Tax planning tip for non-domiciled individuals

If you are not originally from the UK, but are currently resident or are thinking of becoming a resident in the UK and your stay is likely to be less than seven years, you will be subject to tax in the UK based on any remittances that you make from overseas in addition to any income you actually earn in the UK.

For many individuals who have significant wealth overseas and wish to bring it into the UK to purchase a house or to generally support their living expenses, the arrangement of their wealth overseas can be a very effective tax planning tool as any monies remitted to the UK are subject to UK tax, unless they are of a capital nature (i.e. not earned or the proceeds of the sale of an asset). 

It is therefore important to segregate any income producing assets from capital funds that you may wish to remit to the UK during the time that you are resident here as remittance of any income from overseas sources could also be subjected to UK tax at rates of up to 50%.

One way of doing this could be to open up separate offshore bank accounts prior to coming to the UK. The first being where you deposit your initial capital and the second being an account where any interest related to that capital is transferred immediately after being credited to the first account.

Therefore, any monies remitted to theUKfrom the first account will remain as capital and therefore not be assessable to income tax in the UK.

Of course, once you are resident in the UK, you may wish to read our article on The Ultimate Onshore Tax-Efficient Trading Structure for ideas on how to structure your trading activities.

Other articles you may find useful...