How even just one phone call or email could land expats fleeing Dubai with a £75,000 tax bill. Here’s how to find out if you are liable (and how to avoid it)

Dubai’s alluring tax free status has enticed hundreds of thousands of Britons to move to the desert metropolis in a bid to maximise their income.

But any wealthy expats who are now planning to leave Dubai, even just for a short break amid the ongoing Middle East conflict, could return to the UK with an unwelcome extra piece of luggage: a tax bill in the tens of thousands.

Just one phone call or email about work once they reach the UK could land them with a bill worth £75,000 on an average banker salary, even if they are just visiting friends and family, tax experts are warning. That is because HM Revenue & Customs has strict tax rules around working on British land.

Similarly, anyone who is moving back and has been away for less than six years could face a large tax charge, especially if they sell a property in Dubai.

Charlie Sosna, tax head at Mishcon de Reya, a top law firm used by celebrities, says that anyone who has been living in the sun-splashed emirate for less than six years should be ‘particularly cautious’ when planning a return as they’re likely to be hit with a tax demand.

As the US-Israel war on Iran enters its third week and drone attacks on Dubai continue, many worried Britons have been scrambling to get home. On Monday, an Iranian drone hit a fuel tank near Dubai Airport, sparking a massive fire.

Authorities in the United Arab Emirates have reportedly indicated they will show leniency and allow expats to spend more time abroad without losing their tax status in a bid to incentivise residents to return.

However, there’s no guarantee that HMRC will offer any such tax breaks – in fact, experts warn it is highly likely it won’t.

While tax implications might not be at the top of your mind when you’re planning an escape from Iranian missiles, experts are warning it’s vital you understand the rules to avoid unexpected bills later on.

When expats are on the hook for taxes

There are two key factors that will determine whether you are liable for UK tax when returning to the UK from Dubai: how long you’ve lived there and what family ties you have in Britain.

Eamon Shahir, co-founder of Taxd.co.uk and a leading expert in UK-UAE cross-border tax, says the tax rules catch many people out.

If you’ve been away for ten consecutive years, you are in the best position. This is because after a decade of living and working in Dubai – and being a non-resident in the UK – you are entitled to a new four-year tax exemption.

Since April 2025, you can claim a four-year tax holiday on foreign income when you return to the UK under new rules called the Foreign Income and Gains (FIG) regime. This means that for four tax years after becoming a UK resident, most foreign income and capital gains are exempt, even when the money is brought into the UK.

However, this generous rule will not apply to most British expats in Dubai, as they typically left during the pandemic or in the wake of Brexit.

Anyone who has been away for more than a full tax year and less than five years will be the worst affected. This is because they are considered a temporary non-UK resident, as they haven’t been away for very long.

This means if you decide to return to the UK, your resident status will be reinstated. You will then be hit with retrospective tax bills on the sale of any properties or shares you made while you were in Dubai.

‘There is no grace period,’ Mr Shahir explains. Most will be liable for worldwide UK taxation from the day they land here.

This usually applies if you’ve been away fewer than five years but also relies on a series of complicated tests based on the number of days you spend in the UK and whether you still have family ties and property here.

Anyone who has been away for between five and ten years will be classed as a non-resident for tax purposes and will only have to pay UK tax on income they earn within the UK. However, this means if they sell a home in Dubai while living back in the UK, they could be liable.

Will any tax concessions made by the UAE protect British expats?

Authorities in the UAE have signalled they may show leniency for expats who are leaving for a short period of time to avoid the conflict in the Middle East, according to reports in the Financial Times.

Generally, expats are required to be present in the UAE for a minimum of 183 days in any 12-month period to qualify as tax residents. However, these rules could be relaxed in the hopes of luring residents back.

But this does not protect any British expats from receiving large tax bills from HMRC if they return.

Mr Sosna, of Mishcon de Reya, says: ‘The key point is that the UAE’s changes alone will not protect against scrutiny elsewhere, so anyone in this position should seek advice before assuming their status is secure.

‘Those returning to the UK in light of the current situation should be aware that they may trigger a UK capital gains tax liability on gains made whilst in Dubai, as well as an income tax charge on certain forms of income received during that time, both of which they may have assumed would fall outside the UK tax net.’

Anyone returning could face income tax

Dubai has gained a golden status as one of the world’s top tax havens. Those living in Dubai do not pay any personal taxes on their salaries – a huge perk compared to the high levels of taxation in the UK.

HMRC allows something called ‘Split Year Treatment’, which means that in practice any income earned before you leave Dubai should not be liable for income tax in Britain.

If you return to the UK and do even the tiniest bit of work, though, UK income tax could apply.

‘Anything you earn after arrival is fair game,’ Mr Shahir warns.

He says the most dangerous thing is if you intend to work from the UK, even for a few weeks, HMRC could tax your income under the ‘work from home’ rule, which states that work done in Britain should be taxed in Britain.

Mr Shahir explains: ‘If you return to the UK for a few weeks to escape the conflict but continue taking calls or answering emails for your Dubai employer, HMRC considers that UK-sourced income.

‘You could inadvertently bring your entire Dubai salary into the UK tax net just by checking in with the office while on British soil.’

One check-in could mean you fail the ‘Split Year Test’ and will be liable for tax on all your worldwide income (including any salary you earn from a Dubai-based employer) and gains for the full year.

That would trigger an instant £27,432 income tax bill on a typical £100,000 banker salary. Anyone earning between £50,270 and £125,140 a year pays tax at a marginal rate of 40 per cent in the UK. 

Workers do not pay tax on the first £12,570 of their earnings, which is known as the ‘personal allowance’.

But from £100,000 this allowance is tapered away at a rate of £1 for every extra £2 of income they make, until they reach £125,140 — when they no longer have any tax-free allowance. This works out at an effective tax rate of 60 per cent.

Those earning above £125,140 are additional rate tax payers and would be hit with a marginal rate of 45 per cent. 

If you combine this £27,432 with a capital gains tax bill and charges on dividends, someone earning £100,000 could face a tax bill worth £75,000. 

Capital Gains Tax

Capital gains tax, charged on any gains you make above £3,000, is the ‘major sting’ for expats returning to the UK, Mr Shahir warns.

Capital gains tax is payable on the profit made when you sell or dispose of an asset, such as a second home or shares that have increased in value.

Anyone who is classed as a ‘temporary non-resident’ because they have been away for less than five years must be particularly wary. If they sell any assets, such as shares or a property while in Dubai thinking it was tax-free, they are in for a nasty shock when they move to the UK.

HMRC can charge you capital gains tax on those gains the moment you move back.

This is a particular problem for those who sold businesses, shares or non-UK assets such as homes during a period overseas.

Many people who moved to Dubai in recent years formed a financial plan on the assumption that they would remain non-resident in the UK for a long period of time, says Sandra Jeevan, partner at international accountant UHY.

But well-crafted plans have been thrown in the air for many. Plans may have changed but the tax rules haven’t, Ms Jeevan warns.

Assets held before you moved to Dubai and sold whilst in the UAE will be taxed retrospectively on return.

For example, someone who sold a UK business for a £100,000 gain while in Dubai could be liable for £23,000 in capital gains tax when they return.

Similarly, if you sell or have sold a property you own in Dubai or elsewhere in the world while you are away, you’ll be liable for UK capital gains tax on any gains you made unless you can prove it was your main residence during the period you were away.

To claim a home is your main residence, you would need to have lived there for 90 days in each tax year. There’s also a nine-month grace period at the end of the time you own the property where you can live elsewhere and still sell without incurring capital gains tax.

If you are found to be liable for the tax, you’ll pay 24 per cent tax on gains above £3,000 if you’re a higher rate taxpayer.

Tax on dividends and investments

If you have a company of your own in Dubai or elsewhere and pay yourself with dividends, you could suddenly be liable for taxes on these when you return.

Similarly, if you get income from an offshore fund, or a return from a certain type of life insurance policy, you could end up paying tax in the UK on these.

If you return within five full tax years, the UK can effectively ‘bring back’ and tax foreign dividends received during your time away.

For example, if you paid yourself £20,000 in annual dividends in Dubai for four years, you’d be charged more than £25,000 in tax on these dividends when you return, assuming that you are a higher rate taxpayer.

British investors have a £500 dividend tax allowance, which was reduced from £1,000 in April 2024.

Chancellor Rachel Reeves announced a two percentage point hike to the dividend rate, which will kick in next month from April 6. Basic rate taxpayers will be charged 10.75 per cent tax, higher rate taxpayers will be charged at 35.75 per cent and the additional rate will remain unchanged at 39.35 per cent.

This means that someone earning £100,000 a year, who receives £20,000 of annual dividends, you would pay £6,573.75 a year in tax at the current 33.75 per cent rate.

Over four years, this adds up to £26,292 in tax. 

Will HMRC make an exception?

Many hope HMRC will be lenient on those returning to the UK from the Gulf states, as this is a period of war and uncertainty.

The taxman does allow for ‘exceptional circumstances’ where it will allow people to be in the UK and not become liable for tax, but it isn’t clear whether these rules will apply to those returning from Dubai.

Mr Shahir says: ‘Historically, HMRC has set an incredibly high bar for exceptional circumstances.’

The tax office typically only makes concessions in circumstances such as civil unrest or natural disaster where the Foreign, Commonwealth & Development Office (FCDO) advises to avoid all travel to the region.

Because there is no government-imposed travel ban on Dubai, it is unclear that this will apply, so those returning are likely to face the normal tests to decide whether they are tax residents or not.

What can expats do to avoid a large tax bill?

Talk to experts about residency tests

Understanding this is the best way to avoid unexpected liabilities or penalties later on.

Even if you’ve already flown back, take advice to understand how you’ll be classed when it comes to residency.

Mr Sosna says: ‘Anyone concerned they might fall within these rules should seek professional advice as soon as possible, even if they have already returned to the UK. It is important that they fully understand their position.’

Consider a ‘bridge stay’

Not back yet? Mr Shahir suggests a ‘bridge stay’ if you’re near to the five- or ten-year tax mark so that you aren’t liable for a huge and unnecessary bill. This means staying in another foreign country until you have become a non-resident.

Cyprus and Malta are two of his low-tax tips but take advice on your own circumstances.

Consider tax breaks

There are a number of tax breaks available to those returning to the UK from abroad to help them deal with any large sudden bills.

For example, one useful tax break Mr Shahir points to is the Temporary Repatriation Facility (TRF).

This allows you to pay a flat rate of 12 per cent on any gains you made before 2025, rather than facing the usual complex forensic accounting that can lead to 45 per cent charges.

There may be other tax breaks that apply to you but they will depend on your personal circumstances.

Don’t rush it

It’s hard to make level-headed decisions when the world has changed overnight but making calm and considered choices now will reap rewards later.

Mr Sosna says: ‘It is critical that people do not make rushed financial decisions and understand the tax implications of returning.’