Changing the domicile

If you are leaving the UK for good, make sure that you can clearly show the Revenue that you have changed your domicile; otherwise even your overseas assets will remain within the UK inheritance tax net. Your domicile is the country you treat as your permanent home. Complete a DOM 1 form and submit it to the HMRC department for non-residents as soon as you are established in your new home. You elect the foreign earnings exclusion on Form 2555. Foreign earnings include wages, salaries, commissions, professional fees, and bonuses. If you violate home Government restrictions that prohibit travel to certain countries you will not be able to claim the foreign earnings exclusion on your tax return against amounts earned in those countries.

You are not considered to have a tax home in a foreign country for any period for which your household is in the home country. However, if you are temporarily present in the home country, it does not necessarily mean that your household is in the home country during that time. In order for your foreign earnings to be excluded from your tax return, any income must meet the IRS foreign earnings exclusion tests. Usually, the foreign earnings exclusion from your tax return does not include investment income such as interest, dividends, capital gains, pensions, annuities, gambling winnings, alimony, or amounts attributable to certain employee trusts.