Relocating to the United Arab Emirates (UAE) has become increasingly popular among UK professionals and entrepreneurs in recent years. The country’s reputation for low taxation, a high standard of living, and access to a thriving international business environment make it an attractive destination for those seeking new opportunities abroad. However, despite its appeal, moving to the UAE involves a range of financial, legal, and practical considerations that should not be overlooked, particularly from a UK tax and compliance perspective.

If you are considering relocating to Dubai, Abu Dhabi, or elsewhere in the UAE, it is essential to understand both the opportunities and the potential pitfalls before making the move. Below, we outline the key financial, tax, and regulatory points to be aware of, along with some practical advice for ensuring a smooth transition.

Understanding Taxation in the UAE

One of the most frequently cited benefits of relocating to the UAE is its favourable tax environment. The UAE does not levy personal income tax, capital gains tax, or inheritance tax. Salaries are received gross, meaning your take-home pay can be substantially higher than in the UK. This is a major attraction for expatriates and one of the key reasons so many professionals choose to relocate there.

However, it is important to note that the UAE is not entirely “tax-free.” Over recent years, the country has introduced new forms of taxation as it seeks to diversify its revenue sources. The Value Added Tax (VAT) system was introduced in 2018 at a rate of 5%, applying to most goods and services. In addition, a corporate tax of 9% on business profits above AED 375,000 (approximately £80,000) came into effect in 2023, bringing the UAE closer in line with international norms. While this is still low compared with UK corporation tax rates, it is crucial for business owners to plan accordingly and ensure their affairs are structured efficiently.

Maintaining or Breaking UK Tax Residency

For many British nationals, the most complex aspect of relocating to the UAE is determining their UK tax residency status. Even though the UAE has no income tax, you could still be liable to pay UK tax on your income, depending on how your residency status is classified under the UK’s Statutory Residence Test (SRT).

The SRT considers the number of days you spend in the UK, your ties (such as family, accommodation, or business interests), and your work pattern. Leaving the UK does not automatically make you non-resident for tax purposes, and if you fail to plan your departure carefully, you may continue to be taxed on worldwide income.

To avoid unexpected liabilities, it is essential to plan your departure in advance. This means establishing clear evidence of non-residency, ensuring that your UK property and financial ties are appropriately managed, and submitting the relevant forms to HMRC (including Form P85 when leaving the UK).

Another common misconception is that you can return to the UK freely once you’ve become a UAE resident without affecting your tax status. However, spending too many days in the UK, even for family visits or business meetings, could inadvertently trigger tax residency again. Careful record-keeping and professional advice are therefore vital.

Managing Assets and Income Sources

If you retain assets in the UK such as property, investments, or pensions, you will need to consider how they will be treated once you become non-resident. UK property rental income remains taxable in the UK, even if you are no longer resident. You will be required to register under the Non-Resident Landlord Scheme, and although you can apply for rental income to be paid gross, you must still file an annual UK Self Assessment tax return.

Likewise, UK dividends, bank interest, and capital gains may still be taxable depending on the nature of the asset and your residency status. You may also need to review how your pension and retirement planning are structured. Certain UK pension withdrawals could still attract UK tax, so professional advice is essential before transferring or drawing funds.

For those establishing a business or taking up employment in the UAE, income earned locally is generally not taxed in the UAE, but you must ensure that the business structure complies with UAE regulations. Free Zone companies, for example, may offer additional tax incentives and simplified procedures, but the rules differ across jurisdictions. Choosing the correct structure can have long-term implications for taxation and ownership rights.

Financial Planning and Currency Considerations

While the UAE’s tax system is favourable, the cost of living can be high, particularly in Dubai and Abu Dhabi. Housing, schooling, healthcare, and lifestyle expenses can add up quickly. Budgeting realistically for these costs before you relocate is crucial to avoid unpleasant surprises.

In addition, because your income will typically be in UAE dirhams (AED), it’s wise to consider exchange-rate exposure if you maintain financial obligations in sterling, for instance, mortgage repayments, tuition fees, or UK investments. Using international bank accounts or foreign-exchange services can help manage this efficiently, but it’s important to factor in currency fluctuations when planning your finances.

Banking in the UAE is generally straightforward, but expatriates are often required to provide proof of residence, employment, or a visa before opening an account. It’s advisable to set this up early in your move to avoid delays in salary payments or transfers.

Social Security, Healthcare and Lifestyle Adjustments

Another consideration is the difference in social security and healthcare provisions. The UAE does not operate a social security system like the UK’s National Insurance. Expatriates typically rely on employer-provided health insurance or private coverage, as access to public healthcare is limited for non-citizens. Before relocating, ensure your employment contract includes suitable medical insurance or arrange a private plan that covers you and your dependents.

Culturally and socially, the UAE offers a cosmopolitan lifestyle with a strong expatriate community. However, laws and customs are conservative compared with the UK, particularly regarding alcohol, public behaviour, and dress codes. Understanding local laws and respecting cultural norms will help you settle smoothly and avoid potential difficulties.

Planning Your Exit and Return

A successful relocation also involves planning for the longer term, including what happens if you eventually return to the UK. Re-establishing UK residency can have tax implications, especially if you have accumulated significant wealth or disposed of assets while abroad. Keeping thorough records of income, investments, and residence periods will make your eventual return much easier to manage.

It’s also worth noting that the UK and UAE have a Double Taxation Agreement (DTA), which helps prevent the same income from being taxed twice. However, this does not exempt you from all UK taxes automatically, each source of income must be reviewed in context.

How We Can Help

Relocating to the UAE can be a life-changing decision, but from a tax and financial perspective, it demands careful planning.

At Williamson & Croft, we are experienced in international tax matters, we work with individuals and businesses moving abroad to ensure their tax position is optimised, compliant, and stress-free.

We can assist with:

  • Reviewing your UK tax residency status and advising on the Statutory Residence Test
  • Structuring your income, assets, and investments for maximum tax efficiency
  • Ensuring compliance with both UK and UAE reporting requirements
  • Managing UK property income and capital gains while living overseas
  • Advising on corporate structuring for business owners setting up in the UAE

Whether you are relocating permanently, taking up a temporary assignment, or exploring business opportunities in the Emirates, professional tax guidance can save you both money and stress.

Contact our team today to discuss your relocation plans in confidence. We’ll help you understand your obligations, avoid common pitfalls, and make the most of the financial advantages that living and working in the UAE can offer.