UK Inheritance Tax and UAE Property: What British Families Should Know

Many of my British clients move to Abu Dhabi or Dubai and buy a home here. A common assumption follows: "There is no inheritance tax in the UAE, so my UAE property is outside the UK system." That can be wrong, and the rules changed recently.

The rate, stated correctly

The standard UK inheritance tax rate is 40%, but it applies only to the part of the taxable estate above the available thresholds and exemptions — not to the whole estate and not to every property. Reliefs, the nil-rate bands and exemptions such as transfers between spouses can reduce the taxable amount significantly. "The UK takes 40% of your apartment" is not how it works.

From 6 April 2025: residence, not domicile

The big change is that the UK replaced the old domicile-based test with a long-term UK residence test. According to HMRC's guidance:

• You are a long-term UK resident if you were UK tax resident for at least 10 of the previous 20 tax years (or the 10 consecutive years before).
• While you are a long-term resident, inheritance tax can apply to your worldwide assets, including property in the UAE.
• The status continues for a period after you leave — a "tail" of between 3 and 10 years, depending on how long you were UK resident. For example, someone with 10–13 years of residence keeps the status for 3 years after leaving; the tail extends with longer residence, up to 10 years.

There are transitional rules for people who were not UK domiciled on 30 October 2024, for trusts, and for people who return to the UK. These details are exactly where an adviser earns their fee.

Pensions from April 2027

From 6 April 2027, most unused pension funds and death benefits are due to be brought into the value of an estate for inheritance tax, according to the government's technical note. For people who had planned to leave a large pension untouched as a tax-efficient inheritance, this changes the calculation.

The seven-year rule is about gifts

The seven-year rule concerns lifetime gifts: a gift may be free of inheritance tax if the giver survives seven years after making it, with tapering for deaths between three and seven years. It has nothing to do with when you sign a will. Signing a will does not start a seven-year clock.

What this means if you buy in the UAE

• Your UAE property may still form part of your UK estate if you are, or recently were, a long-term UK resident.
• Leaving the UK does not end exposure on the day you leave. The tail matters.
• How the property is held — personally, jointly, through a company — affects both UAE succession and UK tax. Get advice before choosing a structure.
• You still need a UAE will to deal with succession here; see our guide to inheritance for expats in the UAE.

My take

I see British buyers do the hard part — move, settle, buy — and skip the conversation with a UK adviser because "the UAE has no tax". The UAE side is genuinely simple. The UK side, during the years after you leave, is not. Keep a record of your residence history, ask an adviser to map your tail period, and make sure your UK and UAE wills work together.