Is There an Inheritance Tax in Dubai? A Complete Guide for UK Expats

Following the introduction of the UK’s residence-based inheritance tax regime from 6 April 2025, your liability to UK inheritance tax (IHT) may extend beyond domestic property to include overseas assets—depending on your residency history.

This guide outlines the key rules surrounding inheritance tax in the UAE and the UK, highlights scenarios where IHT may still apply to expats, and explains how you can structure your estate to minimise exposure and ensure compliance.

How Does Inheritance Tax In Dubai Work for UK Expats?

The UAE doesn’t impose inheritance tax on any domestic or foreign assets belonging to its residents, including expats. As a UK expat working in Dubai or another emirate, the UAE won’t apply inheritance tax on any part of your taxable estate.

The zero-taxation policy applies to all types of inherited assets, such as stocks, real property, and physical cash, regardless of the total value of your estate.

If you’re an expat residing in the UAE and you own assets in Dubai or a foreign country, your heirs will not be subject to UAE taxation on the assets you leave to them.

Do UK Expats Residing in the UAE Pay Inheritance Tax in the UK?

Relocating from the UK to Dubai, where there is no inheritance tax, will not automatically eliminate your tax obligations in the UK. On 6 April 2025, the previous domicile-based regime was replaced with a new residence-based model. As a result, UK inheritance tax is imposed based on whether you’re considered a:

• A long-term UK resident
• A former UK resident based abroad

Long-Term UK Resident

You’ll be deemed a long-term UK resident for tax purposes if you’ve been:

1. A tax resident in the UK for the previous 10 consecutive years
2. A tax resident in the UK for a combined 10 years or more in the past 20 years

As a long-term UK resident, your beneficiaries will be liable for inheritance tax on both your UK and foreign assets, including bank accounts, possessions, investments, and properties. Assets held in overseas trusts will also incur inheritance tax unless they were:

• Overseas on 30 October, 2024
• Placed in the trust when you had non-UK domicile status
• Overseas on the day you died or when your rights to the trust ceased

The years you spent being a UK tax resident under the statutory residence tests (SRT) before 6 April 2025 will be factored in when calculating your tax residency status under the new regime.

Note that you can maintain your long-term UK resident tax status for up to 10 years after leaving the UK. If you return to the UK after being a non-resident for 10 consecutive years, your residency status will be reassessed accordingly.

Former UK Resident Based Abroad

If you do not meet the criteria for being a long-term UK resident, inheritance tax will only be applied to your UK-based assets, such as property, bank accounts, and UK shares. It will not apply to:

• Overseas pensions (until 6 April 2027).
• Foreign currency accounts held outside the UK.
• Holdings in approved unit trusts and open-ended investment companies based overseas.

However, under the new residence-based regime, pensions will no longer be excluded from your estate for inheritance tax purposes from 6 April 2027. As a result, any unused pension funds or lump-sum death benefits could be subject to inheritance tax unless specifically excluded or protected under trust arrangements.

Your UK tax residency status can continue to affect your liability for inheritance tax on worldwide assets for a limited period after leaving the UK. This transitional period—commonly referred to as the IHT “tail”—is based on how many years you were UK resident in the 20 years prior to your departure:

When Does UK Residence-Based IHT Cease After Leaving?

This “tail” does not apply once you have been non-resident for the applicable period and meet all the conditions to end your UK tax residency status under the statutory residence test.

UK Inheritance Tax Rates

The UK applies a standard inheritance tax rate of 40% on the taxable portion of your estate that’s above the tax-free threshold. The current tax-free threshold or nil-rate band is £325,000.

Your beneficiaries won’t be liable to pay inheritance tax in the UK if:

1. The value of your taxable estate is below £325,000 for individuals or £650,000 for married couples or those in civil partnerships.
2. You leave everything above the £325,000 threshold to your spouse, civil partner, charity, or a community amateur sports club.

If you leave your home to your spouse or civil partner, it won’t be treated as part of your estate, so no inheritance tax is due.

Passing on your home to your direct descendants, such as a biological, foster, or adopted child, stepchild, or grandchild, will qualify you for the residence nil rate band and increase your tax-free threshold by £175,000.

If you leave at least 10% of your net estate to charity, a reduced inheritance tax rate of 36% may apply to the remainder of your taxable estate.

Inheritance Tax on Gifts

Inheritance tax may be imposed on gifts such as cash, personal goods, real estate, or stocks and shares you give during your lifetime if you die within seven years of transferring the gift. The amount of tax to be paid depends on:

• Your relationship with the recipient of the gift
• The timing of when the gift was made
• The value of the gift

A gift to your spouse or civil partner who is a permanent UK resident and to charities and political parties won’t incur inheritance tax. Small cash sums or possessions with a combined value below the tax-free threshold of £3,000 annually, and holiday-related gifts derived from your regular income, are also exempt from tax.

If you gave over £325,000 in gifts in the seven years before you die, the following tax rates will apply:

Other Applicable Taxes for UK Expats in Dubai

While the UAE does not impose inheritance tax, property located in the country may be subject to transactional charges or ongoing fees related to ownership, sale, or transfer. These may include:

• Value-Added Tax (VAT).
• Housing or Municipality Fees.
• Property Maintenance Charges.
• Property Transfer Fees.

Value-Added Tax

If your estate includes developed land or commercial buildings in the UAE, such as offices, shops, warehouses, or serviced apartments, your beneficiaries will owe VAT on the sale, rent, or lease of the property.

Commercial properties built for residential purposes will not be liable for VAT unless a portion of the building is designated for commercial purposes; VAT must then be paid on the rent or sale of that portion.

The standard VAT rate in the UAE is 5% of the transaction’s value.

Housing or Municipality Fees

Dubai levies a housing fee equivalent to 5% of the property’s annual rental value. This is usually paid in monthly instalments and applies to both owners and tenants.

For rental properties, tenants typically pay the fee, while owners of unoccupied or owner-occupied property may also incur it based on the assessed rental value.

Property Maintenance Tax

Owners must pay an annual service fee for the repair and preservation of common areas of the building or community, such as pools, elevators, security systems, and other infrastructure.

The property’s location and amenities will determine the rate of maintenance tax to be paid, but it is usually charged per square foot. Maintenance tax must be paid by the owner —the beneficiary you leave it to—even if the property is rented out.

Property Transfer Fees

When property changes ownership—whether through inheritance, sale, or gift—a property transfer fee (often referred to as a registration fee) may apply.

In Dubai, this is 4% of the property’s market value and is generally split equally between the buyer and the seller. However, inheritance to direct family members (e.g. spouse, children) is typically exempt from this fee at the point of transfer.

The transfer tax rate is a percentage of the property’s sale price or market value, and it varies based on the emirate where the property is situated.

Who Pays Inheritance Tax?

If you’ve determined the value of your estate and how much inheritance tax is likely to be due, you can make arrangements for how it’ll be paid in order to preserve the value of your estate and maximise the inheritance for your heirs. One way to accomplish this is through a whole life insurance policy.

Whole life insurance allows you to pay a fixed premium, either monthly or annually, in exchange for a guaranteed lump sum payout to your beneficiaries upon your death. By setting up a whole life insurance policy in trust, you can place it outside of your estate, ensuring that the payout is explicitly used to cover your beneficiaries’ inheritance tax liabilities.

In the absence of any such arrangement, the executor of your will is charged with paying the inheritance tax using funds from your bank or building society accounts, or by liquidating assets from your estate. If there is no will, payment of inheritance tax will be the duty of the administrator of your estate.

Your beneficiaries may have to pay inheritance tax themselves if:

• You gave them a gift in the seven years preceding your death, and the total value of all the gifts you gave during this period exceeds the tax-free threshold.
• The executor or administrator failed to pay tax before the beneficiary received their inheritance.
• The inheritance is placed in a trust, and the trustee cannot or does not pay.

Under the 2025 reforms, trusts are assessed based on the settlor’s residence status at the time assets were transferred. If the settlor was a UK resident during the relevant period, UK inheritance tax may apply to the trust assets—even if the trust is located offshore or the settlor later became non-resident.

How Does the UK-UAE Double Tax Agreement Affect Your UK Tax Liability?

The UK–UAE double tax agreement does not apply to inheritance tax. UK inheritance tax is governed entirely by UK domestic legislation. Because the UAE does not levy inheritance tax, there is no risk of double taxation in this area.