UK vs UAE Tax: What It Means For British Businesses In 2025 And Beyond

Over the past three years, the UK has reshaped its tax landscape. While headline rates may look familiar, the changes introduced through the Finance Acts of 2023–2025 have quietly — but significantly — altered the playing field for corporates, entrepreneurs, and families.

At the same time, the UAE has strengthened its role as one of the world's most attractive low-tax hubs. For UK companies and internationally active families, the comparison is no longer theoretical. It is a strategic question of competitiveness, succession planning, and where best to locate capital and people.

The UK's New Direction

On the corporate side, the UK has moved from a flat 19% corporate tax rate to a tiered structure. Small profits remain at 19%, but the main rate has risen to 25% for businesses earning more than £250,000. Add dividend taxes of up to 39.35%, and the overall extraction cost for owner-managers is heavy. The “carrot” of permanent full expensing for capital investment is real, but more valuable to manufacturers than to service-driven firms. A survey by The London Chamber of Commerce and Industry (LCCI) suggests that many SMEs respond to rising tax burdens by delaying investment or seeking alternative jurisdictions, which risks reduction in business growth and internal investment in the UK.

Inheritance and succession rules have also shifted. The move from domicile-based to residence-based IHT drags far more globally mobile families into scope, with reliefs capped and pensions increasingly subject to taxation on death. Advisors now warn that effective rates on estates could exceed 60% — a dramatic erosion of family wealth across generations. For asset-rich but cash-thin estates, such as farms or family manufacturing firms, capping Agricultural and Business Property Relief at £1m could incentivize restructuring or even land sales, raising questions for sectors where long-term continuity is critical. With the UK producing only around 54% of its own food, the National Farmers Union (NFU), which represents farmers and growers in England & Wales, has already warned such changes may undermine UK generational investment in domestic farming.

Meanwhile, the abolition of the remittance basis and its replacement with the Foreign Income and Gains (FIG) regime removes one of the UK's long-standing planning tools. New residents get a four-year exemption, but only at the cost of losing personal allowances and CGT exemptions. For internationally active executives, the UK is clearly signaling a less welcoming stance.

The UAE Counterpoint

By contrast, the UAE's framework is deliberately simple. There is no personal income tax, no inheritance or estate duties, and no dividend withholding. Corporate profits up to AED 375,000 are untaxed, with a modest 9% rate thereafter. Free zones provide additional incentives, particularly for firms engaged in cross-border trade and innovation.

Crucially, capital can be repatriated without restriction. Combined with the availability of common-law style foundations and trusts, the UAE now offers a familiar but frictionless environment for entrepreneurs and families accustomed to UK and offshore tax planning. Unlike in the UK, the climate in the UAE is not centered on tax — since there is little to none — but on giving families mechanisms to decide how their assets are managed, how succession is arranged, and how future generations benefit. In practice, these vehicles provide clarity on inheritance and asset protection.

What It Means in Practice

For British businesses, the divergence between the two systems translates into real-world decisions:

1. Capital allocation: Rising extraction costs in the UK push firms to consider retaining profits offshore or using UAE vehicles for international expansion. For SMEs, establishing a free zone entity provides flexibility: profits can be sheltered at low rates and moved or reinvested internationally without any additional barriers from the UAE.
2. Succession: Families need to model IHT exposure earlier and more conservatively, weighing whether relocation or dual-jurisdiction structures make sense. The UAE's absence of estate duties allows assets to transition without disruption, preserving continuity in ways that the UK's tightening system no longer guarantees.
3. Talent: As the UK narrows its welcome, the UAE's lifestyle and tax regime strengthen its hand in attracting globally mobile executives. HMRC research shows that when tax rules are complex, lower income earners often scale back or drop out. For senior professionals, with larger cross-border packages and the option to relocate, the same complexity may discourage them from basing themselves in the UK and instead make hubs with simpler regimes more desirable, where higher incomes are not disincentivised.
4. Resilience: Establishing even a small free zone presence in the UAE can provide optionality and a hedge against UK policy volatility. For companies serving Middle Eastern or Asian markets, this diversification is not just tax-driven but operationally strategic.

The Bigger Picture

This is not to say the UK is losing its relevance. London remains a financial powerhouse with deep capital markets and a robust professional ecosystem. But the trajectory is clear: more complexity, heavier effective burdens, and fewer carve-outs for globally active firms and individuals.

The UAE, by contrast, is doubling down on clarity and competitiveness. Its message to entrepreneurs and wealth creators is simple: plan here, build here, grow here.

Takeaway

For UK corporates, entrepreneurs, and families, the debate is no longer whether to consider the UAE in their strategy, but how soon?

The UK's reforms mark a pivot toward higher taxation and reduced flexibility. The UAE offers stability, predictability, and a platform for global growth.

In practice, this means asking: “do you retain capital in the UK and accept higher tax costs and more compliance hurdles, or position part of your structure in the UAE to maintain greater flexibility?” For many, the answer will not be all-or-nothing. But the urgency to act is greater than ever, and the firms that plan now will be best placed to protect wealth, attract talent, and scale internationally.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.