Leaving the UK? Dividend Planning Just Changed

For UK business owners living abroad, often in the UAE, the Autumn Budget 2025 has changed how dividends taken while non-UK resident can be taxed on a future return to the UK. This closes a planning route that, until now, allowed dividends paid from post-departure profits to sit outside the temporary non-resident rules. Here we explore what these changes mean in practice for owner-managed businesses with UK and UAE connections.

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Temporary non-UK residence Rules, A Quick Refresher

When an individual leaves the UK and becomes non-UK tax resident, UK tax does not always disappear entirely.

Where UK residence is resumed within five complete tax years, the temporary non-UK residence (TNR) rules may apply. These anti-avoidance provisions are intended to deter short-term departures driven mainly by tax considerations.

Where TNR applies, certain income and gains received during the period of non-UK residence can be brought back into the UK tax net in the year of return.

Historically, dividends were one of the areas where careful planning could make a material difference.

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How Dividend Planning Worked Before the Change

Under the previous rules, dividends paid by private companies during a period of non-UK residence were not automatically taxed on a subsequent return to the UK.

Where those dividends were paid out of post-departure profits, meaning profits generated after UK residence ceased, they were generally treated as falling outside the scope of the temporary non-UK residence (TNR) charge.

For founders who moved to the UAE, continued to operate their businesses, and extracted profits while abroad, this often formed a central part of dividend planning.

What the 2025 Budget changed

From 6 April 2026, the Autumn Budget removes the concept of post-departure trade profits from the temporary non-UK residence (TNR) rules.

In practical terms:

• Dividends received during a period of temporary non-UK residence can be taxed on return to the UK.
• It no longer matters whether profits arose before or after departure.
• The tax charge arises in the year of return, using the UK dividend tax rates in force at that time.

The change applies to dividends or distributions from UK companies and from foreign companies that are close, or would be close if they were UK tax resident. For anyone returning to the UK within five years, dividends taken while abroad may now be tax deferred rather than tax free, particularly for business owners who assumed UAE residence alone was enough to secure their UK tax position.

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Who is most affected

This change is especially relevant for:

• UK business owners who have moved to the UAE but expect to return to the UK at some point.
• Shareholder-directors of UK private companies extracting profits while non-UK resident.
• Individuals who left the UK recently and remain within the five-year temporary non-residence window.
• Business owners whose long-term plans are not yet fully settled.

Even where non-UK residence applies today, the risk often only becomes clear years later, when circumstances change and a return to the UK becomes likely.

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Why the timing of a UK return now matters

Under the new rules, the key driver is no longer when dividends are paid, but when UK tax residence resumes. For individuals returning to the UK on or after 6 April 2026, dividends received during a period of temporary non-UK residence may be brought into charge on return, regardless of when they were paid.

Where the temporary non-UK residence rules apply, the timing of a UK return can materially affect the outcome. In some cases, a return before April 2026 may be more favourable, depending on the facts. This can include dividends paid before April 2026, where the return to UK tax residence occurs after 5 April 2026 and the temporary non-UK residence rules apply.

Return timing should not be considered in isolation. Decisions taken without a full review can trigger wider issues under the Statutory Residence Test, create UAE tax exposure, or raise corporate tax and residency risks. This is an area where professional advice matters, as small differences in timing can have a significant tax impact.

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Other Budget changes relevant to UK–UAE business owners

The dividend change does not sit in isolation. The 2025 Budget also includes measures that affect internationally mobile entrepreneurs more broadly, including:

• Continued tightening of anti-avoidance rules for internationally mobile individuals.
• Reforms to transfer pricing, permanent establishment rules, and the removal of Diverted Profits Tax, affecting UK–UAE group structures.
• Increased reporting and transparency for cross-border transactions.
• Ongoing changes to inheritance tax, trusts, and residence-based regimes that matter for long-term relocation planning.

The clear direction of travel is that HMRC expects planning to reflect the full lifecycle, not just the period spent abroad.

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Other Budget changes relevant to UK–UAE business owners

The dividend change does not sit in isolation, the 2025 Budget also includes a range of measures affecting internationally mobile entrepreneurs, including:

• UK dividend tax rates increase by 2 percent from April 2026, affecting the tax cost of dividends on a future return to the UK.
• The notional dividend tax credit for non-UK residents is abolished from April 2026, removing a relief that previously applied in limited circumstances.
• Continued tightening of anti-avoidance rules for internationally mobile individuals.
• Reforms to transfer pricing and permanent establishment rules, alongside the removal of Diverted Profits Tax, with direct implications for UK–UAE group structures.
• Increased reporting and transparency requirements for cross-border transactions.
• Ongoing changes to inheritance tax, trusts, and residence-based regimes, which are particularly relevant for long-term relocation planning.

These changes reinforce HMRC’s expectation that planning should not rely solely on time spent abroad where a UK return is likely.

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Why this matters for UAE-based business owners

The UAE remains an attractive place to live and do business, but UK tax outcomes are driven as much by the risk of return as by departure planning. UAE tax residence alone does not protect against UK tax if UK residence later resumes within the temporary non-UK residence window. Dividends, company control, management decisions, and overall group structure all play a role.

For many business owners, the real challenge is not leaving the UK, but leaving in a way that still works if plans change.

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How iCXO can help

For UK business owners in the UAE, the challenge is no longer just leaving the UK, but doing so compliantly and ensuring planning still works if a return becomes likely.

We help business owners structure their move, review whether dividend planning and business arrangements remain effective under the new rules, and identify what needs to change to avoid unexpected UK tax exposure on return.

If you are living in the UAE, planning a move, or reassessing your position after the 2025 Budget, contact us to arrange a call to discuss your circumstances.