Residence and domicile is the R03 topic most likely to be answered from out of date notes. The rules changed substantially from April 2025, and the old language of deemed domicile and the remittance basis charge has largely gone. Questions in this area are usually straightforward once you know which framework applies, so this is a small amount of learning for a reliable mark or two.
The statutory residence test
Residence for a tax year is decided by a test applied in a fixed order. Work through it in that order in the exam, because the first test that gives an answer settles the matter.
Step one, the automatic overseas tests. A person is non resident if any apply:
- Fewer than 16 days in the UK, having been resident in one or more of the previous three tax years
- Fewer than 46 days in the UK, having been non resident throughout the previous three tax years
- Working full time overseas, with fewer than 91 days in the UK and no more than 30 UK working days
Step two, the automatic UK tests. A person is resident if any apply:
- 183 days or more in the UK in the tax year
- A UK home for at least 91 days, present in it on at least 30 days, with no overseas home used for more than 30 days
- Full time work in the UK over a 365 day period
Step three, the sufficient ties test. Where neither of the earlier steps decides the case, combine days in the UK with the number of ties. The five ties are:
| Tie | Condition |
|---|---|
| Family | Spouse, civil partner or minor child resident in the UK |
| Accommodation | Available UK accommodation used during the year |
| Work | 40 or more UK working days |
| 90 day | More than 90 days in the UK in either of the two previous years |
| Country | More UK days than in any other single country, arrivers only |
Someone who was resident in any of the three previous years, a leaver, is caught by all five ties and by lower day thresholds. An arriver cannot use the country tie. The pattern to remember is that fewer days require more ties, so 16 to 45 days needs four ties for a leaver, and 121 to 182 days needs only one.
Split year treatment can apply in the year of arrival or departure under one of eight cases, which divides the year into a UK part and an overseas part.
What residence determines
- UK resident: taxable on worldwide income and gains, subject to the new arriver regime and any double tax treaty
- Non resident: taxable on UK source income, on UK employment duties performed here, and on gains from UK land and property through the non resident CGT rules
- Non residents remain liable to income tax on UK rental profits, and the non resident landlord scheme requires basic rate deduction unless approval to receive gross rent is given
The foreign income and gains regime
From 6 April 2025 the remittance basis and the £30,000 and £60,000 remittance basis charges ended. In their place sits a four year exemption:
- Available to anyone becoming UK resident after ten consecutive tax years of non UK residence
- Foreign income and gains arising in the first four tax years of residence are exempt, and can be brought to the UK freely
- The claim is made per year, and claiming it forfeits the personal allowance and the CGT annual exempt amount for that year
- A temporary repatriation facility allowed previously unremitted foreign income and gains to be brought onshore at a reduced rate during a limited window
Because the exemption applies only to the first four years, planning now focuses on timing the arrival date and on rebasing overseas assets rather than on segregating clean capital.
Inheritance tax now follows long term residence
Domicile no longer drives inheritance tax scope. The test is long term residence:
- A person who has been UK resident for at least ten of the previous twenty tax years is within scope on their worldwide estate
- Those outside that test are within scope on UK situated assets only
- A tail applies on leaving the UK, keeping worldwide scope for between three and ten years depending on how long the person was resident
Excluded property trusts created before the change are affected by transitional rules, and settlements made by someone who is long term resident are within the relevant property regime on their worldwide assets.
The spouse exemption also follows the new test. Where the recipient spouse is not long term UK resident, the exemption is limited to the nil rate band amount unless an election to be treated as within scope is made.
Double tax relief
Where the same income or gain is taxed twice, relief is given by one of three routes:
- Treaty relief, under the relevant double taxation agreement, which allocates taxing rights and may exempt or reduce the foreign charge
- Unilateral credit relief, giving a credit for foreign tax paid up to the UK liability on the same income
- Deduction relief, treating the foreign tax as an expense, which is worth less and is used only when a credit is unavailable
Credit relief is the default answer in exam questions.
Common errors
- Applying the statutory residence tests out of order
- Using the country tie for a leaver
- Referring to the remittance basis or deemed domicile after April 2025
- Forgetting that claiming the four year exemption costs the personal allowance
- Assuming a non resident escapes CGT on UK property, which they do not
Revision approach
Write the three steps of the residence test on one card, the five ties on another, and the two new headline rules, four years for income and gains and ten of twenty years for inheritance tax, on a third. This topic seldom carries more than a couple of marks, and they are marks almost nobody prepared with old material will get.