Leaving the UK can feel like a fresh start, but don’t be fooled in thinking it wipes the tax slate clean.
From rental incomes to pensions, and from Dubai bank accounts to inheritance tax. HMRC’s reach extends far beyond British borders.
Here is what you need to know before making that move.
(Read Time: Approx. 5 minutes)
Topics Discussed:
- Common tax traps when moving abroad, including rental income, pensions, CGT and IHT
- The truth about Dubai property income and offshore bank accounts
Your UK Tax Liabilities Don’t Vanish at the Border
One of the most common misunderstandings from people planning to leave the UK is the belief that tax obligations disappear once they do.
This couldn’t be further from the truth.
The UK tax system is riddled with traps for those unaware, even the most intelligent of people have been caught out.
If you’re moving abroad and still own UK property, earn UK income or hold a UK pension, the chances are you’re still on the hook for UK tax.
UK Rental Income: Still Taxable
If you own UK property and rent it out while living abroad, that income remains in the UK. It doesn’t matter where you live, HMRC still expects its cut.
In fact, letting agents have a legal duty to deduct tax at source for overseas landlords. If you’re not using a letting agent, you are supposed to register with HMRC’s Non-Resident Landlord Scheme.
Failing to do so, means the tenant may be required to withhold tax themselves.
Pensions and Double Tax Treaties
Pensions are another area where people get caught out. Your private or workplace pension might still be taxed in the UK, depending on where you move and the terms of any Double Taxation Agreement (DTA) between that country and the UK.
Your state pension might even get frozen in some countries, meaning no inflationary increases each year. While this won’t bother everyone, it’s worth checking before you relocate.
Selling Doesn’t Mean Escaping
There is a persistent myth that moving abroad lets you sell your UK assets free of Capital Gains Tax, this is not true.
If you sell UK residential property after leaving, UK Capital Gains Tax still applies.
What can change is the tax treatment of non-UK assets.
If you sell those whiles being non-resident, and you stay out of the UK for 5 full tax years, you may avoid UK Capital Gains Tax.
However, move back early and the gain could still be caught retrospectively. Timing is everything.
Inheritance Tax
From April 6, 2025, new rules make it even easier to be caught by UK IHT.
If you’ve been a UK resident for 10 of the past 20 years, you’ll still be classed as UK domiciled for IHT purposes.
This means all your worldwide assets remain within scope of UK inheritance tax, even if you now live abroad.
Only once you’ve fully severed ties, including selling up and breaking UK tax residency, might your estate fall outside the UK’s IHT net, and that too, after time.
UK Source Income: Still Taxable
Let’s not forget employment income, dividends, bank interest, or any other UK-based income. If it’s earned or generated in the UK, it’s still taxable here.
There are also temporary residence traps, where a short-term return to the UK, could unexpectedly trigger tax residency and undo all your careful planning.
The Dubai Myth: “If I Don’t Bring It Back, It’s Not Taxable”
This one comes up all the time, someone opens a bank account in Dubai, or buys rental property in the UAE, and believes that if the money stays offshore, HMRC will never know or care. That’s a dangerous assumption.
Here’s the truth:
- Since 2018, the UAE has been reporting Uk residents’ financial details under the OECD Common Reporting Standard
- HMRC already knows there are 13,000 UK Residents with UAE property, and only 1900 have declared it on their UK tax returns
This gap isn’t sustainable. It’s only a matter of time before nudge letters start dropping through letterboxes.
Offshore Disclosure Facilities
If you’ve inadvertently made an error or simply didn’t know your Dubai rental income or bank interest was taxable in the UK, there is a way to come clean.
HMRC offers Offshore Disclosure Facilities that allow you to voluntarily correct mistakes with lower penalties. If you wait for them to find you first, the financial damage could be significantly worse.
Think Long-Term, Plan Properly
Relocating abroad for lifestyle or tax reasons can be an exciting chapter. But it needs to be backed up with professional advice and solid planning.
Moving abroad doesn’t mean automatic tax freedom. From IHT and CGT to rental income and offshore accounts, the UK taxman still has eyes on your financial world.
Think carefully about future returns to the UK, family ties, and how to exit the UK tax net properly. Many traps are sprung not during the move, but after returning.
Summary
Whether you’re planning to move to Dubai, Spain or Singapore, the key message is this: UK tax doesn’t end when you leave the country.
It’s a complex area, and myths on social media or pub chat won’t protect you when HMRC comes calling.
If you’re unsure about your tax position, take advice early. Better to plan now than face penalties later.
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
