Why non-domiciled tax payers are a sociological – and political! – issue

Mike Savage

It is tempting to see the British ‘non-dom’ clause – a declaration for tax purposes that you intend to move back to where you are declared to be domiciled – as an odd quirk of the British tax regime. As such, it is no more than a loophole that is exploited by a few rich people to gain tax advantages, but not necessarily revealing of more structural features of British society. In fact, the non dom clause is deeply redolent of embedded cultures of class, race and imperial power that continue to operate in 21st century Britain – and are indeed resurgent.

I am old enough to remember the Conservative minister Norman Tebbit’s inflammatory call in 1990 for a ‘cricket test’ which asked: ‘When England play India, which team do Britons of Indian or Afro-Caribbean origin, who were born and grew up here, support or should support?’ His expectation that such immigrants should fully ally with the English cricket team was deeply contested at the time and was seen as a lodestone of the racist assumptions of the Conservative estsblishment.  

What Tebbit did not mention is that the British state actually institutionalises a form of the ‘cricket test’ in allowing UK residents to indicate on their tax returns that although they are living in Britain, they do not see the UK as their permanent home, with the implication that their prime loyalty is to another nation. It is strange that a supposedly autonomous nation state should allow such a clause, and even more strange that it gives advantages to those who tick this box. Yet in Britain, “non-dom” status is available to individuals who, although they may live for much or even all of the year in the UK (and hence are “resident” for tax purposes), also claim that their permanent home (“domicile”) is abroad. They are exempted from paying tax on any income earned from outside the UK (so long as it is not remitted to the UK), including not having to pay inheritance tax on overseas assets.

The origins lie in British imperial history. The role of domicile was introduced with the first levying of income tax in 1799 (introduced to fund the Napoleonic Wars). British residents were exempt from paying income tax on their foreign income unless it was remitted to Britain. When income tax was introduced on a major and permanent basis by Lloyd George in 1906, he explicitly brought out its imperial basis: ‘the citizen of the empire, who is not domiciled in this country’, was exempted from income tax on their overseas income. The scope of this generous provision was curtailed for most UK residents in a series of reforms during the twentieth century but never abolished.

In recent decades there has been growing public dispute about the fairness of the non-dom clause, with extensive criticism of high-profile figures – working in the heart of government and corporate affairs at the commanding heights of British power – whilst claiming for tax purposes that their ‘permanent home’ was somewhere else in the world. These include revelations that several sitting members of the House of Lords – such as the powerful Tory peer Lord Ashcroft – were claiming non-dom status, along with the former governor of the Bank of England, Mark Carney, and Zac Goldsmith, the Conservative candidate for Mayor of London. In April 2022 there was a major outcry when Akshata Murty, the wife of the then Chancellor Rishi Sunak, was exposed as a non-dom.

Together with Arun Advani, David Burgherr, and Andy Summers, we were the first to systematically research the scale and significance of the phenomenon. We took advantage of the fact that the HMRC, the UK tax authority, necessarily records who is claiming to be a ‘non-dom’ individual, and we can link this information to their reported income, their geographic location in the UK, their age and sex, and their nationality.

It turns out that non-doms are not some peripheral phenomenon but hugely matter for appreciating the full dimensions of inequality within the UK. Figure 1 shows that only 0.3% of those with income below £100,000 are non-doms, but this rises dramatically to about 40% of those with income above £5 million. A hugely disproportionate number of the highest paid thus take advantage of the non-dom clause. 

Figure 1: share of non doms (and anyone who ever claimed non-dom status between 2001-18) among top earners, 2018.

It is well known that in recent decades the top earners in the UK have pulled away from average – and even above average – earners, but now we have prima-facie grounds to think that this may be facilitated by the non-dom phenomenon.

There is also a very distinctive international geography at work. We are increasingly mindful of the significance of imperialism as a force shaping the modern world and this imprint is still very much with us. Figure 2 shows that still today, many non-doms claim links to former imperial nations. It shows that well over half of non-doms claim affiliation to the UK or a former imperial territory, and further analysis reveals the significance of Ireland, Canada and the USA; South Africa; India and Australia. We can also see a strong link to European nations, especially the original 6 nations of the European Union – France, Belgium, Luxemburg, Netherlands, Germany and Italy. By contrast, links to the former Soviet nations, or to the Middle East oil territories are much less significant than media stereotypes might imply.

Figure 2: breakdown of nationality of UK ‘ever non-doms’, grouping similar types of nations.

Returning to Tebbit’s cricket test, we can draw an important conclusion. Tebbit was bothered about the allegiances of immigrants from predominantly non-white nations. By contrast, the non-dom clause attracts migrants from nations with predominantly white populations, notably the ‘white settler’ dominions of Australia, Canada, Ireland, New Zealand, South Africa, as well as the USA. We can also see substantial numbers who have European ties.

Immigrants from nations with predominantly non-white populations are much less important, with the striking exception of India where the number of non-doms has expanded rapidly in the past twenty years. Perhaps Norman Tebbit would be reassured that the vast majority of immigrants to the UK are in fact committed to living here and do not claim on their tax return that their ‘permanent home’ is somewhere else. The exceptions, it appears, are predominantly white economic elites. This is surely a matter of political, as well as sociological, concern.

Mike Savage is Martin White Professor of Sociology at the London School of Economics and Convenor of the ‘Wealth, elites and tax justice’ research programme at the International Inequalities Institute, London School of Economics

Header Image Credit: Gwydion M. Williams


Savage, Mike 2023. ‘Why non-domiciled tax payers are a sociological – and political! – issue’ Discover Society: New Series 3 (3): https://doi.org/10.51428/dsoc.2023.03.0003