Residence & domicile after Brexit
Price Mann • October 20, 2021
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Residence & domicile after Brexit
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How your status affects the amount of tax you pay.
For most UK citizens, the question of what income and gains should be included on their tax return is easily answered because they are both UK domiciled and UK tax resident.
Anyone domiciled and resident in the UK will need to report their worldwide income and capital gains on their return. However, what happens if you are either non-UK domiciled (non-dom) but UK resident, or UK domiciled but non-UK resident?
In these circumstances, different rules apply and the last four years have seen considerable change to tax legislation in this area as the Government seeks to expand the scope of what can be taxed within the UK.
Non-doms make a significant contribution to UK tax revenues, but their numbers are falling. The decline of this small but significant group of UK taxpayers has been partly attributed to tax changes surrounding ‘deemed domicile’, which made their status in the UK less attractive.
Brexit uncertainty has also led some to reconsider whether the UK remains an attractive base for them and their finances, or whether they should move to a different European country.
But it is not just these wealthy non-doms for whom Brexit has caused a rethink.
There are a significant number of UK citizens who now live abroad, whether temporarily on work contracts or who have permanently relocated.
More Britons than ever before decided to make Portugal their permanent home, with 2020 seeing a 34% rise in those living there, according to the latest data from the country’s borders and immigration service.
Now that we have left the EU, UK buyers in Portugal qualify for a ‘golden visa’ – which allows visa-free travel throughout Europe.
Coupled with Portugal’s non-habitual resident tax scheme, which offers foreigners low income tax rates for those able to spend at least half the year there, this is thought to have prompted more UK residents to make the move.
In most cases, non-doms leaving the UK are no longer liable to UK tax. However, for those leaving the UK who are domiciled in the UK, it is not as straightforward.
UK-domiciled taxpayers
Someone who is domiciled in the UK is an individual whose permanent home is in the UK. That person may have more than one tax residence, but they can only have one domicile at any given time.
Everyone has a domicile, which they acquire at birth, normally from their father. This will not always be the country of birth or the country they currently live in.
You can change the domicile of origin acquired at birth to a domicile of choice once you are over 16, but such a change can be difficult to prove to HMRC.
Your domicile is usually the country which you consider to be your permanent home, but working out which country you are domiciled in can be complex.
As it is up to you to determine your own domicile status and with big amounts of tax often at stake, it is wise to seek professional help to determine your position.
To further complicate the issue, from 6 April 2017, changes to UK tax law meant that an individual resident for tax purposes in the UK for 15 out of the last 20 tax years is ‘deemed domiciled’ for the UK’s personal taxes.
Domicile is significant because it can have a bearing on your liability to UK income tax, capital gains tax and inheritance regardless of where you actually reside.
Anyone moving abroad from the UK might find they are no longer considered UK tax resident but are still treated as UK domiciled.
Becoming non-UK tax resident
Your tax residence status can change each tax year and even part way through a tax year.
Since 6 April 2013, UK tax residence status has been determined by the statutory residence test, which contains four components that need to be considered each tax year. These are:
- how much time you have spent in the UK in a tax year
- automatic overseas test
- automatic UK test
- sufficient ties test.
In the simplest terms, you will be considered a non-UK resident for tax purposes if you meet the automatic overseas test.
You will, however, be considered a UK resident if you do not meet the automatic overseas test and you meet one of the automatic UK tests or the sufficient ties test.
If you spend more than 183 days in the UK in a given tax year, you would usually be considered a UK resident.
The statutory residence test is complex, however, so come to us for help with correctly determining your residence status should you need it.
UK domiciled, non-UK resident
Regardless of your residence or domicile, income arising in the UK is usually taxable in the UK. If you are non-resident, your foreign income is generally out of scope of UK tax.
However, tax treaties are in place between the UK and other nations which determine how certain types of income must be dealt with where you reside.
Many people who have left the UK own residential properties in the UK, which they rent out in their absence. Any profits arising from the letting of these properties are subject to UK income tax, regardless of tax residence status.
Letting agents are required to deduct a withholding tax to cover any potential tax due, but this can be the incorrect amount and in many cases will be too much.
An election can be made to become a non-resident landlord with HMRC. Where such an election is made, rents may be received without deducting withholding tax, as long as you report the income via a self-assessment tax return.
In general, a non-resident person is not liable to capital gains tax in the UK – even on assets situated in the UK unless they are used in a trade here. However, this is subject to a number of exceptions and it is wise to seek advice before disposing of any assets so you don’t trigger an unnecessary tax charge.
Your tax resident status can also affect your entitlement to UK income tax and capital gains tax allowances and exemptions. However, you will still be entitled to a personal allowance in the UK each year if any of the following apply:
- you hold a British passport
- you’re a citizen of a European Economic Area (EEA) country
- you’ve worked for the UK Government at any time during that tax year.
You might also be eligible for the allowance if it’s included in the double-taxation agreement between the UK and the country you live in. If you’re not a UK tax resident, you will have to claim the personal allowance at the end of each tax year in which you have UK income on form R43.
In the UK, when someone dies, domicile is a key factor in assessing their estate's liability to UK inheritance tax.
For someone who is UK domiciled, on their death, their worldwide assets will be subject to assessment in the UK, regardless of their tax residence status.
It’s possible to be considered a tax resident in more than one country at the same time, therefore, it’s possible to be subject to tax on the same income and gains in more than one country.
Usually when this occurs, you will not necessarily have to report the income or gains on the tax returns of both countries because most countries have tax treaties to set out in which country you should be taxed on any source of income.
Where such a treaty does not exist and tax is paid in both countries, the UK usually allows you to credit the foreign tax paid on that income against the tax due in the UK on that income.
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Managing risk in your investment portfolio Tips for a balanced investment approach. Investment markets rise and fall, yet the goals that matter to you – retirement security, children’s education, a comfortable buffer against the unexpected – remain constant. Managing risk means giving each goal the best chance of success while avoiding avoidable shocks. You can do that by holding the right mix of assets for your timeframe, using tax wrappers efficiently, and controlling costs and emotions. The 2025/26 UK tax year brings unchanged ISA and pension allowances. This guide explains the key steps, such as diversifying sensibly, rebalancing with discipline, safeguarding cash, and monitoring allowances, so you can stay on track whatever the markets deliver. It is an information resource, not personal advice. Start with a clear plan Define goals and timeframes: Decide what each pot of money is for (for example: house deposit in three years, retirement in 20 years). Time horizon drives how much short-term volatility you can accept. Short-term goals usually need more cash and high-quality bonds; long-term goals can justify more equities. Set your risk level in advance: Ask yourself two questions. Risk capacity: How much loss could you absorb without derailing plans (linked to your time horizon, job security and other assets)? Risk tolerance: How do you feel about market swings? Use a more cautious mix if you are likely to sell in a downturn. Ring-fence cash needs: Keep 3-6 months’ essential spending in easy-access cash before you invest. This reduces the chance of selling investments at a low point to meet bills. Choose simple, diversified building blocks: Broad index funds and exchange-traded funds (ETFs) covering global equities and high-quality bonds provide instant diversification at low cost. Avoid concentration in a single share, sector or theme unless you are comfortable with higher risk. Diversification: Spread risk across assets, regions and issuers Diversification reduces the impact of any single holding. Practical ways to diversify include the following. Assets: Use both growth assets (equities) and defensive assets (investment-grade bonds, some cash). Regions: Combine UK and global holdings. Many UK investors hold too much domestically; global funds spread company and currency risk. Issuers: In bonds, mix UK gilts and investment-grade corporate bonds to diversify credit exposure. Currencies: Equity funds are commonly unhedged (currency moves add volatility but can offset local shocks). For bonds, many investors prefer sterling-hedged funds to lower currency risk. A diversified core helps the portfolio behave more predictably across different market conditions. You can add small “satellite” positions if you wish, but keep any higher-risk ideas to a modest percentage of the whole. Use tax wrappers to reduce avoidable tax and trading frictions Efficient use of ISAs and pensions is one of the most effective risk-management tools because it protects more of your return from tax. ISAs (individual savings accounts) Annual ISA allowance: £20,000 for 2025/26. You can split this across cash, stocks & shares and innovative finance ISAs. Lifetime ISAs (LISAs) are capped at £4,000 within the overall £20,000. Junior ISA (for children under 18): £9,000 for 2025/26 (unchanged). ISAs shield interest, dividends and capital gains from tax. Rebalancing inside an ISA does not create capital gains tax (CGT), which helps you maintain your chosen risk level at lower cost. Note: There has been public discussion about potential ISA reforms, but the current 2025/26 allowance is £20,000. If government policy changes later, we will let you know. Pensions (workplace pension, personal pension/SIPP) Annual allowance: £60,000 for 2025/26 (subject to tapering for higher incomes; see below). You may be able to carry forward unused annual allowance from the three previous years if eligible. Tapered annual allowance: If your adjusted income exceeds £260,000 and threshold income exceeds £200,000, the annual allowance tapers down (to a minimum of £10,000 for 2025/26). Money purchase annual allowance (MPAA): £10,000 for 2025/26 once you’ve flexibly accessed defined contribution benefits (for example, taking taxable drawdown income). Tax-free lump sum limits: The lifetime allowance has been replaced. From 6 April 2024, the lump sum allowance (LSA) caps total tax-free pension lump sums at £268,275 for most people, and the lump sum and death benefit allowance (LSDBA) is £1,073,100. Pensions are long-term wrappers designed for retirement. Contributions usually attract tax relief and investments grow free of UK income tax and capital gains tax while inside the pension. Personal savings: Interest allowances Personal savings allowance (PSA): Basic-rate taxpayers can earn up to £1,000 of bank/building society interest tax free; higher-rate taxpayers up to £500; additional-rate taxpayers do not receive a PSA. Starting rate for savings: Up to £5,000 of interest may be taxable at 0% if your other taxable non-savings income is below a set threshold. For 2025/26, that threshold is £17,570 (personal allowance of £12,570 plus the £5,000 starting rate band). Dividends and capital gains outside ISAs/pensions Dividend allowance: £500 for 2025/26 (unchanged from 2024/25). Dividend tax rates remain 8.75%, 33.75% and 39.35% for basic, higher and additional-rate bands, respectively. The annual capital gains tax (CGT) exempt amount , £3,000 for individuals (£1,500 for most trusts). CGT rates from 6 April 2025: For individuals, 18% within the basic-rate band and 24% above it, on gains from both residential property and other chargeable assets (carried interest has its rate). HMRC examples confirm the £37,700 basic-rate band figure used in CGT calculations for 2025/26. CGT reporting reminder: UK residents disposing of UK residential property with CGT to pay must report and pay within 60 days of completion. Other gains are reported via self assessment (online filing deadline is 31 January following the tax year; if you want HMRC to collect through your PAYE code, file online by 30 December; payments on account remain due 31 January and 31 July). Why this matters for risk: Using ISAs and pensions lowers the drag from tax, allowing you to rebalance and compound returns more effectively. Outside wrappers, plan disposals to use the £3,000 CGT allowance and each holder’s tax bands and consider transfer to a spouse/civil partner (no CGT on gifts between spouses) before selling where suitable. Bonds and cash: Interest-rate and inflation considerations Interest rates: The Bank of England reduced the Bank Rate to 4% at its August 2025 meeting. Bond prices can move meaningfully when rates are high or changing, especially for longer-dated bonds. Consider the duration of bond funds and whether a mix of short- and intermediate-duration exposure suits your time horizon. Inflation: Headline Consumer Price Index (CPI) inflation was 3.6% in the 12 months to June 2025, while the CPI including owner occupiers’ housing costs (CPIH) rose by 4.1%. Inflation affects the real value of cash and bond coupons, and can influence central bank policy, affecting bond prices. Review whether your mix of cash, index-linked gilts and conventional bonds remains appropriate as inflation and interest-rate expectations evolve. Cash strategy: For short-term needs, spread deposits to respect Financial Services Compensation Scheme (FSCS) limits. For longer-term goals, excessive cash can increase the risk of falling behind inflation. Control costs and product risk Keep fees low: Ongoing charges figures (OCFs), platform fees and trading costs compound over time. Favour straightforward funds and avoid unnecessary expenses. Understand the product: Structured products, highly concentrated thematic funds or complex alternatives can behave unpredictably. If you use them, size them modestly within a diversified core. Use disciplined trading rules: Avoid frequent tinkering. Set rebalancing points (see below) and resist acting on short-term news. Rebalancing: Why, when and how Markets move at different speeds. Without rebalancing, a portfolio can “drift” to a higher or lower risk level than you intended. Follow this simple rebalancing framework. Invest in something that will rebalance automatically (i.e. certain ETFs) Frequency: Review at least annually. Thresholds: Rebalance when an asset class is 5 percentage points away from target (absolute) or 20% away (relative). Tax-aware execution: I prefer to rebalance inside ISAs and pensions. Outside wrappers, use new cash or dividends where possible; then consider selling gains up to the £3,000 CGT allowance and factoring in dividend and savings allowances. Implementation tip: If markets are volatile, use staged trades (for example, three equal tranches a few days apart) rather than one large order. Safeguard cash and investments with the right protections FSCS protection (cash deposits): Up to £85,000 per person, per authorised bank/building society group is protected. Temporary high balances from specific life events can be covered up to £1m for six months. The Prudential Regulation Authority has consulted on raising the standard deposit limit to £110,000 and the temporary high balance limit to £1.4m from 1 December 2025 (proposal stage at the time of writing). FSCS protection (investments): If a regulated investment firm fails and your assets are missing or there is a valid claim for bad advice/arranging, compensation may be available up to £85,000 per person, per firm. This does not protect you against normal market falls. Operational risk checks: Use Financial Conduct Authority authorised providers, check how your assets are held (client money and custody), enable multi-factor authentication, and keep beneficiary and contact details up to date. Currency risk: When to hedge For equities, many long-term investors accept currency fluctuations as part of the growth engine, since sterling often weakens when global equities are stressed, partly offsetting losses. For bonds, many prefer sterling-hedged funds to keep defensive holdings aligned with sterling cashflow needs. A blended approach works: unhedged global equities plus mostly hedged bonds. Behavioural risks: Keep decisions steady Common pitfalls include chasing recent winners, selling after falls or holding too much cash after a downturn. Tactics to keep you on track include: automate contributions (regular monthly investing), which spreads entry points write down rules (what you will do if markets fall 10%, 20%, 30%) separate spending cash from investments so you do not sell at weak prices to fund short-term needs use portfolio “buckets” in retirement. Retirement planning: Sequence-of-returns risk and withdrawals If you are drawing an income from investments consider the following. Hold a cash buffer (for example, 12–24 months of planned withdrawals) to avoid forced sales during sharp market falls. Be flexible with withdrawals: Pausing inflation-indexing or trimming withdrawals after a poor market year can help portfolios last longer. Use tax bands efficiently: Consider the order of withdrawals (pension, ISA, general investment account) to make use of personal allowance, PSA, dividend allowance and the CGT annual exempt amount. Take care around the MPAA if you are still contributing to pensions after accessing them. Putting it together: A repeatable checklist Confirm goals and time horizons. Check emergency cash (3-6 months). Map your target asset allocation. Use wrappers first: Fill ISAs and workplace/personal pensions as appropriate. Keep costs low: Prefer broad index funds/ETFs. Set rebalancing rules: Annual review + thresholds. Document tax items: Monitor dividend/CGT use; note 60-day property CGT rule; plan for 31 January/31 July self assessment dates if relevant. Review protection limits: Spread larger cash balances across institutions in line with FSCS; note proposed changes for late 2025. Schedule an annual review to update assumptions for interest rates, inflation and any rule changes. Get in touch if: you are unsure how to set or maintain an asset allocation you plan to draw income and want to coordinate wrappers and tax bands you expect large one-off gains or dividends and want to plan disposals or contributions you have concentrated positions (employer shares, single funds) and want to reduce single-asset risk tax-efficiently you are considering more complex investments. Wrapping up Risk management is not a one-off task but an ongoing discipline. By defining clear objectives, spreading investments across regions and asset classes, using ISAs and pensions to shelter returns, and reviewing allocations at least annually, you create a framework that limits surprises and keeps decisions rational. Document key dates – self assessment payments on 31 January and 31 July, the 60-day CGT rule for property, and the annual ISA reset on 6 April – so tax never forces a sale at the wrong time. Check deposit limits and platform safeguards for peace of mind, and keep a written record of your rebalancing rules to prevent knee-jerk trades. If life events or regulations change, revisit your plan promptly. A measured, systematic approach lets your portfolio work harder while you stay focused on the goals that matter most. Important information This guide is information only and does not account for your personal circumstances. Past performance is not a guide to future returns. The value of investments and income from them can fall as well as rise, and you may get back less than you invest. Tax rules can change and benefits depend on individual circumstances. If you need personalised advice, please contact a regulated financial adviser. If you’d like advice on managing your portfolio, get in touch.
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