Guide to Taxes for Expats Returning to UK From Dubai

A country’s tax system is a crucial legal framework that every citizen is expected to abide by. Recently, Dubai has seen an influx of UK expats, making it an ideal destination to live and work.

One of the most common questions these expats have when returning to their home country is regarding the tax implications. When expats return to the UK from Dubai, their tax filing requirements will change due to the transition from a low-tax to a higher-tax jurisdiction.

The United Arab Emirates (UAE) imposes minimal personal taxation, whereas the UK applies more exclusive rules on income, capital gains, and inheritance based on residency and domicile status.

This blog will provide a detailed guide on the latest tax regulations for expats returning to the UK from Dubai. It will cover how to determine your tax residency, navigate filing obligations, and leverage available tax reliefs under the UK–UAE Double Taxation Agreement.

How Do Tax Obligations Change When Returning to the UK from Dubai?

The tax obligation of an expat returning to the UK from Dubai depends on your tax residency status. Non-residents are only liable for UK tax on UK-sourced income. Whereas UK tax residents have tax imposed on all their worldwide income and gains.

On the other hand, temporary non-residents are taxed on certain income or gains while being abroad, if both of these conditions are met:

1. 1. You return to the UK after living in Dubai for fewer than five complete tax years
2. 2. You were a UK tax resident in at least four of the seven tax years before your departure.

Clearly understanding one’s residency status is a crucial step in determining an expat’s tax requirements when returning to the UK from Dubai.

What Are the Tax Requirements for UK Residents?

UK residents should pay tax on their worldwide income. This includes any gains earned while living in Dubai. Some of the key taxes include:

• Income Tax: Anywhere from 20% to 45%, with a personal allowance of £12,570. This allowance tapers off for incomes above £100,000 and is completely removed at £125,140.
• Corporation Tax: A 19% rate applies to profits up to £50,000, with a main rate of 25% for profits above £250,000.
• Capital Gains Tax (CGT): Higher-rate taxpayers are subject to 24% on gains from residential property, 32% on gains from carried interest, and 24% on gains from other chargeable assets.
• Inheritance Tax (IHT): Estates exceeding the nil-rate band (£325,000) face a standard rate of 40%. If the estate is passed down to direct descendants, an additional Residence Nil-Rate Band (RNRB) of £175,000 may apply. This tax implication will potentially raise the total tax-free threshold to £500,000 (or £1 million for couples).
• Stamp Duty Land Tax (SDLT): For a main residence that you own as your only property, 2%-12% Stamp Duty may apply. An additional 5% on top of the SDLT rate is applicable if buying a new residential property means you’ll own more than one. For non-residents, a 2% surcharge is applicable if the residential property is in England or Northern Ireland.

Note: Since Dubai does not impose personal income tax, capital gains tax, or inheritance tax, UK expats returning from Dubai often experience a significant increase in their overall tax exposure. Professional guidance can help you understand these changes and structure your finances more efficiently.

What Tax Rules Apply to UK Non-Residents?

Non-residents in the UK are subject to tax obligations only on UK-sourced income and UK-situated assets. They may qualify for a personal allowance if (1) they are UK nationals, (2) they are citizens of the European Economic Area (EEA) or Switzerland, or (3) they reside in a country with a double tax treaty that permits the allowance.

In the UK, the personal allowance, i.e., the amount of income you can earn each year without paying income tax, reduces gradually if your income exceeds the threshold of £100,000. It is fully withdrawn once income exceeds £125,140. Additional UK tax obligations for non-residents include:

• Income Tax on UK-sourced income, such as employment earnings, pensions, and rental income
• Capital Gains Tax (CGT) applies to the disposal of UK property and certain specified UK business assets
• Inheritance Tax (IHT) on the value of UK-situated assets (like property and certain investments) when passed on after death.
• Stamp Duty Land Tax (SDLT) is charged on UK property purchases, with an additional 2% non-resident surcharge on top of the standard rates.
• Corporation Tax on profits derived from a UK permanent establishment (PE), even if the parent company is based abroad, such as in Dubai.

UK non-residents can disregard certain types of income, such as state pensions, UK dividends, and other taxable social security payments. However, disregarding this means the candidate will have to forgo the personal allowance as well. Any expat who hopes to retain their personal allowance must declare the income on their Self Assessment tax return.

How Do You Determine Your UK Tax Residency?

UK tax residency is assessed under the Statutory Residence Test (SRT). Generally, a person is considered a UK tax resident if they spend more than 183 days in the UK within a single tax year. If this criterion is not met, the SRT follows a three-tiered assessment, as follows: (1) Automatic UK Tests. (2) Automatic Overseas Tests and (3) Sufficient Ties Test.

Automatic UK Tests

A person is automatically considered a UK tax resident if they meet any of the following conditions:

• Has only home in the UK: A person’s only home was in the UK for at least 91 consecutive days, and has spent 30 or more days there in the tax year. If they had a home overseas other than the UK, they must not have spent more than 30 days there.
• Full-time UK work: An individual has worked full-time in the UK for at least 365 days, with 75% or more of those days involving work of more than three hours per day. It also implies that at least one workday must fall within the tax year being assessed.

Automatic Overseas Tests

Under the automatic overseas tests, an individual is automatically considered a non-resident if they meet any of the following criteria:

16-day test

• A UK resident in at least one of the three previous tax years
• Spent fewer than 16 days in the UK in the current tax year

46-day test

• Not a UK resident in any of the three prior tax years
• Spent fewer than 46 days in the UK

91-day test

• Worked full-time abroad and spent fewer than 91 days in the UK
• Must not have worked more than 30 days in the UK (defined as more than three hours per day).
• There is no significant break from your overseas work.

Note: You must not have taken significant breaks from full-time work abroad, excluding permitted leave such as annual, parental, or sick leave, for the 91-day test to apply. This test applies to both employed and self-employed individuals but excludes voluntary workers and crew members on vehicles, aircraft, or ships.

Sufficient Ties Test

If a candidate does not qualify under the automatic tests, the UK residency will then be assessed through the sufficient ties test. This test evaluates one’s personal and professional ties to the UK. Here are the criteria that need to be met:

• A family tie: You have a spouse, civil partners (unless they are separated), or a child under 18 who is a UK resident. Certain exemptions apply based on time spent with the child.
• An accommodation tie: You have UK accommodation available for at least 91 consecutive days and have stayed there for at least one night. If the accommodation belongs to a close relative, you must stay 16 or more nights for the tie to apply.
• A work tie: You work in the UK for 40 or more days (continuous or intermittent), with each workday involving more than three hours of work.
• A 90-day tie: You spent more than 90 days in the UK in either or both of the previous two tax years immediately before the year under consideration.
• If an individual was a UK resident in any of the three previous tax years, the country tie must also be considered.

The individual will have a country tie for a tax year if the UK is the country in which they were present at midnight for the greatest number of days in that tax year. If the greatest number of days the individual was present in a country at midnight is the same for two or more countries in a tax year, and 1 of those countries is the UK, then the individual will have a country tie for that tax year.

What Are the Tax Implications for Expats Returning During a Tax Year?

If an expat comes back to the UK during a tax year, that year isn’t automatically split. It’s only split into non-resident and resident periods if they meet HMRC’s official rules under the Statutory Residence Test. Otherwise, the whole year may count as UK-resident.

• 1. A non-resident period, during which the tax applies only to UK-source income
• 2. A UK-resident period, which applies UK tax on worldwide income and gains.

To qualify for split-year treatment, an individual must meet all of the following:

• 1. Become a UK resident under the Statutory Residence Test (SRT) for the tax year.
• 2. Meet one of HMRC’s specific split-year cases. This includes acquiring a sole UK home (your only UK residence), starting full-time work in the UK, or ceasing full-time work abroad.

When an individual qualifies for split-year treatment because they start to have a UK-only home (Case 4), they must:

• Not have their only home in the UK at the start of the tax year
• Acquire a UK home during the year and use it as their only home
• Continue meeting the test (Sole UK Home Test) until the end of the tax year.

If these conditions are not met, split-year treatment under this case does not apply, and the individual may be treated as a UK resident for the entire tax year.

How Are UK Non-Domiciled Expats Taxed When Returning from Dubai?

Previously, UK tax residents with non-domiciled status were taxed on a different basis. Under that system, income earned abroad was only taxed when brought into the UK. However, as of April 6, 2025, the UK has abolished the non-domicile tax regime and the remittance basis.

Under the new rules, most UK tax residents are taxed on their worldwide income and gains, regardless of domicile. Individuals returning after at least ten consecutive years of non-residence may qualify for the Foreign Income and Gains (FIG) regime, which provides temporary relief on foreign income and gains.

Foreign Income and Gains (FIG) Regime

UK expats returning after at least ten consecutive tax years of non-residence may qualify for the Foreign Income and Gains (FIG) regime. This provides:

• Full UK tax relief on foreign income and gains for the first four tax years of UK residency.
• No UK tax liability on such income and gains, even if remitted to the UK.

Eligibility for the FIG regime is limited to those who meet the 10-year non-residence requirement before becoming UK residents.

To help individuals adjust to the new global taxation rules, the UK also provides transitional reliefs for those who previously claimed non-domiciled status.

Transitional Reliefs for Former Non-Doms

To ease the transition from the previous remittance system, three key reliefs are available for current UK residents who previously claimed non-dom status:

• Temporary Repatriation Facility (TRF): From 6 April 2025, individuals who have been taxed on the remittance basis will be able to elect to pay tax at a reduced rate of 12% on remittances of pre-6 April 2025 FIG under a new Temporary Repatriation Facility (TRF) that will be available for tax years 2025-26 and 2026-27.
• 50% Foreign Income Reduction (2025/26 only): For those who previously used the remittance basis but are not eligible for the new FIG regime (for example, because they were resident in the UK for more than four years by 6 April 2025), there is a transitional concession: in the 2025/26 tax year only, they will be taxed on 50% of their foreign income.
• Asset Rebasing: Individuals who paid UK tax under the remittance basis between 2017 and 2025 can rebase foreign assets held on April 5, 2019, to their market value on that date, reducing future capital gains tax exposure.

Why These Changes Matter for Returning Expats from Dubai

For UK nationals and residents returning from Dubai, these changes significantly affect how foreign income and assets are treated for tax purposes. Under the old remittance system, only money brought into the UK was taxed, allowing some flexibility for those who kept income abroad.

With the new rules, worldwide income is subject to UK tax from day one, making careful planning essential. The FIG regime offers a valuable exception for long-term non-residents, helping ease the financial impact during the first few years back in the UK.

After understanding the tax implications and reliefs for returning expats, it is essential to know the formal steps required to notify HMRC upon re-entry to the UK.

What Are the Requirements for Notifying HMRC When Returning to the UK?

Upon returning to the UK from Dubai, an individual must inform HM Revenue and Customs (HMRC) promptly. This allows HMRC to determine the UK tax residency, assess eligibility for split-year treatment, and review State Pension status.

Updating the UK Address with HMRC can be done via the Personal Tax Account or the Self-assessment Registration Process. This notifies HMRC of the change in residency and ensures that tax coding and return filing are correct.

An expat returning to the UK from Dubai may also qualify for the UK State Pension if they have at least ten qualifying years of National Insurance (NI) contributions. A qualifying year can include:

• Employment in the UK with NI contributions paid;
• Years NI credits received (e.g., due to unemployment, parenting, or illness); or
• Voluntary NI contributions made while living abroad.

When notifying HMRC and submitting Form P85, it is crucial to record the exact return date, as this determines residency status and the period for which UK tax applies.

UK-UAE Double Tax Treaty: Does it Affect UK Tax Liability Upon Repatriation?

The double tax agreement (DTA) between the UK and the UAE prevents income from being taxed twice. While the UAE currently imposes no personal income tax, the treaty provides structural protections in case tax laws change.

The treaty establishes which country has primary taxing rights for income types such as employment income, pensions, dividends, and business profits. Since the UAE has no personal income tax, income earned in Dubai isn’t taxed there. Whether the UK taxes that income depends on your UK tax residency status.

If the UK has primary taxing rights, UK tax may apply, but relief is given for any foreign tax paid (if applicable). One situation in which both countries could claim taxing rights is when a business has a permanent establishment (PE), such as a fixed office, branch, or dependent agent, in the other country. In such cases:

• Income attributed to the PE is taxed only in the country where the PE is located.
• The other country must either exempt that income or provide relief for it under the treaty.

Example: If a UK company operates a branch in the UAE, the UAE has taxing rights over the branch’s profits, subject to UAE corporate tax thresholds (e.g., AED 375,000 exemption). The UK would typically exempt these profits or provide a tax credit under the DTA, avoiding double taxation.

Key Takeaways

Returning from Dubai to the UK significantly changes one’s tax obligations. As a UK tax resident, an expat in Dubai is liable for tax on worldwide income and gains, including those earned abroad. This contrasts with the UAE’s low- or zero-tax environment.

An individual’s UK tax position depends on their residency under the Statutory Residence Test (SRT) and, for returning non-domiciled individuals, eligibility for the FIG regime, which provides four years of full relief on foreign income and gains if the 10-year non-residence condition is met.

Other considerations include split-year treatment, permanent establishment rules, and the UK–UAE Double Taxation Agreement, which protects against double taxation.

Simplify Your Tax Obligations with AIX

At AIX Investment Group, we specialize in helping UK expats return confidently to their home country. Our cross-border advisors offer guidance on tax residency, transitional reliefs, and strategies to optimize your financial position. Whether returning permanently or planning ahead, we ensure your wealth is structured efficiently and in compliance with UK tax laws.

For more information, get in touch with one of our financial consultants at +97145460000 or schedule a meeting at a time convenient for you.

Frequently Asked Questions

How to avoid the 60% tax trap in the UK?

Paying more into your pension is one of the most simple and efficient ways to avoid the 60% taxable income in the UK. It can help restore some or all of your personal allowance.

What is the UK exit tax?

The proposed ‘exit tax,’ also known as a ‘settling-up charge,’ would impose a 20% tax on unrealized gains from UK business assets when an individual stops being a UK tax resident. This includes shares in private companies and other financial instruments, even if they are not sold at the time of departure.

What’s the difference between withholding tax and income tax?

Withholding tax is the portion of your paycheck that your employer deducts and remits to the government as a prepayment toward your income taxes. Anyone who earns income is responsible for paying income tax. When you file your tax return, you calculate your total income tax, subtract any withholding tax already paid, and either pay the balance or receive a refund.

Can I get all my tax back if I leave the UK?

If you overpaid UK tax, you may be able to claim a refund from HMRC.HMRC generally allows claims for up to four years after the end of the tax year in which the overpayment occurred. Even if you left the country some time ago, you may still be owed money, especially if you didn’t realise you were eligible or never filed a claim.

What is the 5-year rule for expats in the UK?

If a non-resident becomes a resident again in the UK during a period of five years, any assets that were sold after leaving the UK will be taxed upon return. If an expat becomes a resident after this specified five-year period, any asset disposed of while being a non-resident will not be subject to tax.