Celebrating 25 years

Read about our history

Brit expats in EU under HMRC fire

“British expats have been urged to ensure that their tax affairs are in order,” reports the Telegraph this week, “as HM Revenue & Customs (HMRC) escalates efforts to target those who live abroad.” UK expats living in Dubai can breathe a sigh of relief (provided their tax affairs are above board!). It’s Europe that the British taxman is targeting. The HMRC “massively stepped up the use of EU laws” in 2017 to make over 1000 requests for help to foreign tax authorities, leading to the recovery of £5.7m in tax.  

UK expats in Dubai – what about my tax affairs?

British expats settled abroad are only taxed on income produced in the UK – rental income from a Buy-to-let property, for example. Other UK-specific taxations may apply – and especially in the case of a British Last Will & Testament where the dreaded Inheritance Tax (IHT) will apply. Note that a Will obtained in Dubai with the DIFC Wills Service (the favoured option for expats) applies only to Dubai, not to anywhere else, including other Emirates or the UK. No IHT is paid on the first £325k of assets. This is called the “nil rate band.” The basic rate of IHT is 40%. Key areas of IHT which can be handled to reduce the tax bill levied on your inheritance include:
  • Marriage & civil partnership – gifts are not taxed between partners, and partners of the deceased can claim any surplus from the deceased’s nil-rate band.
  • Pensions – not considered part of your financial estate; any pension savings can be passed on tax-free.
  • Charity – all monies left to a charity are IHT-free and, if you allocate more than 10% of your legacy to a charity, you will qualify for a reduction of 4% in the standard rate of IHT (40%) levied on the rest of your estate ie. 36%.

The grey area – Contractors beware!

Brits who are most likely to get snarled up in the confusion are contractors working outside of Britain on a semi-permanent basis. Kevin Austin of Access Financial confirms that, “the Revenue’s rules in this area are very complicated and it can be hard for people to know whether they are resident or not.” The danger for British workers lies in the complexity of the HMRC’s own regulations. It’s easy enough to end up owing tax to the UK even though you are convinced that you qualify for the status of “automatically overseas.” The best way to navigate the HMRC’s “183 days” test and the ‘sufficient ties” test is to hire a guide; in cross-border tax planning, financial advisors come into their own.

Ready to chat with
a specialist?

Get started

You may also be interested in

2024 general election

The 2024 General Election: What the Outcome Could Mean For Your Finances

The 2024 general election is just around the corner. The battle lines have been drawn; now it’s your chance to have your say on the UK’s future. Still unsure which...

Read more
interest rates

Interest rates: what are they, and how do they work?

Key points: Interest rates show the cost of borrowing and how rewarding it is to save. Inflation is the rate at which the price of goods and services increases over...

Read more
Double tax agreements explained

Double tax agreements – what are they and how do they affect expats?

Key points Double tax agreements prevent you from being taxed twice on the same income. The UK has the world’s largest network of double tax agreements. Double tax agreements provide...

Read more
Investment funds

Investment Funds: What you Need to Know

Key points Investment funds pool money from multiple investors to buy assets. Funds offer a passive and active option to cater to different goals. Investment funds offer a straightforward way...

Read more