Paying yourself from a UK company after you move to Dubai

What actually changes when you move, and what does not

When you move from the UK to Dubai and become non-UK resident, the biggest change is not to your company but to how the money you take out of it is taxed in your hands. The company carries on much as before. You, on the other hand, cross a line in the tax system, and the way your salary and your dividends are treated changes the day you become non-resident, not the day you land in Dubai. Those are not always the same day, and the gap between them is where a lot of the confusion sits.

Most owners I speak to expect the opposite. They assume that moving abroad does something clever to the company and very little to them personally. In practice it is the other way round. The company stays exactly where it was in the eyes of the tax office, and the useful change is entirely on your side of the line, in how you are taxed on what you draw.

This note explains what changes, what does not, and the order you have to get right for any of it to work, because the benefit is real but it is conditional, and the condition is your own residence.

Your UK company does not move when you do

A UK company stays UK tax resident and keeps paying UK corporation tax wherever you run it, because its residence was fixed when it was incorporated. Under the incorporation rule in section 14 of the Corporation Tax Act 2009, a company formed in the UK is UK tax resident for as long as it exists, regardless of where its director sits or where the work is done. Moving to Dubai does not move the company, and it does not switch off the company's corporation tax.

The full version of this point, including what happens if you try to solve it with a UAE company instead, is in the note on running a UK business from Dubai and the detail of the residence test itself in the central management and control analysis.

So the profit your company makes is taxed in the UK before you take a penny of it, whether you live in Surrey or in Dubai Marina. That is worth saying plainly, because it sets up the whole point of what follows. The saving from your move does not come from the company paying less. It comes from what happens when the after-tax profit is passed to you.

Dividends are where the real change happens

Once you are genuinely non-UK resident for a whole tax year, dividends from your UK company are treated as 'disregarded income', and your UK income tax on them is capped at the tax deducted at source, which for dividends is nil. This is the change that makes the move worthwhile for an owner, and it is set out in section 811 of the Income Tax Act 2007. The rule limits a non-resident's UK income tax on certain kinds of investment income, and dividends from a UK-resident company are on the list, alongside interest and a few other categories.

HMRC's own guidance in its Savings and Investment Manual confirms it directly: the liability on that income is limited to the tax deducted from it, treated as deducted, or the tax credit it carries. Dividends since 2016 carry no tax credit and have no tax taken off at source, so the cap works out at nothing.

The honest way to describe this is not that your money comes out tax-free. It does not. The company has already paid corporation tax on the profit before it can be declared as a dividend, so the profit has been taxed once already.

What disappears when you are non-resident is the second layer: the dividend income tax that a UK-resident shareholder pays on top, at up to 39.35%, when they draw the same money. For a higher or additional-rate owner, losing that second layer is a large and genuine saving, and it is the reason so many owner-managers structure their extraction around dividends once they have left.

There is a trade-off written into the rule, and it is fair to be clear about it. The way the cap is calculated, you give up your UK personal allowance in that computation. In practice the tax office works out your bill two ways, the normal way with your allowance and reliefs, and the capped way under section 811 with no allowance, and charges you the lower of the two.

For an owner whose main UK income is dividends from their own company, the capped calculation almost always wins, and it wins comfortably. Where you also have other UK income, a salary for UK workdays or UK rent, the sum is a little more involved and worth running properly rather than assuming.

Salary and director's fees are a different story

Salary and director's fees are taxed differently from dividends, because earnings for duties you actually perform in the UK stay within UK tax even when you live abroad. If you fly back and work in the UK, the pay for those UK workdays is UK-source and remains taxable here, and HMRC calculates it on the days you work in the UK.

Pay for genuine work done wholly in the UAE is a different matter, but the moment UK workdays enter the picture, so does UK tax on that slice of your earnings.

There is also an administrative layer that dividends avoid. A UK company paying a salary has to operate PAYE, and it does not stop having to simply because the employee has moved abroad. The usual route is to apply to HMRC for a no-tax code for a non-resident employee, so that PAYE is not deducted where the earnings are not UK-taxable, but that is a process to go through, not an automatic result, and payroll and National Insurance still have to be handled correctly.

This is why, for most non-resident owners, dividends are the cleaner way to take profit and salary is kept small or left for a specific reason. It is not a rule that salary is wrong; it is that salary carries UK-duty exposure and payroll obligations that dividends do not, and once you are non-resident the dividend route is usually both simpler and cheaper. The comparison sits like this once you are non-resident for a full tax year.

This only works if you are non-resident for the whole year

None of this applies until you are non-UK resident for a complete UK tax year, because the disregarded income cap does not apply in the overseas part of a split year. This is the condition that people skip, and skipping it is expensive.

The cap in section 811 is available only where you have been non-resident for the entire tax year, so in the year you actually leave, even if split-year treatment applies to your other income, the dividend cap does not. A dividend taken in the run-up to departure, or in the UK part of your leaving year, is taxed as a UK resident would be taxed on it.

Your residence for the year is decided by the Statutory Residence Test, not by your visa or your flight date, and it can keep you UK resident on far fewer than 183 days if you keep UK ties. The mechanics of that, and of when a full tax year of non-residence actually begins, are set out in the notes on how the day count works when moving to Dubai and on UK tax when you live in Dubai. The practical lesson is that the timing of a large dividend and the timing of your departure have to be planned together. Take the dividend in the wrong year and the saving you moved for is not there.

The catch that undoes a quick move out and back

If you leave for only a few years and take a large dividend while you are abroad, the temporary non-residence rule can tax it when you come back. The rule exists precisely to stop someone stepping out of UK residence for a short spell, drawing a big distribution from their own company while away, and then returning. If you were UK resident in four of the seven tax years before you left, and your time abroad is five years or less, certain income and gains realised while you were away, including large distributions from a close company you control, can be taxed in the year you return. The wider mechanics are in the note on the temporary non-residence rule.

The point for extraction planning is simple. Clearing a company's retained profit as dividends over a short absence and then coming home is exactly the pattern the rule is built to catch. To rely on the non-resident dividend treatment for a substantial distribution, you generally need to be leaving for the long term, more than five complete tax years, not stepping out for a single profitable window.

If your plan is a genuine relocation, this is not a problem. If it is a two-year trip around a big dividend, it usually is.

What still stays taxable in the UK

Some UK income stays within UK tax however long you live in Dubai, and it is worth knowing which parts of your money the move does not touch. Rent from UK property remains UK-taxable and is collected through the Non-resident Landlords Scheme, as explained in the note on UK tax on your rental income while abroad and the wider picture in UK tax when you live in Dubai. Earnings for UK workdays stay taxable, as above. Some UK pensions remain UK-taxable, subject to the UK-UAE treaty. And the company's corporation tax, of course, is untouched by any of this.

The clean summary is that becoming non-resident changes the tax on your non-UK income and on the dividends you draw, and leaves UK-source income broadly where it was. Knowing which of your income sits on which side of that line is most of the planning.

What to do, and what to keep

Getting this right is mostly about sequence and records, and very little about anything clever. A short, honest set of steps covers most of the risk.

• Fix your residence first. Confirm you will be non-UK resident for a complete tax year under the Statutory Residence Test, and from which 6 April it runs, before you plan any large extraction. Everything here depends on that year being clean.
• Time the dividends to the right year. Keep significant dividends out of your split leaving year and into a full non-resident year, and plan a large clearance of retained profit against the five-year temporary non-residence rule.
• Keep salary deliberate. Decide what, if any, salary you take, apply for a no-tax code if appropriate, and keep an honest record of any UK workdays, because those earnings stay taxable.
• Keep the company's records straight. Proper board minutes, dividend vouchers showing sufficient distributable profits, and clean accounts. Dividends have to be lawful dividends, not drawings dressed up as dividends.
• Register for Self Assessment as a non-resident. You will usually still need to file, using the residence page of the return, which non-residents send on paper or through commercial software rather than HMRC's online service.
• Deal with the UAE side separately. Becoming non-UK resident does not make you a UAE tax resident automatically, and if you are thinking of a UAE company rather than your UK one, that is a separate decision with its own traps, covered in opening a Dubai company from the UK.

None of this needs to be alarming. It needs to be organised, and most of the work is in getting the residence year clean and the timing of your dividends right before you act, rather than explaining it afterwards.

If you would like the residence position, the company and the extraction planned and handled together before you move, that is what our company setup in Dubai for UK residents service is built to do.

Frequently asked questions

Do I still pay UK tax on dividends from my UK company if I live in Dubai?

Usually not, once you are genuinely non-UK resident for a whole tax year. Dividends from a UK company are treated as disregarded income under section 811 of the Income Tax Act 2007, which caps your UK income tax on them at the tax deducted at source. Dividends carry none, so in practice the dividend bears no further UK income tax in your hands. The important conditions are that you are non-resident for the entire tax year, not just from your departure date, and that the money is not caught by the temporary non-residence rule if you return within five years.

Does my UK company stop paying corporation tax if I move abroad?

No. A UK-incorporated company is UK tax resident wherever it is run, under the incorporation rule in section 14 of the Corporation Tax Act 2009, so it continues to pay UK corporation tax on its profits even if you run it entirely from Dubai. Moving abroad changes how you are taxed on what you take out of the company, not how the company is taxed on what it earns. This is why the saving from your move is on the extraction side, in the dividends you draw, and not in the company's own tax bill.

Is it better to pay myself in salary or dividends once I am non-resident?

For most non-resident owners, dividends are the cleaner route. A dividend from your UK company is disregarded income for a non-resident and usually bears no further UK income tax, whereas salary for any duties you perform in the UK stays UK-taxable and obliges the company to run payroll, even if it later applies for a no-tax code. Salary can still make sense for specific reasons, such as pension contributions or a genuine UK working role, but as a way of drawing profit after you have left, dividends generally carry less UK tax and less administration.

What is disregarded income, and how does it help a non-resident?

Disregarded income is a category in the Income Tax Act 2007 that limits a non-resident's UK income tax on certain investment income, including dividends and interest from UK sources. Under section 811, your UK tax on that income is capped at whatever was deducted or credited at source, which for dividends is nothing. The trade-off is that you give up your UK personal allowance in that calculation, so HMRC works your bill out both ways and charges the lower. For an owner whose main UK income is dividends from their own company, the capped calculation almost always produces the better result.

Do I lose my UK personal allowance if I live in Dubai?

Not automatically, but it interacts with the dividend rule. Many non-residents, including British and EEA citizens, remain entitled to a UK personal allowance. However, the disregarded income cap that makes your dividends tax-free is calculated without a personal allowance, so where you rely on that cap you are effectively choosing the capped figure over the allowance. HMRC compares the two calculations and charges the lower, so you are not worse off, but it is why the personal allowance and the dividend treatment should be looked at together rather than assumed to both apply in full.

Can HMRC tax a big dividend I take while living in Dubai if I come back?

Yes, if you return too soon. Under the temporary non-residence rule, if you were UK resident in four of the seven tax years before leaving and you are non-resident for five years or less, large distributions from a close company you control that you take while abroad can be taxed in the year you return. Clearing your company's retained profit as dividends over a short absence and then coming home is precisely what the rule is designed to catch. To rely on the non-resident treatment for a significant dividend, you generally need to be leaving for more than five complete tax years.

Should I set up a UAE company instead of using my UK one?

It can be the right answer, but only if it is genuine, and it does not automatically solve anything. A UAE company run in reality from the UK can be UK tax resident under the central management and control test, and if you own it while still UK resident the controlled foreign company and transfer-of-assets rules can reach its profits. If your business and your life are genuinely moving to the UAE, a UAE company may fit; if you are staying connected to the UK, your existing UK company plus a clean non-resident extraction position is often simpler. The decision is set out in opening a Dubai company from the UK.

Do I need to file a UK tax return once I live abroad and take dividends?

Usually yes. A non-resident with UK income normally has to file a Self Assessment return, including the residence page, and non-residents cannot use HMRC's standard online service for it, so the return goes in on paper by 31 October or through commercial software that supports the residence page. Even where your dividends end up bearing no UK tax under the disregarded income rule, the position is reported on the return rather than simply assumed, and keeping the filing current is what makes the treatment defensible if HMRC ever asks.

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Living in Dubai can take the second income-tax layer off the profit you draw, but only once you are non-resident for a full tax year and only if the dividends are timed with the move rather than against it. Get that order right and the treatment looks after itself.

This is general information rather than advice on your own facts, so confirm your residence and how you take money out of the company before you act.