Domicile vs. Residency
Domicile' and 'residency' are two of the most important words in UK tax, and while they sound similar, they mean very different things. This guide explains the key differences so you can understand your true tax position.It's a common mistake to use these terms interchangeably, but for HMRC, the distinction is critical. Your residency status determines if you pay UK tax, while your domicile status can affect what you pay tax on.
What is Residency?
Your residency is based on where you live and how much time you spend in the UK during a tax year. It's a factual test determined by the Statutory Residence Test (SRT). You can be a UK resident for tax purposes regardless of your nationality.
- If you are a UK resident, you are typically taxed on your worldwide income.
- If you are not a UK resident, you are only taxed on your UK-sourced income.
What is Domicile?
Your domicile is about where your permanent home is – the country you consider your "homeland." For most people, this is the country where they were born and where their father was from. It's much harder to change your domicile than your residency status.
- If you are UK domiciled, you are taxed on your worldwide income and gains.
- If you are not UK domiciled (a 'non-dom'), you may be able to use the special 'remittance basis' of taxation, where you only pay UK tax on foreign income and gains that you bring into the UK.
In short: Residency is about where you live now. Domicile is about where your roots are.