5 financial questions to ask yourself before moving to UAE

19th April 2018
5 financial questions to ask yourself before moving to UAE

Financial planning is an important part of any international relocation. When moving to the UAE, it’s imperative you consider key financial questions. These are the things you should discuss with your independent wealth manager. Your advisor can go through your options and help you make the best choices to protect your assets.

How does the cost of living in the UAE compare to London?

The cost of living in the UAE is generally on a par with or cheaper than the cost of living in London. The tax-free incentive and high salaries in the UAE can mean your family has more disposable income after relocation. The biggest expenditures in both the UAE and London are accommodation and education. If you can negotiate a company package that includes an allowance towards either of these costs, this can swing the cost of living decisively in the UAE’s favour. Private school fees are high in the UAE given the stiff competition for places at the best international establishments, a factor to consider when moving to the UAE with children.

What should I do with my UK pension?

Deciding on the best option for your pension, will depend on your plans for retirement and whether you’re planning on remaining an overseas resident in the long-term. You should consult a trusted expert in financial planning for expats when considering the most suitable option for you. Many expats will stop paying into their UK pension when relocating. While you receive tax relief on your pension contributions while working in the UK, when you draw from your pension in the future, it is a taxable income.

Earnings in the UAE are tax-free, so paying into a UK pension negates that benefit – the earnings are eventually taxed when the money is drawn out. Check the terms of your current UK pension and consult with an independent wealth manager to discuss the best options moving forwards. There will be a variety of options for you to consider.

As an overseas resident, it can be possible to transfer a UK pension scheme into a Qualifying Recognised Overseas Pension Scheme (QROPS). These have different tax structures according to the country they are based in. This option has several important considerations and is an area that where you would need to seek specialist advice.

There is no state pension in the UAE. You could consider paying into an offshore pension scheme, or with your tax-free salary, you could also consider a different investment scheme to get the best return on your assets.

What taxes do I need to pay while living in the UAE?

The UAE does not levy any income tax, which has long been one of the reasons that it is so popular with British expatriates. However, this does not mean that there are no taxes to pay in the UAE. There are plenty of ‘hidden’ taxes, such as a 10% municipal tax in hotels, for example, which would be added to your bill. VAT is now payable on certain goods and services. Alcohol is highly taxed, and you need a licence to buy it.

You should also ensure you meet any tax liability in the UK. If you move part-way through a tax year, you may have to pay tax on your earnings in the UAE for that tax year. If you have assets that generate an income and are based in the UK, you are still liable for the tax on those. Your wealth manager can give more information on your tax situation.

What is the best way to transfer assets to the UAE?

When moving to the UAE, you will likely have cash assets to transfer, most commonly from the sale of a property. If you opt to use a high-street bank, you could lose tens of thousands in fees and charges. Therefore, it is necessary to shop around for the most favourable exchange rates with the lowest overall costs. Using a specialised money transfer service, such as HiFX, means you pay little or no transfer fees, as well benefitting from generous exchange rates. You can usually ‘hold’ an exchange rate when you are planning your move, so you don’t have to worry about fluctuations in the rate at the actual time of transfer.

What happens if I need to return to the UK?

If you need to return to the UK, you must have a comprehensive exit strategy. You must clear all financial liabilities in the UAE, particularly any outstanding loans (for example, a mortgage). You also need to speak to a financial advisor or wealth manager as much in advance as possible to protect your assets and investments made while living in the UAE. You don’t want your income-free earnings and gains to be met with a hefty tax bill when returning home. There is a comprehensive article on financial planning for expatriates returning home here.

Are you getting ready to move to the UAE? Take a look at our expat relocation checklist, to help you prepare for and plan your international relocation.

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