What UK tax will you pay if you move to Dubai?

More than 120,000 expat Brits are reported to live in Dubai, the UAE's second-largest emirate (Abu Dhabi is the biggest). Many are attracted by Dubai's sunny climate and its family-centred, clean and safe environment (serious crime is almost non-existent).

The beaches are beautiful, and while its traditional Arabic heritage remains, Dubai is a multicultural metropolis with modern infrastructure and awesome architecture. It is home to the world's tallest building (the 830-metre-high Burj Khalifa) and the largest shopping mall on Earth (shopping is another reason why people love Dubai).

Dubai attracts about 14.3 million international visitors each year and about 1.5m of them are from the UK. Many Brits continue to relocate to Dubai, attracted by excellent career opportunities, a tax-free salary and a higher standard of living. If you're thinking about moving to Dubai, you'll probably be wondering about visas and how much tax you'll pay.

Which visas do I need to live in Dubai?

• Freelancers, the self-employed and skilled employees can apply for a UAE Green Visa, a residency visa that enables someone to sponsor themselves for five years, they don't need sponsorship from a UAE national or employer. The Green Visa is renewable for five more years upon expiry.
• Freelancers or self-employed people must get a permit from the Ministry of Human Resources and Emiratisation (MHRE). They also need proof of their degree or diploma and evidence of self-employed income for the previous two years of at least 360,000 UAE Dirhams (about £77,000), or proof that they have enough money to sustain their stay in the UAE.
• Skilled employees must have a valid employment contract, salary of at least 15,000 AED (£3,200) a month, a degree or equivalent and their occupation must be of a sufficiently high professional level according to the MHRE.
• A two-year standard employment work visa is available to those coming to work in the UAE's private sector. The employer applies for this.
• Over-55s who wish to retire in the UAE can apply for a five-year Residence Visa, which is renewable, although they will need significant property assets or income.

Telling HMRC you're moving to Dubai

You must tell HMRC (the UK's tax authority) if you're leaving the UK to live abroad permanently or going to work abroad full-time for at least one full tax year (6 April to 5 April). This applies to Dubai, of course.

If you don't normally complete a self assessment tax return and you've already left the UK, you need to fill in form P85 online. If you're still in the UK, fill in form P85 offline and include Parts 2 and 3 of your P45 form (get these from your employer).

If you usually complete a self assessment tax return (eg because you're self-employed or a landlord), you'll also need to complete the 'resident' supplementary page (form SA109) to report your residence and domicile status once you're living in Dubai.

You must use commercial software to file all forms – you won't be able to do it online via GOV.UK (it's not available to people who live outside the UK). Alternatively, you can get a UK-based accountant to do it for you, but you'll have to pay a fee. Doing it yourself is cheaper and is reasonably easy. HMRC will let you know if you're owed a refund for the tax year during which you left the UK.

If you don't normally submit a tax return, you'll first need to register for self assessment by 5 October following the tax year in which you had taxable UK income or you could be charged a penalty.

Need to know! You also need to let your local council know if you're leaving the UK to live in Dubai or anywhere else, so that you're not charged Council Tax (if applicable). Your UK citizenship will not be affected by moving and you can usually vote in UK elections.

Paying UK tax if you're a non-resident

If you're "non-resident" in the UK for tax purposes, no UK tax is payable on any income or gains that you earn or make in Dubai.

• You're usually non-resident for UK tax purposes if you: spent less than 16 days in the UK (or 46 days if you have not been a UK resident for the three previous tax years); worked abroad full-time (averaging at least 35 hours a week) and spent less than 91 days in the UK and no more than 30 of them were spent working.

Although there is no income tax in Dubai, you'll need private medical cover – it's a legal requirement. If applicable, your employer must provide basic health insurance, but that doesn't extend to dependents (eg a spouse or children) and it comes from deductions from your salary. If you work for yourself or don't work, you must arrange your own private medical cover.

If you're non-resident in the UK for tax purposes because you've moved to Dubai, UK tax may be payable on income earned in the UK. Taxable UK income can include:

• pension payments
• rental income
• savings interest
• wages from UK employment

Need to know! If you don't claim any tax expenses, you do not pay tax on the first £1,000 of UK property rental income or income from UK self employment.

How much UK income tax will you pay?

You won't pay tax on your total UK taxable income until it is more than the tax-free personal allowance of £12,570 (2023/24 figure) in a tax year. You don't get the tax-free personal allowance it if your taxable income is more than £125,140 a year.

You pay tax on your profit, which is the amount of UK income that remains once tax expenses or allowances have been deducted. If you rent out more than one UK property, the profits or losses from them all are added together to arrive at a total figure and you will be taxed on that basis.

The amount of UK income tax you pay is determined by the income tax band into which your total UK taxable income falls.

• The basic rate (20%) is payable on annual UK taxable income between £12,571 and £50,270.
• The higher rate (40%) is payable on annual UK taxable income of between £50,271 to £125,140.
• The additional rate (45%) is payable on annual UK taxable income over £125,140.

You may be able to claim a range of tax reliefs and allowances to reduce your taxable UK income. Income tax is no longer automatically taken from interest on savings and investments. Non-residents do not usually pay UK tax on the UK state pension or interest from UK government securities (ie gilts).

How to report your taxable UK income from Dubai

If you live in Dubai (or elsewhere overseas) and receive taxable income from UK property or have other taxable UK income to report to HMRC, you must fill out and file a self assessment tax return (SA100), as well as the resident supplementary page (the SA109 form) to report your residence and domicile status.

• If you have UK taxable rental income to report, you'll also need to fill out and file the SA105 form.
• If you have taxable UK income from self-employment, you'll also need to fill out and file the SA103 form.
• You may have to file other supplementary pages, depending on your income sources.

You can't use HMRC's online services to file your self assessment tax return and any supplementary pages if you're living in Dubai (or anywhere else overseas). You can either fill out your forms by hand and send them by post, get a UK-based tax professional to do it for you or you can use commercial self assessment filing software, which is a cheaper option and it's simple enough.

• The filing deadline for a paper self assessment tax return is midnight on 31 October following the end of the tax year to which the tax return refers.
• The UK tax year runs from 6 April until the following 5 April.
• If you use filing software and choose to file online, the deadline is midnight on 31 January following the end of the tax year to which the tax return refers.
• Another key advantage of using filing software is you get more time (ie three months) to complete your self assessment tax return.

Paying UK tax on UK rental income

If you earn more than £1,000 from renting out property in the UK, it can be subject to income tax, once your taxable income goes over the personal allowance (£12,570 a year in 2023/24). Capital Gains Tax can also be payable if you make a "chargeable gain" (ie after selling you get more than the amount you paid for the property or land).

If you live outside of the UK for six months or more a year, HMRC classes you as a "non-resident landlord", regardless of whether you're a UK resident for tax purposes or not. You can choose to get the full amount of rent from your tenant(s) and pay tax on it via Self Assessment. If so, you need to apply by filling out the NRL1i form and sending it to HMRC.

The other option is for the tax to be deducted by your letting agent or tenant, who will pay it to HMRC on your behalf. They will deduct the basic rate tax from the monthly rent (minus any expenses if an agency) and give you a certificate at the end of the tax year detailing the tax they've deducted.

You'll need to keep accurate records of your rental income and expenses, because HMRC can ask for proof of the self assessment figures you report. You must keep your records for at least five years after the filing deadline for each tax year.

Need to know!If you report your UK rental income via self assessment from Dubai, as a landlord, you can claim a range of "allowable expenses" to cover things you pay for to rent out your property. Claiming these can reduce your UK tax bill significantly. Visit GOV.UK for official guidance on paying UK tax on UK property rental income.

Copyright 2023. Sponsored post by Mike Parkes of GoSimpleTax - tax return software that can help you manage your self assessment.