UAE insights on cross-border wealth: The hidden tax and succession traps for international families

Many of my clients live in one country, hold investments in another and own property across several jurisdictions, while maintaining ties to their country of origin. This international outlook creates opportunities, but it also brings tax, succession and residence issues that are easily overlooked.

That increasingly international outlook is also reflected in Irwin Mitchell’s latest foreign direct investment research, which explores overseas investment into the UK and the importance of strong international connections. Yet families’ legal and tax arrangements do not always keep pace with their mobility.

As Head of the Middle East Desk at Irwin Mitchell, I often encounter the assumption that moving country draws a line under the legal and tax regime left behind. The reality is rarely that straightforward, particularly for those with connections to both the UK and the UAE.

A clear takeaway from recent roundtable discussions was that four areas continue to produce costly and unexpected outcomes:

• international probate;
• UK pensions and inheritance tax;
• the use of foundations and lifetime structures; and 
• residence day-count rules.

International Probate: Navigating Multiple Legal Systems

An estate may include UK property, UAE investments, offshore accounts and business interests in other jurisdictions. It is not common that such assets fall within a single succession or probate regime.

Probate and succession rules vary considerably in different jurisdictions –  arrangements that work in one may not be recognised, or may operate differently, in another. The UK, for example, has a well-established probate process, while the UAE has a distinct legal framework and its own succession and inheritance procedures. The potential relevance of Sharia principles is another consideration when co-ordinating succession arrangements across jurisdictions.

Without proper planning, families may face delays, higher legal costs, conflicting legal interpretations and difficulties accessing assets. Multiple probate applications may also be needed, adding administrative complexity at what may already be a difficult time.

Co-ordinated international succession advice can help families navigate these differences. A carefully structured estate plan can reduce complexity and help assets pass efficiently to the intended beneficiaries.

UK Pensions and Inheritance Tax: A Significant Change on the Horizon

A significant forthcoming change is the planned inclusion of most unused pension funds and death benefits within the scope of UK Inheritance Tax (IHT) from April 2027.

UK pensions have historically been viewed as an efficient estate planning vehicle, with many individuals assuming that pension assets sit outside their taxable estate. Some expatriates and non-residents also assume that leaving the UK removes these assets from future UK tax exposure.

Yet many people living overseas retain UK-situs pension arrangements. Following the potential changes, these assets may fall within the scope of IHT even where the pension holder has long ceased to be UK resident.

For British expatriates, in particular, the assumption that “I no longer live in the UK, so UK tax no longer applies” can leave significant gaps in their planning.

The position will depend on the individual’s circumstances, including domicile history, residence profile, asset structure and wider estate planning arrangements. Double tax treaty provisions may also offer relief.

We expect a further technical note from HMRC before the end of this year to clarify how the new rules will be administered for internationally mobile individuals. Given the potential exposure, reviewing existing pension and succession arrangements should be a priority.

For wider analysis of tax and policy developments affecting personal wealth, succession and long-term planning, visit Irwin Mitchell’s Budget Hub.

Foundations and Lifetime Structures: Understanding the UK Perspective

Foundations and similar wealth-holding structures continue to gain traction across the UAE and other international financial centres. They can provide a framework for succession planning, asset protection, governance and long-term wealth preservation.

For individuals with UK connections, however, it is important to understand how these structures may be treated for UK tax purposes and the potential consequences for income, gains and transfers of wealth. Decisions to establish a foundation or transfer assets into a long-term structure should not be assessed solely under the rules of its home jurisdiction. Cross-border advice can help prevent unexpected tax consequences elsewhere, including in the UK, from undermining the intended benefits.

Timing also matters. The UK’s temporary non-residence rules may bring particular income and gains realised during a period of UK non-residence back within the UK tax net on a return.

Where there is a UK connection, the UK analysis needs to happen at the outset rather than after the structure has been established, assets transferred and UK residence resumed.

Residence Day Counts: A Continuing Source of Risk

UK residence remains a frequently misunderstood issue for internationally mobile individuals.

Those moving regularly between countries may assume that staying below a certain number of days is enough to avoid UK residence. In reality, the UK’s Statutory Residence Test (SRT) is more complex, taking into account more than a simple day count.

The outcome can depend on previous UK residence, family connections, available accommodation, work patterns and other UK ties. Two people spending the same number of days in the UK may, therefore, have very different residence outcomes.

For those travelling frequently between the UK, the UAE and elsewhere, inadvertent UK tax residence can have significant consequences, potentially bringing worldwide income and gains within UK taxation and creating additional compliance requirements.

It is quite common for travel patterns to be changed. An additional trip home, a change in working arrangements or a shift in family circumstances can alter a residence position that previously appeared unambiguous / deceptively simple.

Accurate travel records and regular residence reviews are, therefore, essential: even a seemingly minor change can have unwelcome tax consequences.

The Growing Importance of Joined-Up Planning

For families with UK and UAE connections, probate, pensions, foundations and tax residence need to be considered together. Decisions in one area can affect the wider succession and wealth-planning strategy across several jurisdictions.

The central takeaway from these conversations is simple: moving country does not mean leaving every tax and succession issue behind. A co-ordinated approach can help protect assets, achieve succession objectives and identify unexpected tax exposure before it becomes a costly problem.

Irwin Mitchell’s international work and growth in overseas markets were also recognised through its recent King’s Award for Enterprise in International Trade.