Moving to Dubai from the UK
Recent years have seen many UK residents attracted to the idea of relocating to Dubai or finding a position in Dubai to take advantage of a number of benefits (not just the weather). The good news is that there is no tax at all in Dubai but you may have tax obligations in the UK. In this article, we look at the tax position of someone who is departing the UK to move to Dubai.
Telling HMRC you are moving to Dubai
You must tell HMRC if you are leaving the UK to live abroad. If you usually complete a self-assessment tax return, you will need to report your residency status to HMRC on your tax return.
If you do not usually complete a self-assessment tax return, you need to fill inform P85 online.
UK Tax for residents in Dubai
If you are not a UK resident, you do not pay UK tax on income or gains you make outside the UK.
You only pay UK tax on your UK income, as a non-resident. For example, you could be taxed if you decide to rent out your UK home or receive income from renting out any other properties in the UK.
As there is no tax payable in Dubai, this would mean that there is only the UK tax payable on UK income as a resident in Dubai.
Tax on UK rental properties
In most cases, the source of UK income for a non-UK resident is income from letting properties in the UK. As the property would be situated in the UK, the income received from letting the property will be subject to UK income tax.
UK Income tax rates are 20% on income between £12,571 and £50,270, 40% on income between £50,271 to £125,140 and 45% on income more than £125,140.
If you are a British citizen or a citizen of most European countries, the first £12,570 of your UK income will be tax-free as you would be entitled to the UK personal allowance.
Capital Gains Tax (CGT) can be payable if you make a gain from selling a UK property. You will make a gain, if you sell the property for more than the amount that you paid for the property.
The UK CGT rates when selling residential properties are either 18% or 28% depending on whether you are a higher rate or basic rate taxpayer.
Inheritance Tax
After you depart the UK, you may still be UK domiciled and this is the basis to determine your UK inheritance tax status.
You will be treated as domiciled in the UK if either of the following applies:
- Living in the UK for 15 of the last 20 years.
- A permanent home in the UK at any time in the last 3 years of their life.
If you are non-UK domiciled, then IHT will only be payable on UK-based assets e.g., UK property or bank accounts.
The result of a non-UK resident being treated as UK domiciled, is that all their worldwide assets will become part of their estate for UK IHT purposes.
This means that, the value of your IHT estate in excess of the IHT nil rate band, currently £325,000, may be subject to a death tax charge at the rate of 40% when you pass away.
Visiting the UK after your departure
If you come back to visit the UK after you have moved to Dubai, it would not mean that you automatically become a UK resident. You can visit the UK without becoming resident again depending on why you visit and how long you visit for.
If you work full-time in Dubai, you can usually visit the UK for up to 90 days as long as you do not work for more than 30 of these days in the UK.
You might become a UK resident again if you start working in the UK or buy a new home.
There are a number of other factors which are called ties which will help determine how many days you can visit the UK before you are deemed to be resident in the UK for tax purposes. If you are unsure about your tax residency position, you will need to complete the Sufficient Ties Test to determine your tax residency position.
At UK Landlord Tax we can assist you with completing your Sufficient Ties Test to determine your current residency position and we can also provide you with confirmation of how many days you can visit the UK for in the future without being deemed to be UK resident for tax purposes.
If you have any further queries on this subject please reach out to us at 01902 711370 or email enquiries@uklandlordtax.co.ukif you have any questions or require our expert assistance.
