With the UK’s rumour mill spinning about an impending wealth tax and uncertainty around the November budget, relocating to Dubai (or Portugal, Malta, and other low-tax destinations) is starting to look appealing for many.
However, it isn’t just a question of hopping on a plane. If you don’t plan it properly, you could still find yourself on the hook for UK tax long after you’ve left.
(Read Time: Approx. 5 minutes)
Topics Discussed:
- The seven essential tax considerations before relocating to Dubai.
- How UK tax rules can still apply even after you’ve moved abroad.
1. The Statutory Residence Test is the Starting Point
Many people assume they’re non-resident the moment they leave the UK.
In reality, HMRC uses a strict set of rules known as the statutory residence test to determine your tax status.
This test focuses on how many days you spend in the UK, along with your personal ties such as family, work and accommodation.
If you don’t meet the criteria for non-residence, you may still be classed as UK tax resident.
That means your worldwide income remains taxable in the UK, regardless of where you live.
It’s essential to take professional advice. Falling foul of this test is one of the most common and costly mistakes we see.
2. Get Your Timing Right
The timing of your move can significantly affect your UK tax liability.
Leaving part-way through the tax year might allow you to claim split-year treatment.
This means you are only considered UK resident for part of the year, depending on when you meet the qualifying conditions for non-residence.
However, your eligibility for this treatment depends on how you exit the UK, and once again, the statutory residence test plays a role.
Plan your departure carefully and make sure it aligns with both your intentions and the rules.
3. Structure Your Income Before You Go
If you’re expecting to receive income in the form of dividends, bonuses or capital gains, the timing of those payments can make a major difference.
Income received while you are still UK resident is taxable in full.
Where possible, defer income until after you’ve become non-resident.
This could allow you to benefit from a more favourable tax treatment, depending on your new country of residence.
Proper structuring before departure is key to ensuring you’re not paying more than you need to.
4. You Can Keep UK Property (But Watch the Rules)
Many people think they need to sell their UK properties before moving overseas.
That’s not the case. You can retain ownership of UK property, but you must declare any income correctly.
Rental income from UK property is still taxable in the UK, even if you are non-resident.
You may need to register under the non-resident landlord scheme, and you’ll continue to file annual Self-Assessment tax returns.
When you eventually sell, UK capital gains tax will apply.
Make sure the structure is right, and the reporting is correct. HMRC has tightened its grip on overseas landlords in recent years.
5. Running a UK Company from Abroad Requires Caution
If you plan to manage your UK limited company while living in Dubai, you need to be very careful.
HMRC does not look only at where the company was incorporated. Instead, it focuses on where the business is actually managed and controlled.
If you are directing key decisions from abroad but the company is still seen as having its central control in the UK, it may continue to be UK tax resident.
This means corporation tax and other UK taxes would still apply.
Some people assume that running a UK company from Dubai automatically removes UK tax obligations.
This is incorrect, and misunderstanding this point can be very expensive.
6. Know What Changes with ISAs, Pensions and Investments
Once you become non-resident, your ISAs lose their UK tax benefits.
You can keep existing accounts, but you can’t contribute further, and any income or gains could be taxable in your new country.
Pensions may offer more flexibility. You might consider transferring to an overseas pension scheme if you plan to remain abroad for the long term.
However, these decisions are complex and should only be made with advice.
Review your entire investment portfolio before you leave.
What works well from a tax perspective in the UK may not suit your new circumstances abroad.
7. Advance Planning is Crucial
Relocating to Dubai is more than just a lifestyle move. It’s a financial and legal decision that can have lasting tax consequences.
Poor planning can undo all the benefits you hoped to gain.
Even if you become non-resident for income and capital gains tax, you may still be UK domiciled for inheritance tax purposes.
Domicile is not easy to shed, and HMRC often challenges attempts to claim non-domicile status.
If your estate remains within scope, your worldwide assets could still face a 40% inheritance tax bill.
Proper planning before you leave is essential. It’s far more effective than trying to fix things after the fact.
Summary
Dubai might offer tax-free sunshine and a better lifestyle, but getting there without a solid tax exit plan could cost you dearly.
The UK tax net is wider than many realise, and moving abroad doesn’t automatically free you from it.
From your tax residence and timing of income to property, investments and inheritance rules, each decision must be carefully mapped out.
Get in touch with Tax Expert today and make your move with confidence.
Fill out our form here for any questions, email us at info@taxexpert.co.uk, or message us on our WhatsApp for out of office hours.
Kind regards,
Ilyas Patel