Spotlight on Relocating from the UK to Dubai

Relocating from the UK to Dubai is a significant decision that requires careful consideration, especially when it comes to understanding the tax implications in both regions.

Dubai offers a very different tax landscape compared to the UK, which can be both advantageous and complex. Today's blog focuses on six points that UK residents should consider when contemplating a move to Dubai.

Point 1: Understanding the UAE’s Tax-Free Environment

Dubai, part of the United Arab Emirates (UAE), is renowned for its tax-free living, meaning there is no income tax levied on salaries or wages paid in the UAE. This is often one of the most attractive aspects for UK expatriates. However, it’s crucial to note that while there is no direct taxation, there are other forms of indirect taxes, such as the Value Added Tax (VAT) at a rate of 5% on most goods and services and which will likely require daily consideration.

Point 2: UK Tax Residency and Non-Residency

Before moving, it’s important to determine your residency status as this affects your UK tax obligations. If you are considered a UK resident for tax purposes, you are taxed on your global income. To become a non-resident, you generally must spend fewer than 16 days in the UK during the tax year or 46 days if you haven’t been a UK resident in the previous three tax years.

Changing your tax residency isn’t just about the amount of time you spend in the UK but also involves severing significant ties to the UK such as family, accommodation, and economic activities. The Statutory Residence Test (SRT) is used to determine your status. Once non-resident, you will not be taxed in the UK on your foreign income, including income from Dubai.

Point 3: Capital Gains Tax Implications

For those owning property in the UK, capital gains tax (CGT) is an important consideration. As a non-resident, you are still liable for CGT on the disposal of UK property or shares in companies where most of their value derives from UK real estate. However, you are entitled to rebasing your property value to its worth as of April 2015 or the date you became non-resident, potentially reducing the taxable gain.

Point 4: Income from UK Rentals

If you plan to maintain rental properties in the UK, income generated from these properties will still be subject to UK income tax. Non-residents are taxed at the basic rate of 20% on UK rental income, but personal allowances may be available depending on your circumstances.

Point 5: Inheritance Tax Considerations

UK inheritance tax (IHT) is another consideration. Your worldwide assets remain subject to UK IHT for three years after becoming non-resident. Additionally, if you are domiciled in the UK (a concept distinct from residency and based on your long-term connection to the UK), your global estate may be liable for IHT.

Point 6: Planning for Pensions

UK pensions remain taxable in the UK. However, there may be options to transfer your pension overseas. The QROPS (Qualifying Recognised Overseas Pension Scheme) allows for the transfer of UK pension benefits to a non-UK pension scheme, potentially mitigating UK tax charges, although the regulations are stringent and advice should be sought.

Seeking Professional Advice

Given the complexities of tax planning across borders, obtaining professional advice is crucial. A tax advisor with expertise in both UK and UAE tax laws can provide guidance tailored to your personal circumstances, helping to ensure compliance and optimise your tax position.

Relocating to Dubai from the UK presents an exciting opportunity but requires thorough planning, especially regarding tax implications. Understanding both the UAE's and the UK's tax systems will ensure that you are well-prepared for your new life in Dubai while managing your financial obligations responsibly.

For tailored advice in all aspects of property law and professional services, visit our website at Dubai Tax Experts.