Thinking of moving to Dubai? With no income tax and no capital gains tax, Dubai seems like an attractive destination for many UK residents. However, before you pack your bags, there are important UK tax considerations to keep in mind. Getting it wrong could result in unexpected tax bills down the line.

Why Dubai Appeals to UK Expats

Dubai’s tax-free status makes it a popular choice for UK expats. Many people are drawn to the opportunity to save on income and capital gains tax. However, the process of moving and adjusting your tax status isn’t as simple as it seems.

If you’re planning to relocate, there are several key areas to consider:

• Your UK tax residency status
• Double tax treaties between the UK and Dubai
• Business setup and ongoing income
• The temporary non-resident rule

UK Tax Residency – What You Need to Know

The first thing to understand is your UK tax residency status. Even if you leave the UK, you may still be classed as a UK tax resident under HMRC’s Statutory Residence Test.

If you plan to leave the UK and avoid UK tax on income or capital gains, you need to be considered a non-resident for at least five years. This is known as the temporary non-resident rule. If you return to the UK within five years, HMRC could retroactively tax any gains you made while you were away.

Double Tax Treaty – How It Works

Dubai has a double tax treaty with the UK, which can help prevent you from being taxed in both countries. However, this doesn’t mean you’re automatically exempt from UK tax.

You need to follow the correct process to claim relief under the treaty. Failing to do so could result in double taxation — a situation you definitely want to avoid.

Business Setup and Ongoing Income

If you’re an entrepreneur or business owner, how you set up your business in Dubai matters. You need to make sure your business structure complies with both UK and Dubai regulations.

Even if you stop working in the UK, you may still have income streams from the UK, such as property rental income or dividends. This income remains taxable in the UK, so you’ll need to factor it into your tax planning.

Tax on UK Property

If you continue to own UK property while living in Dubai, any rental income will still be taxed in the UK. You’ll need to report this income to HMRC and possibly pay tax on it, depending on your total income.

Similarly, if you decide to sell your UK property, you could face capital gains tax, even if you’re a non-resident. UK property sales must be reported to HMRC within 60 days of completion.

Don’t Get Caught Out by HMRC

One common mistake is assuming that leaving the UK for a short period will exempt you from UK tax. Under the temporary non-resident rule, you need to stay out of the UK for at least five years to avoid tax on gains made while abroad.

If you spend even part of a year in the UK or maintain significant ties (like property or family), HMRC may still consider you a UK tax resident. This could lead to unexpected tax bills and penalties.

Plan Ahead for a Smooth Move

Relocating to Dubai can offer fantastic tax benefits, but it requires careful planning. Speaking to a tax expert before you leave can save you from costly mistakes later.

At LSR Partners, we help expats navigate the complexities of UK tax residency and double tax treaties. We’ll ensure you’re fully prepared before you make the move.

Get Expert Advice

Thinking of moving to Dubai? Book a call with LSR Partners today. We’ll help you understand the tax rules, avoid costly mistakes, and make the most of Dubai’s tax-free benefits.

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