New UAE – UK Double Taxation Treaty

On the 1st January 2017 a new UAE-UK double taxation treaty came into force, which could potentially enable UK expats to mitigate UK income tax on their pensions.

All UK pensions in payment are subject to UK income tax at a member’s marginal rate, however the new DTA could potentially mean that British expats, who are over the age of 55 and reside in the UAE can take an income, or even cash out of their full pension pot, entirely tax-free.

Essentially those living outside of the UK and residing in a jurisdiction where there is a double taxation treaty with the UK can benefit from only paying the local rate of tax. And of course UAE residents do not pay income tax.

The treaty is effective for UK personal tax purposes from 6 April 2017.

The DTA specifies, that other than government pensions, “pensions and other similar remuneration paid to a resident of a Contracting State shall be taxable only in that State”.

But an individual must be regarded as non-UK resident and must also be UAE resident at the point of withdrawal.  

A word of warning though for those thinking of cashing in. UK pensions are not subject to inheritance tax.  Any money that you remove from your pension and keep elsewhere, either as cash or to purchase investments or property for example, will automatically fall into the IHT arena.  As ever you should always seek independent, qualified financial advice.