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What is a Non-Dom, what does it mean for tax purposes and who is eligible? Explained

A revelation that Chancellor of the Exchequer Rishi Sunak’s wife, Akshata Murthy, has non-resident status in the UK was the talk of the town this week – meaning she pays no UK tax on overseas earnings

Chancellor of the Exchequer Rishi Sunak and his wife Akshata Murthy
Chancellor of the Exchequer Rishi Sunak and his wife Akshata Murthy

The term “non-dom” made headlines this week after it was revealed that Chancellor Rishi Sunak’s wife, Akshata Murty, doesn’t pay taxes on her overseas earnings.

That’s because the businesswoman has ‘non-dom’ status, which basically means you don’t have to pay tax on profits made outside the UK.

It is a phrase used for a UK resident whose permanent address or residence is outside the UK – however this particular case is interesting as Akshata Murty lives in London with her family.

Non-domicile is not illegal, but it is controversial. It has nothing to do with the chosen nationality, citizenship or residency status.

If you have this status, you only have to pay tax on UK income.

You don’t have to pay tax in the UK on money earned anywhere else in the world (unless you put that money into a UK bank account).







As a Non-Dom resident, Akshata Murty can legally avoid paying tax on any income she earns outside the UK
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Picture:

PA)

For a businessman or woman, this means you can make significant savings by choosing to register in a country with a low tax rate.

It is not granted automatically; A resident must apply. The status also implies that her stay in the UK is not permanent.

You can become a Non-Dom in two ways:

  • Domicile of origin – if you were born in a country other than the UK or if your father is from another country.
  • Choice of Residence – if you are over 16 and decide to leave the UK and live in another country indefinitely

Akshata Murty’s status as a Non-Dom stems from the fact that her billionaire father, Narayna Murthy, is Indian and she was born and raised in India.

Despite being a fashion designer by trade, she reportedly owns just under 1% of Infosys, the giant Indian IT services company founded by her father – a stake worth around £710million.

It would have earned her £11.6million in dividends last fiscal year.

Had she not been a non-dom, 38.1% of that income would have been due to the government agency her husband runs.

If you are a Non-Dom you will still have to pay an annual fee to the UK Government.

Instead of paying tax on overseas income, you’ll instead pay an annual fee, which is £30,000 if you’ve been here for at least seven of the last nine tax years, or double it – £60,000 if you’ve been here for at least 12 of the last 14 tax years .

The system has been around for 200 years, but the rules for using it changed in 2017.

You can no longer apply for Non-Dom status if you have been a UK resident for 15 years out of the last 20, were born in the UK, have been a UK resident or have been a UK resident for at least one year since 2017.

In 2010 it was revealed that several members of the House of Lords had Non-Dom status, including Conservative peer Lord Ashcroft and Lord Paul in the Labor benches.

According to the latest figures from HM Revenue and Customs, 75,700 people claimed Non-Dom status in the UK in the 2020 tax year.

Most non-doms in the UK live in and around London, namely in Kensington and Westminster – the most affluent areas of Britain.

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https://www.mirror.co.uk/money/what-non-dom-what-mean-26669009 What is a Non-Dom, what does it mean for tax purposes and who is eligible? Explained

Fry Electronics Team

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