High-net-worth individuals in Dubai often prioritise estate planning to protect their global assets and avoid unexpected tax liabilities. While the UAE does not impose inheritance tax, the situation can be more complex for UK residents living in Dubai, as UK inheritance tax rules may still apply.
This has become even more important with the introduction of the UK’s residence-based inheritance tax rules from 6 April 2025. The exposure of an expat to UK inheritance tax (IHT) can extend to include overseas assets, based on residency history.
In this blog, we will provide a clear breakdown of IHT for UK expats in Dubai, explain when it may be payable, and outline strategies to help structure your estate to minimise tax exposure while remaining compliant.
The UAE does not impose any inheritance tax on either domestic or foreign assets held by its residents, including expats. This rule applies to a UK expat working or living in Dubai or any other emirate.
This zero taxation policy applies to all types of assets, including property, investments such as stocks, and physical cash, regardless of the total value of the estate. In addition, assets passed on to heirs are not taxed in the UAE, whether the beneficiaries are based locally or abroad.
Despite the zero-tax policy in the UAE, relocating as an expat does not free you from inheritance tax obligations in the UK. Since the domicile-based regime was replaced in 2025, a new residence model is in place, which assesses eligibility for IHT based on whether you are a:
You will be considered a long-term UK resident for tax purposes if you have been:
As a long-term resident, your estate will be liable for IHT on both UK and foreign assets. This includes bank accounts, possessions, investments, and properties.
Assets held in overseas trusts may still be subjected to UK inheritance tax. However, non-UK assets can remain excluded from IHT if they were:
Transitional provisions may also apply to certain assets that were already situated outside the UK as at 30 October 2024, subject to specific conditions.
Any years spent as a UK tax resident under the statutory residence tests (SRT) before 6 April 2025 will be considered when calculating your long-term tax residency status under the new statutory law.
Please be informed that you may remain within the scope of UK inheritance tax on your worldwide assets for up to 10 years after leaving the UK as a long-term resident. However, if you wish to return to the UK after being a non-resident for 10 consecutive years, the residency status will be reassessed as needed.
For individuals living outside the UK (including expatriates residing in Dubai) who do not meet the criteria for long-term UK residency, UK inheritance tax (IHT) will only apply to UK-based assets, such as UK property, UK bank accounts, and shares in UK companies
The following non-UK assets are generally outside the scope of UK inheritance tax, provided you are not classified as a long-term UK resident:
Under the new residence-based regime, pensions may no longer be excluded from your estate for inheritance tax purposes from April 6, 2027. Consequently, any unused pension funds or certain death benefits may be subject to IHT depending on the final rules and structure of the pension.
Additionally, your UK tax residency history may continue to influence your exposure to IHT on worldwide assets for a period after leaving the UK. This transitional period, known as the IHT ‘Tail,’ can last for up to 10 years, depending on the number of years you were a UK resident in the 20 years before your departure.
Years UK resident (last 20) → IHT tail after leaving
After departure, the UK inheritance tax continues to apply for a limited period, depending on the length of prior UK residence history. Referred to as the “ IHT Tail,” it broadly corresponds to the number of years you were a UK resident in excess of 10 (within the previous 20 tax years), subject to a maximum of 10 years. This extended exposure ceases once you have remained a non-UK resident for the required duration and have fully met the conditions for non-residence under the Statutory Residence Test.
In the UK, inheritance tax (IHT) is charged at a standard rate of 40% on the portion of your estate that exceeds the nil-rate band, currently £325,000 per individual. Your estate will not be liable for inheritance tax if:
Gifts given during your lifetime, such as cash, personal belongings, real estate, or stocks, may be subject to IHT if you die within seven years of giving them. The tax depends on:
If you make gifts exceeding £325,000 within the seven years prior to your death, the following inheritance tax rates will apply:
Although the UAE does not impose inheritance tax, property located in the country may be subject to transactional charges or ongoing fees related to ownership, sale, or transfer. These may include:
If your estate includes developed land or commercial properties in the UAE, such as offices, shops, warehouses, or serviced apartments, VAT may apply to the sale, rent, or lease of the property. Residential properties are generally exempt unless a portion is designated for commercial use; in that case, VAT is applied to that portion’s rent or sale. The standard VAT rate in the UAE is 5% of the transaction’s value.
Dubai imposes a housing fee equivalent to 5% of the property’s annual rental value. This fee is usually paid monthly and applies to both owners and tenants. For rental properties, tenants generally cover the fee, while owners of unoccupied or owner-occupied properties may also pay the fee based on the assessed rental value.
Owners are responsible for an annual service fee to maintain and repair common areas of the building or community, including pools, elevators, security systems, and other infrastructure. The cost of these depends on the property’s location and amenities, and the fee is typically calculated per square foot. The maintenance fee must be paid by the owner or , in case of inheritance, the beneficiary, even if the property is rented.
When the ownership of a property changes through inheritance, sale, or gift, a transfer or registration fee may apply. This rate in Dubai is generally 4% of the property’s market value, typically split between the buyer and the seller.
However, transfers to direct family members, such as a spouse or children, are usually exempt at the point of inheritance. The exact transfer fee varies depending on the emirate where the property is located.
Here is a breakdown:
Once you have determined the value of your estate and the likely inheritance tax (IHT) liability, you can make arrangements to manage payment, helping to preserve the value of your estate and maximize the inheritance for your beneficiaries. One common approach is through a whole life insurance policy. Such a policy allows you to pay a fixed premium, either monthly or annually, in exchange for a guaranteed lump-sum payout to your beneficiaries upon your death.
By placing a whole life insurance policy in trust, the payout can be kept outside your estate, ensuring it is used specifically to cover inheritance tax liabilities.
If no such arrangement exists, the executor of your will is responsible for paying IHT using funds from bank accounts, building society accounts, or by selling assets from the estate. If there is no will, the responsibility falls to the estate administrator.
Beneficiaries may be required to pay inheritance tax themselves if:
Under the 2025 reforms, trusts are assessed based on the settlor’s residence at the time assets were transferred. If the settlor was a UK resident during that period, UK inheritance tax may apply to the trust assets, even if the trust is offshore or the settlor later became non-resident.
The UK–UAE double tax agreement does not apply to inheritance tax. UK inheritance tax is governed solely by UK law. Since the UAE does not levy inheritance tax, there is no risk of double taxation in this area.
As one of the leading financial advisory and consultancy firms in the Middle East, we have experience guiding UK expats living in Dubai on inheritance tax and cross-border estate planning.
We provide clear, tailored guidance to help you structure your estate efficiently, minimize potential tax exposure, and remain fully compliant with UK regulations, giving you confidence that your wealth and legacy are protected for future generations.
UK expats in Dubai are not subject to inheritance tax under UAE law, but may still be liable for UK IHT depending on long-term UK residence in the 20 years prior.
Long-term UK residents may owe IHT on worldwide assets, while former residents are liable only on UK-based assets. UK Pensions will be included in the estate for IHT from 2027, and trust assets are assessed based on the settlor’s UK residence at the time of transfer, even if the trust is offshore.
Executors typically pay IHT from estate funds, though whole life insurance policies held in trust can be used to cover liabilities. Certain gifts made within seven years of death may also incur tax. Property in Dubai may attract VAT, housing fees, maintenance charges, and transfer fees but these are local transactional or ownership charges, not inheritance tax. The UK-UAE double tax treaty does not affect inheritance tax.
The UAE-UK double taxation agreement (DTA), in effect since 2016, determines which country has the primary right to tax specific types of income and provides a framework for resolving any tax disputes between the two jurisdictions.
UK pensions can be received in Dubai without incurring tax, meaning they are paid gross with no UK or UAE tax liability, provided you are non-resident in the UK and meet any applicable HMRC reporting requirements.
If you return to the UK within five years, you may be required to pay tax on certain income or gains earned while you were non-resident. This does not include wages or other employment income earned abroad.
You can receive up to £10,000 in foreign employment income, provided it has been taxed in the country where it arose. Foreign investment income up to £100 is also exempt, as long as it has been subject to tax in the country of origin. But these exemptions are subject to HMRC rules.
The first step after receiving an inheritance is to engage qualified professionals to help manage it. Define your short- and long-term financial goals and create a clear, sustainable plan before making any large or high-risk investments.
Gifting can reduce IHT liability if done >7 years before death (Potentially Exempt Transfers), but leaving the money as an inheritance allows you to retain control over your assets during your lifetime. Through wills and trusts, you can set the terms for distribution, ensure your financial needs are met, and simplify estate management for your beneficiaries.
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