UK expats fleeing Middle East could face UK tax residence

UK expats fleeing the escalating conflict in the Middle East could trigger UK tax residence and potentially a “substantial” tax bill, Hoxton Wealth has warned.

It noted that record numbers of high net worth (HNW) Brits had relocated to Dubai in recent years, with the United Arab Emirates (UAE) one of the primary destinations for HNWs leaving the UK.

Hoxton Wealth said many UK nationals leaving the UAE were finding that the UK’s Statutory Residence Test was “far less forgiving” than they expected.

Even a stay of a few weeks could be enough to classify an individual as a UK resident for the 2025/26 or 2026/27 tax year, Hoxton Wealth global head of tax, Claire Spinks, warned, and Dubai expats accustomed to zero income tax could see a dramatic impact.

“People move to Dubai expecting a low-tax environment,” Spinks stated. “But if they accidentally trigger UK residence, their worldwide income can suddenly fall back into the UK tax net.”

Hoxton Wealth calculated that a Dubai-based executive earning £400,000 a year could face a UK tax bill of more than £160,000 if they triggered UK tax residence.

The firm warned there was a common misconception that the 60-day ‘exceptional circumstances’ rule offered protection, as while HMRC may disregard days spent in the UK due to emergencies, the threshold for what qualifies was “extremely high”.

“HMRC’s interpretation of exceptional circumstances is often far narrower than people expect,” Spinks said.

“While countries such as Iran and Iraq are currently subject to strict ‘no travel’ advisories, the UAE is presently classified under ‘all but essential travel’.

“Because the Foreign Office is not formally advising evacuation, HMRC is likely to count days spent in the UK towards the Statutory Residence Test, regardless of wider regional instability.”

As HMRC is able to identify someone returning to the UK through passport and border entry data, Hoxton Wealth highlighted that returning expats may unknowingly accumulate UK days that affect their residency status.

It noted that HNWs coming back to the UK without considering the impact on their Statutory Residence Test could fall back into the UK tax net.

“The real risk isn’t necessarily today,” Spinks said. “It’s nine to 18 months down the line when tax returns are filed and claims for exceptional circumstances are reviewed.

“After Covid we saw a significant increase in HMRC enquiries around these claims. Many individuals assumed they were safe until HMRC began questioning their UK day counts and the wider factors affecting their residence position.”

People who do not have ‘exceptional circumstances’ accepted may need to rely on complex treaty claims, and if they were unsuccessful they could face UK tax on employment income, investment income and other worldwide earnings.

“The Statutory Residence Test does not pause during periods of geopolitical tension,” Spinks stated.

“For expats earning in low-tax jurisdictions, returning to the UK - even temporarily - can have dramatic tax consequences.”

Spinks urged individuals to review their residence position carefully before travelling and to seek professional advice.

“Where leaving the region becomes necessary, expats should not assume the UK is the only option,” she said.

“In many cases, relocating temporarily to another country rather than returning to Britain could prevent accidentally triggering UK tax residence.”

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