UK tax on Dubai property: rental income, capital gains and inheritance tax explained

A UK tax resident is taxed on a Dubai property in much the same way as on a UK buy-to-let. Rental profit is charged to income tax as it arises, a gain on sale is charged to capital gains tax at 18% or 24%, and the property falls within inheritance tax if you are a long-term UK resident. The UAE levies no personal income tax, so there is normally no foreign tax to offset. The rules below are for the 2026 to 2027 tax year (6 April 2026 to 5 April 2027). This is general information, not tax advice, and a UK-qualified tax adviser should confirm how the rules apply to you.

UK tax on UAE property at a glance (2026/27)

Do UK residents pay tax on Dubai rental income?

Yes. HMRC's Property Income Manual states that from 6 April 2025 all UK residents are taxed on the arising basis on their worldwide income and gains. It does not matter whether the rent stays in a UAE bank account.

Rent from property outside the UK forms an overseas property business. The profit is worked out in the same way as for UK lettings: rent received less allowable running costs such as service charges, management fees, insurance and repairs. It is kept separate from any UK property business, and a loss on one cannot be set against a profit on the other (PIM4702).

The profit is added to your other income. For 2026/27, outside Scotland, income above the £12,570 Personal Allowance is taxed at 20% up to £50,270, 40% up to £125,140 and 45% beyond that.

Two further points:

• Small amounts. A £1,000 property allowance covers gross property income up to that level. It cannot be combined with a deduction for expenses or with finance-cost relief.
• A rate change is planned. A government policy paper of 26 November 2025 sets out separate property income rates of 22%, 42% and 47% from April 2027. Check whether this has been enacted before modelling income for 2027/28 onwards.

How to report Dubai rental income

Report the income and expenses on the foreign pages (SA106) of a Self Assessment return. If you do not already file, tell HMRC by 5 October after the tax year in which the income arose. Convert dirham amounts into sterling using a reasonable method applied consistently; HMRC publishes average and spot exchange rates.

Foreign Tax Credit Relief exists for income taxed abroad, but PwC's Worldwide Tax Summaries (reviewed 9 September 2026) confirms that the UAE has no federal or emirate-level personal income tax, so there is ordinarily nothing to claim.

Mortgage interest: the finance-cost restriction

Individuals who let residential property cannot deduct mortgage interest and other finance costs from rental profit. Relief is given instead as a tax reduction at the basic rate, 20%, of the lowest of the finance costs, the property profit, or adjusted total income above the Personal Allowance. Unused amounts carry forward (PIM2054 and HMRC's landlord guidance). The restriction looks at what the loan is for, so it covers a UAE mortgage and, equally, borrowing raised in the UK to buy the Dubai property.

Worked example: rent

A higher-rate taxpayer receives AED 100,000 of rent and pays AED 25,000 in service charges and management. At £1 = AED 4.88 (mid-market rate, 12 November 2026) that is £20,492 of rent and £5,123 of expenses.

• Profit: £15,369. Income tax at 40%: £6,148.
• If the purchase was funded with a loan costing £6,000 a year in interest, the tax is reduced by 20% of £6,000, or £1,200, to £4,948.
• Had the interest been deductible in full, the tax would have been £3,748. The restriction costs this owner £1,200 a year.

Capital gains tax when you sell a Dubai property

GOV.UK is direct: you pay Capital Gains Tax when you dispose of overseas property if you are resident in the UK.

Rates. For 2026/27 the rates for individuals are 18% on gains that fall within the unused part of the basic rate band and 24% above it, after an annual exempt amount of £3,000. The higher rate on residential property was 28% until 5 April 2024 and has been 24% since 6 April 2024. On 30 October 2024 the rates on other assets were raised to the same 18% and 24%, so there is now a single pair of rates.

Costs. You can deduct the costs of buying, selling and improving the property. For a Dubai purchase that includes the 4% Dubai Land Department fee and agents' and legal fees. Routine maintenance does not count.

Currency. The gain is computed in sterling, not dirhams. HMRC's Capital Gains Manual (CG78310) requires the purchase cost to be converted at the exchange rate on the date of acquisition and the sale proceeds at the rate on the date of disposal. A fall in sterling against the dirham between purchase and sale increases your taxable gain, and a rise reduces it.

Reporting. The requirement to report and pay within 60 days of completion applies to UK residential property. A gain on a Dubai property is reported on the Self Assessment return for the tax year of disposal. HMRC's real-time Capital Gains Tax service, with a deadline of 31 December after the tax year and payment by 31 January, cannot be used where you are claiming foreign tax credit relief on overseas property.

Worked example: a gain created by the exchange rate

You buy for AED 1,500,000 when £1 = AED 4.88 and pay the 4% DLD fee of AED 60,000. Sterling cost: £307,377 plus £12,295. Some years later you sell for the same AED 1,500,000, but sterling has weakened to £1 = AED 4.40 (an illustrative rate).

• Sterling proceeds: £340,909.
• Gain: £340,909 − £307,377 − £12,295 = £21,237, although the dirham price never moved.
• Less the £3,000 exempt amount: £18,237. For a higher-rate taxpayer, at 24%: £4,377 of tax.

The reverse also holds: if sterling strengthens, a dirham profit can shrink or become a sterling loss.

Non-doms, the end of the remittance basis and the 4-year FIG regime

Before 6 April 2025, UK residents domiciled abroad could elect to be taxed on foreign income and gains only when the money was brought to the UK. That remittance basis has been abolished, and domicile no longer determines how Dubai rent or gains are taxed.

Its replacement is the 4-year foreign income and gains (FIG) regime. It is available only in your first four tax years of UK residence after at least 10 consecutive tax years of non-residence. A qualifying person can claim relief in the Self Assessment return on foreign income, including overseas property profits, and on foreign gains. Claiming means losing the income tax Personal Allowance and the CGT annual exempt amount for that year, and residential finance costs cannot be claimed for the overseas property business in a year for which FIG relief is claimed (PIM2054).

This helps long-term expatriates returning from the Gulf, not people who have always lived in the UK.

Inheritance tax on a Dubai property

From 6 April 2025 the domicile test for inheritance tax was replaced by a residence test. You are a long-term UK resident in a tax year if you were UK tax resident for at least 10 of the previous 20 tax years. Long-term residents are within inheritance tax on overseas assets they own outright, so a Dubai apartment is part of the estate. The standard rate is 40% on the value above the £325,000 threshold, and assets left to a spouse or civil partner are usually exempt.

The status does not end when you leave. It continues for between 3 and 10 tax years of non-residence, depending on how long you lived in the UK: 3 years for someone resident for 10 to 13 of the previous 20 years, rising by a year for each additional year of residence.

UK inheritance tax and UAE succession are separate questions; wills are covered in buying UAE property from the UK.

The UK-UAE double tax treaty in outline

The Double Taxation Convention was signed on 12 April 2016 and entered into force on 25 December 2016. For property owners the relevant provisions are short:

• Article 6: income from land and buildings may be taxed in the country where the property is.
• Article 13: gains on land and buildings may be taxed there too.
• Article 21: the UK gives its residents credit for UAE tax paid on the same income or gain.

"May be taxed" in the UAE does not mean "only taxed" there. The UK keeps its right to tax its residents, and with no UAE tax on an individual's rent the credit is nil.

Holding the property through a company

A company is sometimes suggested because the finance-cost restriction does not apply to companies, or to avoid inheritance tax. For a UK resident it brings its own problems.

• Residence. A company incorporated abroad is UK resident if its central management and control is exercised here (INTM120060). A UAE company run by a director living in the UK is likely to be UK resident and liable to corporation tax, at 25%, or 19% where profits are £50,000 or less.
• Anti-avoidance. If the company is genuinely non-resident, rules can attribute its gains to UK-resident participators (CG57200), and the transfer of assets abroad rules (HMRC helpsheet HS262) can charge its income on the individual.
• Second layer. Profits are taxed again when paid out to you.
• Inheritance tax. Shares in a non-UK company are overseas assets, and remain within the charge for a long-term UK resident.
• UAE corporate tax. The UAE charges 9% on business income above AED 375,000. PwC notes that an individual's real estate investment income is left out of the test for whether a person is in scope; that exclusion is for individuals, not companies.

Take advice in both countries before using any structure.

If you move to the UAE and later return: temporary non-residence

A person who is not UK resident does not pay UK tax on foreign income, and gains on non-UK assets are generally outside UK tax. The temporary non-residence rules limit how far a short spell abroad can be used. They apply if you were UK resident in at least four of the seven tax years before the year you left and your period of non-residence is five years or less.

Where they apply, gains realised while abroad on assets you owned before leaving are treated as arising in the year you return, and taxed then. Gains on assets acquired after departure are not normally caught (HMRC helpsheet HS278). So a Dubai property bought while UK resident and sold during a three-year stay in Dubai is taxed in the UK in the year of return, while one bought after you became non-resident and sold before you return is generally outside the charge.

Whether and when you become non-resident is decided by the Statutory Residence Test, not by holding a UAE visa.

Stamp duty: no SDLT on a UAE purchase

Stamp Duty Land Tax is charged on land in England and Northern Ireland, with separate taxes in Scotland and Wales. None applies to a purchase in the UAE. There is one indirect effect: if you later buy a home in England or Northern Ireland, the 5% higher rates apply where you already own a residential property worth £40,000 or more "anywhere in the world", which includes a Dubai apartment. UAE-side costs are in Dubai property buying costs and the UAE property tax guide.

What older guides get wrong

Records to keep

Keep the sale and purchase agreement, proof of the DLD fee and other buying costs, the exchange rate on each payment date, service charge and management statements, tenancy contracts, loan statements and invoices for improvements. To see what tax does to the return on a specific property, start with the figures in Dubai rental yields.