Moving to Dubai: when do you stop being UK tax resident?

He left the UK for Dubai and saved £14,625 in tax. Same business. Same clients. Same work.

The only thing that changed was where he was taxed and getting that right came down to one day.

That figure is one client's result on his own facts. What follows is how the UK rules on residence and timing work.

Why can one day change your UK tax position?

Move your residence status by even a day too late, and it's not a saving. It's a UK tax bill on income you thought you'd already left behind.

The Statutory Residence Test works on day counts. HMRC's guidance note RDR3 says that if you were UK resident in one or more of the 3 previous tax years, you are non-UK resident for a tax year in which you spend fewer than 16 days in the UK. If you work full-time overseas, the test is fewer than 91 days in the UK, fewer than 31 days on which you work more than 3 hours in the UK, and no significant break from the overseas work. At the other end, 183 days or more in the UK makes you UK resident without looking at any other test.

Between those limits the sufficient ties test applies, and it is banded by days. For someone who was UK resident in one or more of the 3 previous tax years, RDR3's table shows 46 to 90 days in the UK needs at least 3 UK ties to make you resident, and 91 to 120 days needs at least 2. The ties it lists are family, accommodation, work, a 90 day tie and a country tie. Each band starts at a fixed number of days, so one extra day in the UK can put you in the next band.

What does UK residence mean for income earned abroad?

HMRC's guidance says residents normally pay UK tax on all their income, whether it is from the UK or abroad, and non-residents only pay tax on their UK income.

How is the tax year you leave treated?

HMRC's manual says that under the test you are either UK resident or non-UK resident for a full tax year. If you start to live or work abroad during the year, the year is split into a UK part and an overseas part, but only if your circumstances meet specific criteria. It also says you do not have a choice over whether split year treatment applies.

RDR3 says that if you leave the UK in a year in which you are UK resident, you need to consider split year cases 1 to 3, and that you must meet all the conditions of a case for it to apply. HMRC's guidance adds that you will not get split year treatment if you live abroad for less than a full tax year before returning to the UK. It says you may be non-resident the day after you leave the UK, depending on your situation and how split year treatment applies to you.

Coming back early has its own rules. RDR3 says that if you return after a period of temporary non-residence, you may need to pay tax in the year you return on certain income and gains received while you were away. Its list includes distributions from closely controlled companies, and the rules do not apply where the period of non-residence is more than 5 years.

What has to be in place before you go?

This is why "just move abroad" isn't a plan. The residence position, the business structure, and the exact timing all have to line up before you go, not after.

If you're a business owner thinking about relocating, get the position checked first.

HMRC also has to be told. Its guidance says you must tell it if you are leaving the UK to live abroad permanently, or going to work abroad full-time for at least one full tax year. If you file a Self Assessment tax return you do that on the residence section (form SA109), and if you do not you fill in form P85.

The case for getting your UK position efficient first is in optimise your UK tax before a move to Dubai. The company side of a move is covered in tax when you move abroad, and residence more generally is on our international tax page.

The residence rules and HMRC's guidance change, and your status depends on your own day counts, ties and dates in each tax year, so this is general information rather than advice on your move. If you are planning to leave the UK, talk to us before you set the date.