax years.

Therefore, if you are resident in the UK but a citizen of another country, you must still pay a fee.

For high net-worth individuals, many will opt for the yearly charge because the income received from foreign businesses and investments is likely to lead to a far higher tax bill.

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