Navigating tax responsibilities when moving abroad can be complex. This article breaks down the key considerations for UK residents relocating to the UAE.
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Relocating to a new country can feel like stepping into a thrilling adventure filled with fresh opportunities. But for UK residents heading to the UAE, that excitement can quickly morph into a whirlwind of confusion, especially when it comes to taxes.
So, what should you really know about your tax responsibilities? How can you sidestep those unexpected financial pitfalls? Let’s break it down for a smoother transition.
Your UK Tax Residency: What You Need to Know
The first hurdle in your relocation journey is figuring out whether you’ll still be a UK tax resident after you make the move.
Enter the Statutory Residence Test, which sets out clear criteria based on how many days you spend in the UK, your personal ties, and your family or job connections back home. Just because you’ve packed your bags doesn’t mean you’ve cut all ties with the UK.
For example, if you plan to hop back to the UK frequently or keep a UK job, you might still be classified as a tax resident. This means you’ll be taxed on your global income and gains. On the flip side, if you do become a non-resident, you might qualify for “split-year treatment,” which divides your tax year into parts where you’re a resident and non-resident. Gains made after your departure could escape UK tax, but any earnings leading up to it will still be on the tax radar.
Your UK Property and Investments: What’s the Deal?
Another crucial aspect to consider is what happens to your UK property once you settle in the UAE. If you decide to keep ownership of your home, selling it later might trigger capital gains tax (CGT) based on any increase in value while you’re a non-resident. Rules have shifted since April 2015, now requiring non-residents to pay CGT on UK residential property sales, and you’ll need to report this within 60 days of the sale.
If you plan to rent out your property while living abroad, keep in mind that rental income is still subject to UK tax. You might also need to engage with the Non-Resident Landlord Scheme, which means tax will be deducted at the source. Plus, your investments—like shares or funds—could also bring tax implications if you sell them while still under UK tax jurisdiction.
Planning Ahead: Inheritance Tax and Staying Compliant
As you gear up for your move, inheritance tax (IHT) is a critical piece of your financial puzzle. Even if you’ve waved goodbye to the UK, your estate could still be subject to IHT for up to ten years if you were a long-term resident. It’s a smart move to revisit your will and estate plans to dodge any unintended consequences.
Don’t forget to inform HMRC of your departure by filling out form P85. This step clarifies your tax status and helps reduce any potential confusion about your obligations. With tax regulations being notoriously complex—especially with major changes to non-domicile taxation coming in April 2025—getting professional advice before you make the leap is a wise decision.
Making the move to the UAE can open up a world of possibilities, but smart tax planning today can save you from unwelcome surprises tomorrow. Take a close look at your residency status, property implications, and inheritance tax responsibilities to ensure your transition is as seamless as possible.
