For British expatriates living in the Gulf region, keeping abreast of UK tax residency rules has never been more critical. The year 2025 has ushered in sweeping changes to the UK tax system, with significant implications for those who maintain connections to Britain while living abroad. In this guide, Lead Solution Wealth Management explores the latest updates to UK tax residency rules and offers practical strategies for Gulf-based British expatriates to navigate these changes effectively.
The End of Domicile: A Fundamental Shift in UK Tax
The most significant change taking effect from 6 April 2025 is the abolition of the domicile concept for tax purposes. The UK government has replaced the remittance basis of taxation, which was based on domicile status, with a new tax regime based on residence. This represents a fundamental overhaul of a system that has been in place for over two centuries.
For Gulf-based expatriates, this change means that your tax liability will now be determined almost exclusively by your residency status rather than by your domicile of origin or choice.
What Has Changed?
- The concept of domicile has been removed as a connecting factor for UK tax purposes
- A new residence-based regime has replaced the previous system
- The remittance basis of taxation has been abolished
- Inheritance tax is now determined by long-term residence rather than domicile
Understanding the New Statutory Residence Test (SRT)
The Statutory Residence Test (SRT) has now become the primary means of determining your UK tax status. Under this test, an individual is automatically non-UK resident if they spent less than 16 days in the United Kingdom in the tax year (for those who were UK resident in one or more of the three prior tax years).
For those who have not been UK residents in any of the previous three tax years, the threshold increases to 46 days. However, for Gulf expatriates who frequently visit the UK, these relatively short periods can create unexpected tax liabilities.
Key SRT Thresholds to Monitor:
- The 16-day rule: If you were UK resident in any of the previous three tax years, spending 16 days or more in the UK during the current tax year could make you UK resident again
- The 46-day rule: If you were not UK resident in any of the previous three tax years, the threshold increases to 46 days
- The 91-day rule: For those working full-time overseas, spending 91 days or more in the UK or working in the UK for 31 days or more can trigger UK tax residency
- The 183-day rule: Spending 183 days or more in the UK during a tax year automatically makes you UK resident
The New Four-Year Foreign Income and Gains Regime
To maintain the UK’s attractiveness for international talent, the government has introduced a new internationally competitive residence-based regime, providing 100% relief on foreign income and gains for new arrivals to the UK in their first four years of tax residence.
To qualify for this relief, you must not have been a UK tax resident in any of the 10 consecutive years prior to your arrival.
This provides a valuable planning opportunity for Gulf-based expatriates considering returning to the UK for a period, allowing them to maintain tax efficiency during their initial years of resettlement.
Implications for British Expatriates in the Gulf
The Gulf region, with its zero or low-tax environment, has long been attractive to British expatriates. However, the changes to UK tax residency rules present both challenges and opportunities.
Potential Risks:
- Day counting becomes more critical: Even short visits to the UK could now trigger tax residency
- Property ownership concerns: Having available accommodation in the UK could strengthen your ties for SRT purposes
- Family connections matter more: Having close family in the UK (spouse, civil partner, or children under 18) creates stronger ties under the SRT
- Digital nomad complications: Working remotely from the UK even for short periods could trigger the work tie under the SRT
Tax Planning Opportunities:
- Strategic timing of UK visits: Carefully planning the duration and timing of UK visits to remain under the relevant day thresholds
- Four-year regime for returnees: Potentially benefiting from the new four-year relief if returning to the UK after a substantial period abroad
- Transitional repatriation facility: Taking advantage of the temporary opportunity to repatriate foreign income and gains at reduced rates
New Inheritance Tax Rules for Gulf Expatriates
The changes to inheritance tax (IHT) rules are particularly significant for wealthier expatriates. From 6 April 2025, IHT will be charged on worldwide assets for individuals who have been UK resident in ten out of the last twenty tax years.
Interestingly, individuals who have been UK resident for between ten and thirteen years will remain within the IHT net for three tax years after leaving the UK, with this period extending by one year for each additional year of residence. Those who have been UK resident for twenty years will remain subject to IHT for ten years after departure.
This creates a unique planning opportunity for British expatriates who have been living in the Gulf for many years, as they may now find themselves outside the scope of UK IHT on their non-UK assets if they have been non-resident for a sufficient period.
Practical Steps for Gulf-Based British Expatriates
In light of these changes, here are six practical steps for British expatriates in the Gulf to consider:
- Maintain meticulous records: Keep detailed logs of days spent in the UK, including midnight presence, travel patterns, and work activities
- Review UK property arrangements: Consider whether your UK property arrangements create a ‘home’ for SRT purposes and whether restructuring is appropriate
- Assess family ties: Evaluate how family connections in the UK might affect your residency status under the SRT
- Plan strategic returns: If considering a return to the UK, evaluate whether you qualify for the four-year foreign income and gains regime
- Consider IHT planning: Review your worldwide asset base and exposure to UK IHT under the new residence-based rules
- Document non-residency formally: Submit form P85 to HMRC when leaving the UK, and file UK tax returns as appropriate to establish your non-resident status
Special Considerations for Different Gulf Countries
While the Gulf Cooperation Council (GCC) countries share many similarities, there are important distinctions in how the UK tax residency rules might apply depending on your specific location:
Saudi Arabia
Saudi Arabia’s strict residency rules and the need for exit/re-entry visas can actually help establish clear patterns of non-UK residency, potentially strengthening your position under the SRT.
United Arab Emirates
The UAE’s freehold property ownership laws for expatriates can create complexities for IHT planning under the new residence-based rules for those with significant property investments in Dubai or Abu Dhabi.
Qatar
Qatar’s employment contracts often specify a maximum number of days outside the country, which can help with UK day counting and demonstrating non-UK residence.
Bahrain, Kuwait, and Oman
These countries generally have similar considerations to the above, though specific local regulations may affect your ability to structure your affairs optimally from a UK tax perspective.
Looking Ahead: Future Tax Trends
The shift from domicile to residence for tax purposes represents a fundamental realignment of the UK tax system. Experts anticipate that these changes may prompt an influx of expatriates and returning nationals to the Gulf as a result of the UK’s abolition of non-domicile tax status from April 2025.
For British expatriates already settled in the Gulf, maintaining non-UK residency is likely to become increasingly important as a tax planning strategy, with careful attention to the SRT thresholds being essential.
For expert guidance, contact Lead Solution Wealth Management
At Lead Solution Wealth Management, we specialise in providing tailored tax and wealth planning advice to British expatriates across the Gulf region. Our team of experts has extensive experience in navigating the complexities of the UK tax system and can help you develop a personalised strategy to optimise your tax position in light of the 2025 changes.
Contact us today for a confidential consultation to discuss how these critical updates might affect your specific circumstances.
