So, you’re thinking about moving to Dubai?
With its sun-soaked skyline, zero personal Income Tax, and vibrant business environment, it’s no wonder British entrepreneurs are flocking there.
However, before you book your one-way ticket and dream of leaving UK tax bills behind, let’s talk through some of the realities.
While Dubai has its perks, you need to make sure you’ve got your tax affairs in order.
The last thing you want is to end up with the UK’s HM Revenue & Customs (HMRC) chasing you, thinking you’ve skirted around the system.
Dubai: No personal tax, but it’s not a free-for-all
Yes, Dubai is famous for not having personal Income Tax.
If you live there, you won’t pay a penny in Income Tax, Capital Gains Tax, or Inheritance Tax.
However, if you’re planning to set up or run a business there, you need to know that the UAE introduced a Corporate Tax in 2023.
It’s 9 per cent on profits over AED 375,000 (about £80,000), but the good news is that businesses set up in the free zones may still enjoy a 0 per cent rate if they stick to certain conditions.
So, if you’re thinking of going down the free zone route, make sure you know exactly what’s required to stay compliant.
Then there’s VAT, which is set at 5 per cent.
If your business will be supplying goods or services in Dubai, you’ll need to factor that in.
Not as bad as the UK’s 20 per cent VAT, but still, something to keep in mind when you’re doing your sums.
UK tax: Some still apply to you
Here’s the bit people tend to overlook when they’re packing for Dubai: you might still have UK tax obligations.
Just because you’ve moved to a tax-free haven doesn’t mean HMRC is going to forget about you, especially if you’ve got UK assets or are still technically considered a UK resident.
1. The Statutory Residence Test (SRT)
This is what determines whether HMRC considers you a UK tax resident and they can be strict.
You need to be really clear on how many days you spend in the UK, where your family lives, and whether you still have a home here.
The SRT is complex, so don’t think you can fudge the details.
If you’re classed as a UK resident, you’ll still be on the hook for tax on your worldwide income.
Yes, that includes anything you earn while living in Dubai.
2. Capital Gains Tax (CGT)
There’s no Capital Gains Tax in Dubai, but HMRC is still very much interested in any assets you hold here.
Whether it’s property, shares, or other investments, if you sell them while you’re still considered a UK resident, you could face a hefty CGT bill.
If you’re planning to sell up, make sure you time it right, or you could end up with a surprise tax bill just when you think you’re in the clear – timing is everything.
3. Dividends and business income
Let’s say you own a UK-based business and plan to draw dividends from it while living in Dubai.
That income could still be subject to UK tax, especially if your business operations are still primarily based here.
This is where things can get tricky, and we’ve seen people caught out before.
It’s worth getting your business structure reviewed before you make the move to avoid paying unnecessary tax.
4. National Insurance Contributions (NICs)
Yes, you might still need to pay NICs if you’re working for a UK company or running your UK-based business from Dubai.
However, you could apply for an exemption if you plan to be in Dubai long-term, but you’ve got to know your stuff here – this isn’t a one-size-fits-all situation.
Inheritance planning: Don’t ignore the future
Dubai might not care about Inheritance Tax, but the UK certainly does.
If you’ve got UK assets, your estate could still face a 40 per cent tax bill when you pass away, even if you’re living in Dubai.
The thought of handing over almost half your estate to the taxman doesn’t exactly make for pleasant planning, does it?
Trusts, Wills, and smart estate planning are your best bet for protecting your wealth, so don’t leave it to chance.
Setting up shop in Dubai: Free zones vs mainland
If you’re heading to Dubai to expand or relocate your business, choosing the right structure is key.
Free zones are popular for expats because they offer 100 per cent foreign ownership and tax incentives.
But don’t be fooled into thinking that this is a ‘set it and forget it’ scenario.
If you operate outside the free zone, you could still face taxes and regulations, so it’s important to get the structure right from the start.
On the other hand, if you want to do business across Dubai, a mainland company might be necessary – but this could expose you to Corporate Tax.
Our advice is to weigh up your options and get professional advice before diving in.
Double taxation treaties: Your get-out-of-jail-free card
Luckily, the UK and UAE have a Double Taxation Treaty.
This is basically your safeguard against being taxed twice on the same income.
The treaty covers income, capital gains, and wealth taxes, so make sure you’re fully clued up on it.
This can save you a lot of headaches – and money – in the long run.
Our advice
Relocating to Dubai can sometimes be the best move for your business and your bank balance, but it needs careful planning.
Don’t assume you can just disappear into the desert without leaving a trail.
The UK taxman is always watching, and if you don’t sort out your residency, business structure, and estate planning, you could find yourself in hot water.
Don’t wait until the last minute.
Speak to an international tax adviser well in advance to make sure you’ve got everything sorted.
Moving abroad should be exciting, not stressful – and with the right advice, it can be exactly that.
If you’re ready to take advantage of Dubai’s tax perks, make sure you do it properly.
