Planning & protection
Harry Sims
There’s been a lot of talk lately about non-domicile status and tax changes introduced by the Labour government.
The general feeling is clear: people are tired of the UK’s growing tax burden. High income tax rates, inheritance tax now applying to businesses and farms, rising employer National Insurance costs – the list keeps growing.
One option for wealthy individuals keen to keep hold of their assets is to move to a lower tax country such as the United Arab Emirates (UAE).
However, I know that most of my clients would never actually think of moving to Dubai for tax – for them, the lifestyle change just doesn’t justify the tax savings.
What’s more, there are ways to stay in the UK and shelter your wealth – read on to find out more.
Since Labour came into power in July 2024, there have been growing reports of a wealth exodus from the UK. Initially, the focus was on non-dom reforms, first introduced by Conservative Chancellor Jeremy Hunt in 2024, as providing the spark that made the ultra-wealthy consider leaving.
Now, there’s concern that more of the “mass affluent” may follow, especially with reforms that bring more assets into the scope of inheritance tax (IHT).
One report has claimed that as many as 16,500 millionaires will leave the UK during the course of 2025.
Many of these wealthy people are said to be heading to the UAE because of its low taxes, residency programmes and high-end lifestyle.
But is living somewhere like Dubai all it’s cracked up to be?
Moving to Dubai for tax might seem like a solution, but recent developments suggest it may not be a long-term fix.
For example, neighbouring Oman has become the first Gulf Arab state to introduce income tax, raising concerns that Dubai could follow within the next five years.
Under a royal decree, residents in Oman will pay 5% income tax on earnings above OMR 42,000 (around £80,000). While the tax won’t take effect until 2028 and is modest compared to the UK’s top rate of 45%, it signals a shift in the region.
Most of my clients -those with £1 million to £5 million + in assets – enjoy the UK lifestyle, with plenty of travel built in. So instead of moving to Dubai for tax reasons, we focus on smart, strategic tax planning, retirement planning and estate planning.
Here are some examples of what can be done.
If you’re a high earner now, offshore bonds can help you defer tax on investment gains. Offshore bonds are issued outside UK jurisdiction and are ideal if you expect to be a lower earner in the future or plan to retire in a country with lower tax rates.
For example, if you are a 45% taxpayer, you can defer all gains from tax until you are ready to crystalise them. Later in life, you may become a basic rate taxpayer, meaning you could pay only 20% tax on the profits.
If you are not a basic rate taxpayer and wish to reduce your tax liability, you can assign the Offshore Bond to your children for their benefit (if they are over 18) or your partner to potentially save tax on the gains.
Despite the name, offshore bonds are not complex or shady. They’re a legitimate and often essential part of a well-structured tax plan. Like pensions, they allow you to invest in a wide range of assets while deferring tax until withdrawal.
Pensions remain one of the most powerful tools for tax relief. Contributing £60,000 to your pension every year can attract up to 45% tax relief. Yes, there’s tax when you draw from it, but it’s usually far less.
Here’s a simple example:
If you’re a 45% taxpayer, every £100,000 in your pension only costs you £55,000 net. Later, if you’re a 20% taxpayer in retirement, you could draw £100,000 and receive £85,000 net. That’s a return of £85,000 from a £55,000 net cost.
Note: 25% of any amount drawn down from a pension is tax-free, and the remaining 75% is taxed—netting down to 60% after tax = 85%. Therefore in the above example, you can turn £55,000 net into £85,000.
Venture Capital Trusts allow you to invest in small, high-growth businesses. These investments carry risk, but you receive 30% income tax relief on your investment, and all dividends and gains are tax-free. Names such as Secret Escapes, Five Guys UK, Zoopla, Graze, Tails, Depop were all backed by the UK VCT market.
Individual Savings Accounts (ISAs) are basic but remain very effective when compounded over a long period of time. All gains, dividends and interest from ISAs – whether cash or investment ISAs – are tax free.
A Loan Trust lets you retain access to your capital while removing the growth from your estate. For example, if you lend £500,000 to a trust you set up (of which you can still be trustee) and it grows to £1.5 million over 20 years, only the original £500,000 remains in your estate. The rest belongs to the trust, often for your children/grandchildren. However, it’s important to note that you as the settlor can’t access the growth at any stage!
This strategy is ideal for clients who want flexibility and access to their original capital. If you don’t use the capital during your lifetime, you can write off the loan. If you survive seven years, the £500,000 is outside of your estate. Alternatively, you can spend it on making memories!
These give trustees full control over how and when assets are distributed. They’re perfect for clients who want to gift assets without handing over full control and access to their children/grandchildren.
It’s important to note that if you set up a Discretionary Gift Trust you can’t benefit from the monies. However, a variation of the gift trust – the Discounted Gift Trust (DGT) – allows you to draw a fixed income for life while gifting the capital.
Previously known as Business Property Relief, Business Relief allows qualifying business assets to be passed on free from inheritance tax (IHT), or at a reduced rate, provided certain conditions are met.
There are many Business Relief funds available that qualify for IHT relief after two years of holding the shares. This could potentially save your estate up to 40% in IHT. Nevertheless, there are various risks and conditions that need to be met here. As a result, you should take expert financial advice before going down this route.
A Whole of Life insurance policy is a form of financial protection which can be used to cover a future IHT bill directly.
When written in trust, the payout doesn’t form part of your estate and can be used to pay the tax quickly. It’s especially useful for estates tied up in property or business assets. The proceeds are also free from income tax.
Taking out a Whole of Life Insurance policy also means that there is no investment risk attached. Your family don’t have to worry about whether adverse market conditions will leave them short on the Inheritance Tax bill.
While the tax burden is on the rise, you can mitigate the effects without moving to Dubai for tax.
Taking expert financial advice and planning ahead could help you to keep more of your wealth while enjoying UK life.
For further details on any of the issues raised in this article, please get in touch.
Disclaimer: It is important to note that the value of investments can go down as well as up and you may not get back the full amount you invested. Past performance is also not a reliable indicator of future performance. This article is for informational purposes only and does not constitute financial, tax, or legal advice. Tax treatment depends on individual circumstances and may change. Always seek professional advice before making financial decisions.
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