Moving from UK to Dubai to avoid tax

Every year hundreds of British entrepreneurs are moving from the UK to Dubai to avoid tax and enjoy the rich lifestyle of Dubai. Zero Income tax and zero corporate Tax in the free zone has been attracting hundreds and thousands of Brits.Tax saving is a major reason but second best reason to go there and enjoy year-round sunshine. 

But before you make this big move and leave your country, it’s always a good idea to understand UK tax implications after moving from UK to Dubai. Like it’s normal to wonder “Will I pay tax in the UK if I move to Dubai?”

The idea of zero income tax in Dubai seems great but you may have tax liability in the UK even when you become a Dubai resident. Feel surprised? It can be true to your case. So, It’s time to find out if you really avoid tax when moving from the UK to Dubai. Let’s find out everything regarding this matter in detail below.

Do I need to pay tax in the UK when I am earning income in Dubai?

When you move from UK to Dubai, and become a Dubai resident then the tax law of that country will be applicable on your income. Since there is no income tax, it means that you won’t be paying anything for tax and it means keeping all the income and a high amount of disposable income in your hand. What a relief!

Must understand: Is Dubai really tax free?

UK income tax

Now if you move back to Dubai, then you become a UK Tax resident again and it’s when tax is applicable on your worldwide earning. You may have a property in the UK and you don’t sell it but put it on rent. You are a non-resident landlord of the property, and rental income is taxable in the UK. 

Let’s tax another example, if you have a business in the UK and Dubai both then you won’t pay for income generated in UAE but will definitely pay the taxes on profit you earned from all your UK activities.

As a Dubai resident, you become non-resident in the UK. Your UAE income remains tax-free but you will pay tax on your UK-sourced income. You need to complete a self-assessment tax return for your UK Income. You may be liable to pay corporation tax if you run a limited company in the UK.

If you want to reduce your tax burden in the UK after moving from UK to Dubai, you can consult with our tax experts at Prospr. We will help you reduce your tax liabilities and enjoy tax saving in the best possible manner.

In the UK, progressive tax system is applied to individuals. If you have a high income, you pay more tax and vice versa. The income  tax rates in the UK for basic income is 20 percent and 45 percent for the highest income bracket.

UK capital gains tax (CGT)

If you decide to permanently move from UK to Dubai, you will be selling all your UK assets. Now profit you earn from these assets will be subject to UK CGT. The rate of tax depends on your tax status but usually it’s either 18 percent or 28 percent. You can get tax exemption based on your unique circumstances too, so you better consult with a tax expert in your home country.

Inheritance tax implications

You may not be interested to think about inheritance tax but you never know when you will encounter a circumstance where understanding of inheritance tax becomes essential. Now once you become a Dubai residency, you will still be regarded as ‘Domiciles in the UK”.

What does domiciled mean? It means a place that a person considered as their home country for legal and tax purpose.Now if you are born in the UK and move somewhere else but the moment you come back here, you become a domicile for UK tax purposes. 

In that case, your worldwide tax will be subject to UK Inheritance Tax in case you die.You remain domicile when you live in the UK for at least 15 or 20 years or you have a permanent home in the UK for at least 3 years of your life.

But when you are non-UK Domicile and you die then tax will be applicable to only UK based assets like your property or bank accounts. 

Transferring funds to the UK

If you have family in the UK and you want to transfer funds to them then if you are non-domicile UK resident, you can take tax advantages on remittance basis. On the flip side, when you are a UK Domicile, you can’t get any tax benefit. What Tax British business owners pay in Dubai?

You find out that there is zero income tax in Dubai but what about business tax or corporate tax. Well, if you run your business in a free zone then you won’t be paying any corporate tax. 

Do you know :Why are so many Brits moving to Dubai?

You may ask. What is a free zone? Well, it’s a designated area where businesses can set up their business to enjoy different business advantages such as low tax, 100 percent foreign ownership of business, exemption from custom duties, no need of local sponsor and full control over business.

Setting up a company in freezone is a pretty straightforward and simple process. You can start your business without minimum capital requirements. Since the government is quite supportive in Free Zones, you won’t find it tricky to grow your business there.

Now even when you start a company in Mainland, you may not need to hire a local sponsor as many business activities don’t need one. As far as corporate tax is concerned, you will pay only 9 percent corporate tax as as specified in Cabinet Decision No. 55 of 2023

Must know: How to register for corporate tax in Dubai

Now you will pay 9 percent when your taxable income is more than AED 375,000 which is around 80,484 GBP. But this rate is quite lower than the 25 percent corporate tax rate in the UK.

You also need to pay VAT -Valued Added tax in Dubai. No matter if you set up your business in Free Zone or Mainland, you will pay 5 percent VAT for selling goods or importing goods within the UAE. 

What happens to my tax status when I move back to the UK from Dubai?

If you move back from Dubai to the UK, then you need to notify HMRC about your return and update your tax records. Your residency status will be changed then.

On the flip side, if you are only visiting the UK then you can do that for 30 days or a maximum of 9- days. During that time, you remain non-resident in the UK and there won’t be any tax liabilities that you need to worry about. 

Your residency status in the UK depends on different factors such as amount of time you spend in this country, your intention regarding stay and your domicile status. It’s always a good idea to consult with an expert to get a clear picture about your UK Residency status or tax liabilities during your stay in the UK.

Also read: Moving from UK to Dubai Comprehensive guide

Stay compliant in the UK and UAE With Prospr

If you are moving from UK to Dubai to avoid tax then you should have a clear idea about the situation where tax is applicable on you and where you have zero tax liabilities. Our business consultants are well versed with local laws and regulations. Thereby, we can help you better understand all the rules you need to follow to avoid penalties and stay compliant in both the UK and UAE.

Is moving from UK to Dubai to avoid tax?

Zero income tax and low corporate tax are two magnets that are attracting British entrepreneurs for moving from UK to Dubai before you make a big move you must understand that every individual scenario is different. At Prospr, we advise British investors and entrepreneurs to take personalized workshops, which are designed to help you better understand Dubai Dynamic market. 

Making a permanent move to Dubai from the UK is a big decision and you shouldn’t take it only on the basis of zero income tax. There are many other cost factors and lifestyle things that you need to take into account for example your family, your lifestyle in the UK, your properties there, etc.

We don’t want you to make the wrong move. Instead, we have planned these workshops to help you understand whether this move will be as profitable as you think it will be. Interested to join our workshops? Send us inquiries to hello@Prospr.ae