UK tax law provides special rules for an individual who is resident, but not domiciled, in the United Kingdom.
These rules apply for income tax, capital gains tax, and inheritance tax.
First, a look at the income tax and capital gains tax position.
An individual who is resident and domiciled in the United Kingdom is taxed, on an arising basis, on his worldwide income and gains, .
An individual who is UK-resident, but not UK-domiciled is taxed, on an arising basis, on her UK income and gains . However, for her foreign income and gains, she may elect for those to be taxed in the UK on a “remittance basis”. Basically, this means that such income and gains would only be subject to UK tax if remitted there. The definition of “remittance” is quite broad, and goes beyond the straightforward matter of transferring money to the UK. For example, it will also catch the situation where a non-domiciled individual uses foreign income (held in a bank account abroad) to settle UK bills, e.g. school fees.
Subject to a narrow exception, remittance basis taxation does not apply automatically – although it did in the past. Exception aside, if a taxpayer wishes to use the remittance basis, she must make a claim for it.
The domicile of an individual is also relevant for inheritance tax purposes. For example, foreign-situate assets of a non-UK domiciled individual are treated as “excluded property” for the purposes of inheritance tax.