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A new chapter for British property investors
For years, UK landlords enjoyed steady rental income, accessible finance, and favourable tax rules. But as margins have thinned, from Section 24’s mortgage interest restrictions to capital gains tax changes, many seasoned investors are rethinking their strategy. The result? A quiet but accelerating migration of British capital to the United Arab Emirates.
Dubai, Abu Dhabi, and Ras Al Khaimah have emerged as more than luxury destinations; they’re now among the world’s most dynamic property markets. Add to that a 0% personal income tax, strong yields, and world-class infrastructure, and it’s easy to see why British landlords are exploring how to own UAE property, without leaving the UK.
This article outlines how to structure that cross-border investment sensibly, covering everything from tax residency and banking to UAE foundations, holding companies, and succession planning.
1. Understanding the UK tax position
Remaining a UK tax resident means you’ll continue to pay UK income tax on worldwide earnings, including rent from overseas property. That doesn’t mean UAE investments are off the table, but it does mean the structure must be airtight.
If a UK-resident individual owns a Dubai apartment directly, the rent remains taxable in the UK. However, if ownership sits under a UAE company, profits can be reinvested or distributed more flexibly. With careful planning, this approach can reduce the effective tax burden and protect long-term growth.
The critical consideration is substance. HMRC will challenge any arrangement that looks like a paper entity. To withstand scrutiny, the UAE company must demonstrate genuine management and control abroad - local directors, a registered office, board meetings held in the UAE, and ideally, an active business licence.
2. Choosing the right UAE structure
There’s no one-size-fits-all solution, but these are the three main options for British investors:
Free Zone Holding Company (ADGM or DIFC)
A holding company in the Abu Dhabi Global Market (ADGM) or Dubai InternationalFinancial Centre (DIFC) offers 100% foreign ownership, English common law, and strong global credibility. Such an entity can:
- Own real estate directly or through subsidiaries.
- Access UAE banking and double-tax treaty benefits.
- Operate with limited reporting requirements and no personal income tax.
(https://www.cosmos.global/services/company-formation)
Mainland UAE Company
If your plans extend beyond passive ownership, for example, managing holiday rentals, property development, or co-investment projects, a mainland company (LLC) may be better suited. It offers:
- Broader commercial activity permissions.
- The ability to transact directly within the UAE market.
- Visa eligibility and greater operational flexibility.
ADGM Foundation
For wealthier investors, an ADGM Foundation is often the keystone of a well-structured portfolio. It can own shares in a holding company, safeguarding your assets against personal or business risks while simplifying inheritance. A foundation separates ownership (the founder) from control (the council), allowing you to appoint successors or professional guardians to manage assets long-term - a vital feature for estate planning.
3. UAE corporate tax and economic substance
Since June 2023, the UAE has introduced a9% corporate tax on profits exceeding AED 375,000. However, the regime remains globally competitive, and certain types of passive income (including dividends and capital gains) may still qualify for exemption.
What really matters is Economic Substance Regulations (ESR) compliance. If your UAE company earns income from activities like holding, leasing, or financing, it must show real presence in the country:
- a registered office;
- local management or directors;
- occasional in-person meetings;
- and UAE-based banking or accounting.
4. Banking, mortgages, and finance
Opening a UAE corporate bank account is usually straightforward for well-structured entities in ADGM or DIFC. Banks typically require:
- corporate documents and ownership structure;
- proof of address and source of funds;
- and a clear business rationale for the account.
Some UAE banks even offer non-resident mortgages, though typically with higher down payments (35–40%) and tighter credit terms. Alternatively, UK-based private banks in Jersey or Switzerland sometimes lend against UAE property, offering cross-collateralised loans for larger portfolios.
In practice, loan-to-value ratios for non-resident or offshore-owned companies tend to remain conservative, typically around 50%, though slightly higher gearing may be achieved for stronger borrowers or income-producing assets. Interest rates are generally mid- to high-single digits, reflecting both EIBOR fluctuations and borrower risk. Tenures average between five and fifteen years, often with a short interest-only period at the outset, and the property is customarily mortgaged as security with rental income or insurance sometimes assigned to the bank. Lenders usually require audited or management accounts, proof of rental cash flow and evidence of real UAE presence - such as a local director, office or bank account.
Holding assets through an ADGM or DIFC company tends to enhance bank confidence because these entities operate under English-law frameworks and are recognised internationally.
5. VAT and rental income
Rental income in the UAE is not subject to personal income tax, but VAT treatment depends on the type of property:
- Residential leases (12+ months) are exempt.
- Short-term holiday lets (under six months) may attract 5% VAT and municipal tourism fees.
A common strategy is to use two entities:
1. A holding company that owns the real estate.
2. An operating company that manages rentals, maintenance, and marketing.
This separation simplifies VAT registration and allows for clean accounting if you decide to sell or refinance later.
6. Succession and inheritance planning
The UK’s 40% inheritance tax (IHT) applies to worldwide assets held personally, including foreign property. But if structured through a UAE foundation or offshore company, ownership can be insulated from UK IHT exposure and governed by your own succession terms.
UAE law also allows British investors to register a DIFC Will, ensuring your assets follow English inheritance law rather than Sharia law. Combined with anADGM Foundation, this approach provides the same level of estate control as a trust structure in Jersey or Guernsey, but with lower costs and direct ownership of onshore UAE property.
7. Staying compliant in both jurisdictions
If you continue living in the UK, you’ll remain tax resident there, unless you meet the conditions for non-residency under the Statutory Residence Test. This means your UAE entity’s profits could, in some cases, be attributed back to you if HMRC believes the company is managed and controlled from the UK.
The safest approach:
- Appoint a UAE-based director or professional management company.
- Hold board meetings in the UAE.
- Maintain UAE accounting and local bank records.
Maintaining clear financial separation between your UK and UAE affairs is vital. Rental income should flow through your UAE entity, not your personal UK account, helping to evidence that your structure is genuinely offshore.
Working with experienced advisers such as Cosmos ensures your structure is compliant, bankable, and aligned with both HMRC and UAE regulatory expectations.
8. The smart route forward
Here’s a typical example of how it all fits together:
Step 1: Establish an ADGM Foundation for asset protection and legacy planning.
Step 2: The Foundation owns an ADGM Holding Company, which opens a bank account.
Step 3: The Holding Company purchases properties in Dubai or Abu Dhabi, financed by equity or bank debt.
Step 4: Rental income flows into the UAE bank account, and profits are reinvested or distributed in a tax-efficient way.
This structure is legitimate, transparent, and entirely compliant when managed correctly.
9. Final thoughts
For UK landlords weary of regulatory headwinds and diminishing yields, the UAE offers an alternative that blends opportunity with security. It’s not about hiding assets - it’s about structuring them intelligently. With the right foundation, corporate setup, and professional guidance, investors can retain UK residency, earn tax-efficient income from UAE property, and secure their legacy across generations.
As the world shifts toward mobility and private capital globalises, the smartest investors aren’t those who move countries - they’re the ones who structure smartly.
