“How can I pay less tax? . It’s a common question at BM &CO Accountants.  Moving to another country might seem like a joke, but with UK taxes getting more complex, it’s something to think about. Lots of big companies, like Apple, Google, and Microsoft, have been using countries with low taxes for years to cut what they owe on their profits from overseas. Now, with less red tape in some places, it’s getting easier for smaller businesses to do this too. This article looks at one of those places: Dubai, in the United Arab Emirates, and especially the good things about its Free Zone Companies.

The UK’s recent heatwave, with temperatures up to 29.3°C in London, has many Britons thinking about warmer places. But it’s not just the hot weather; rising UK taxes are making professionals and investors really think hard about their money plans

One client commented during a year end review meeting  “Look, if the government’s going to keep playing with the tax rates, I might as well pay them (taxes) in a country where I can enjoy the sun all year. I’d rather sweat in the heat than suffer through endless grey winters!” This did make us chuckle 

Dubai, with its good tax rules and Free Zones, is attracting people who want to pay less UK tax. This article will look at the main tax differences in 2025 that are making people interested. For simplicity we have excluded Free Trade Zone Companies.

1. Personal Income Tax: Comparing the UK and Dubai

When people think about moving, a big thing is how much of their income they get to keep. There’s a big difference here between the UK and Dubai.

United Kingdom: The More You Earn, the More They Take

The UK has a progressive income tax system. This means that the more you earn, the higher the tax rate. Here’s how it works:

• Personal Allowance: £12,570 (no tax)
• Basic Rate: 20% on earnings between £12,571 and £50,270
• Higher Rate: 40% on earnings between £50,271 and £125,140
• Additional Rate: 45% on earnings above £125,140

So, as your income goes up, you pay a bigger share of it in tax. The idea is to share the wealth, but it means high earners give a lot of their income to the government.

Plus, there’s National Insurance Contributions (NICs), which also reduce your take-home pay. NICs pay for things like state pensions, adding to the tax you pay. When you get your payslip in the UK, you can see how much income tax and NICs take away from what you earn.

Dubai: Keep What You Earn

Unlike the UK, Dubai (which is part of the UAE) has no personal income tax. People keep all their earnings, whether it’s in Dirhams, Pounds, Dollars, or any other money.

This is a big plus. People like doctors, lawyers, engineers, and tech workers get to keep 100% of their salary. Business owners keep all their profits, which encourages them to invest and grow.

It also changes how people think about money. In the UK, a lot of income goes to taxes. In Dubai, people see a clear link between how hard they work and how much they earn, which can be a big motivator.

2. Corporate Tax: What It Means for Businesses

How businesses are taxed is a big deal when they decide where to set up or expand. This part compares how companies are taxed in the UK and Dubai.

United Kingdom: Balancing Money for the Government and Attracting Businesses

In the UK, companies pay corporation tax on their profits. The rates have changed over the years, as the government tries to get enough money but also keep the UK attractive to businesses. For 2025, the rates are:

• Lower Rate: 19% on profits up to £50,000 (for small businesses and new companies)
• Higher Rate: 25% on profits over £250,000 (for bigger, more established companies)
• Marginal Relief: This is a way of gradually increasing the tax rate on profits between £50,001 and £250,000, so it’s not such a big jump to the higher rate.

These rates show the government trying to balance its need for money with the need to bring in and keep businesses, which create jobs and help the economy.

Dubai: A Place for International Business

The UAE has recently brought in a federal corporate tax, designed to be competitive worldwide. The structure is:

• Low Rate: 0% on profits up to AED 375,000 (about £80,000 as of May 2025)
• Competitive Rate: 9% on profits over AED 375,000

3. Value Added Tax (VAT): How It Affects Costs

Value Added Tax (VAT) is a tax on most goods and services, and it’s another important part of how things are taxed.

United Kingdom: A Big Part of What Things Cost

VAT is a major part of the cost of living and doing business in the UK. The standard VAT rate is 20%, and it applies to most goods and services. For every £100 spent, £20 goes to the government as VAT.

The UK does have lower VAT rates: 5% for things like children’s car seats and home energy, and 0% for essentials like most food and children’s clothes. While these lower rates help consumers, the 20% standard rate adds a lot to both personal and business expenses, making things more expensive.

Dubai: More Affordable for People and Businesses

Dubai has a much lower VAT rate. Since 2018, VAT has been just 5% on most goods and services. This is a big difference from the UK, and it makes a big difference to the cost of living and doing business.

With a 5% VAT rate, only £5 of every £100 spent goes to the government, compared to £20 in the UK. This helps keep prices down, which is good for both consumers and businesses. It makes things more affordable and reduces the financial burden on companies.

Like the UK, Dubai also has VAT exemptions and zero-rated sectors, including healthcare and education. This further reduces costs in these important areas.

4. Capital Gains Tax (CGT): What It Means for Investments

How investment profits are taxed is important for building wealth.

United Kingdom: Taxing Investment Profits

In the UK, when you sell assets like property, stocks, or art for a profit, you might have to pay Capital Gains Tax (CGT). CGT rates depend on your income level and the type of asset you sell. As of 2025, the CGT rates are:

• Residential Property Gains: 18% for basic-rate taxpayers, 28% for higher-rate taxpayers
• Other Assets: 10% or 20%, depending on income level (generally 10% for basic-rate taxpayers, 20% for higher-rate taxpayers)

These rates can significantly reduce how much profit you make on your investments, especially if you’re a higher-rate taxpayer selling property, which might discourage you from investing.

Dubai: No Tax on Investment Profits

Dubai doesn’t tax capital gains for individuals. Investors keep all the profit when they sell assets.

The fact that there’s no CGT can greatly increase your long-term investment returns and encourages investment in things like property and stocks.

5. Inheritance Tax (IHT): Passing on Your Wealth

Inheritance tax, which you pay when someone dies, is another key thing to consider.

United Kingdom: A Big Tax

The UK taxes estates worth more than £325,000 when someone dies. The standard Inheritance Tax (IHT) rate is 40%.

For example, if an estate is worth £500,000, the IHT would be £70,000 (£175,000 taxed at 40%), leaving £430,000 for the people who inherit. IHT can really reduce the value of what people inherit.

Dubai: A Different Approach

Dubai doesn’t have inheritance tax. The full value of an estate goes to the heirs.

However, if there isn’t a proper will, inheritance is handled according to Sharia law. Sharia law has specific rules for how assets are divided among family members, which can be different from how things are done in the UK. For example, Sharia law might say that spouses, children, and parents get fixed shares, which might not be what the person who died wanted.

So, while there’s no inheritance tax in Dubai, it’s very important to have a will to make sure your assets are distributed the way you want, rather than according to Sharia law.

6. Administrative and Compliance Considerations

Besides tax rates, it’s also important to think about how easy it is to follow the tax rules.

United Kingdom: Dealing with Complexity

The UK tax system is very complex, with lots of complicated rules. For example, the rules about what expenses self-employed people can claim are tricky, and you often need professional advice.

People and businesses often need accountants, tax advisors, and lawyers to make sure they’re following the rules and don’t make mistakes. The complexity of the UK tax code makes things harder for everyone and can be time-consuming and stressful.

Dubai: A Simpler System with Important Rules

Dubai’s tax system, while still developing, is generally simpler than the UK’s. However, businesses do have to follow rules that are in line with international standards. These include:

• Corporate Tax Registration: Businesses must register for corporate tax and file and pay their taxes on time.
• Economic Substance Regulations (ESR): These rules require businesses that do certain activities in the UAE to show they have a real economic presence there, to prevent tax avoidance.
• Anti-Money Laundering (AML) Requirements: Dubai has strict AML rules to fight financial crime. Businesses must take steps to identify and report any suspicious transactions.

While these rules do create some administrative work, they also bring Dubai in line with global best practices and make it a more responsible and transparent place to do business. They show that Dubai is serious about compliance and wants to attract legitimate businesses.

Conclusion: Looking at Dubai’s Financial Situation

As the UK deals with a high tax burden, Dubai has a lot to offer. It has both a good climate and a tax-efficient environment, especially for Free Zone Companies. These zones, where businesses can sometimes get complete tax exemptions, are a big draw for international businesses looking to pay less tax.

For professionals, business owners, and investors who want to escape the UK’s high taxes, Dubai offers several attractive options, including moving there, setting up businesses to take advantage of Free Zone benefits, and investing in a tax-efficient way.

BM & Co Accountants partners with specialists in advising clients on international tax matters. With expertise in both the UK and Dubai tax systems, we provide tailored guidance to support informed decision-making. Whether you are considering a move to Dubai, aiming to optimise your UK tax position, or exploring the opportunities in Dubai’s Free Trade Zones, our firm can assist you.

Ultimately, whether Dubai’s financial climate is right for you depends on your individual situation and financial goals. However, its tax advantages, combined with a strong economy and strategic location, make Dubai a compelling destination for those seeking better financial opportunities.

Contact us today for a consultation to explore how we can help you achieve your financial goals and navigate the opportunities available in Dubai.