Moving from the UK to Dubai

Dubai's allure is undeniable. With its ultramodern architecture, luxurious lifestyle, and strategic location as a global business hub, it’s no surprise that many UK residents are considering making it their new home. However, moving abroad is a significant life decision, and without proper tax planning, the financial benefits of relocating to a tax-free jurisdiction like Dubai could be undermined by unexpected tax liabilities in the UK.

Before you pack your bags, it’s crucial to understand how your move will impact your tax obligations. The UK’s tax system is complex, and even if you’re living abroad, you could still be liable for taxes on income, gains, and assets in the UK. 

Your tax residency status is the cornerstone of your UK tax obligations. It determines whether you are liable to pay UK tax on your global income or only on income generated within the UK. To ensure you do not inadvertently regain UK tax residency, it is essential to carefully plan your time spent in the UK and manage your ties. Once you’ve established your non-resident status, understanding how your income will be taxed becomes critical.

One of the main attractions of moving to Dubai is that the UAE does not impose income tax on earnings. As a UK non-resident, you will not be liable to pay UK tax on your Dubai-earned income. However, this benefit hinges on your ability to prove non-residency.

Even as a non-resident, you will still need to pay UK tax on income sourced from the UK. This includes rental income, dividends and interest, pensions. It’s important to consult with a tax advisor to understand how your specific pension arrangements will be taxed.

The UAE-UK double tax treaty specifies the types of income subject to taxation in each country. Notably, the UAE does not impose income tax on individuals, making it an appealing destination for expatriates. As a result, income earned there is not subject to double taxation, as long as you are accurately classified as a non-resident in the UK.

Maintaining assets in the UK, such as property and investments, can have ongoing tax implications after you move to Dubai. If you own property in the UK, there are several tax considerations: rental income, capital gains tax (CGT). Your UK investment portfolios can also be subject to UK tax, even if you’re no longer resident. 

Even after moving to Dubai, UK inheritance tax (IHT) can still apply to your estate, potentially reducing the amount passed on to your heirs.

While the UAE offers a tax-free environment, it’s still essential to understand the specific tax breaks and exemptions that may apply to you as a British expat.

Moving to Dubai can create unexpected tax complications if not managed carefully. Understanding common pitfalls and how to avoid them is crucial for a successful relocation. Some of the most common tax pitfalls include: failing to establish non-resident status, overlooking UK-sourced income, misunderstanding double taxation agreements.

Law Firm Limited is here to help you navigate the complexities of UK tax law, providing expert legal and tax advice tailored to your needs. Whether you need assistance with establishing non-residency, managing UK assets, or planning for inheritance tax, our team of professionals is ready to guide you every step of the way.