Introduction: The Rise of ‘Tax Travellers’

The UK is on the verge of a major tax overhaul, and it’s sending shockwaves through its wealthy Indian-origin communities. Effective April 6, 2025, new tax regulations will impose inheritance tax (IHT) on global earnings and assets of UK residents. This has spurred a strategic exodus of high-net-worth individuals seeking refuge in tax-efficient countries like the UAE and Bahrain. Meet the “tax travellers” – families redefining their lives to preserve their wealth.

What Are Tax Travellers?

Tax travellers are primarily Persons of Indian Origin (PIOs) with British passports or NRIs who have established roots in the UK. Under the upcoming tax rules, spending fewer than 90 days in the UK each year is key to avoiding UK tax residency. By carefully orchestrating their stays across multiple countries, these individuals are sidestepping the harsh impacts of the new tax regime.

The Game-Changer: UK’s Tax Overhaul

The UK’s revised tax policies are a departure from its longstanding, investor-friendly approach. The key changes include:

• Global Taxation: Worldwide income will now be taxable for UK residents, even if it is not remitted to the UK.
• Inheritance Tax on Global Assets: Long-term UK residents – defined as those who spend 10 of the previous 20 years in the UK – will face IHT on their worldwide assets, including offshore trusts, properties, and bank accounts.
• Shortened Non-Domicile Period: The non-domicile rule, which previously allowed foreign income to remain untaxed for 15 years, will now apply for just 4 years.

These changes are dismantling years of careful estate planning and prompting families to explore alternative tax-efficient arrangements.

Why Dubai Is the Go-To Tax Haven

Dubai stands out as a prime destination for tax travellers. Here’s why:

• No Inheritance Tax: Dubai exempts foreign income and assets from local taxes, offering complete protection against IHT.
• Proximity to India: Its geographical closeness to India makes it convenient for Indian-origin families.
• Luxurious Lifestyle: Dubai offers a high standard of living comparable to the UK, easing the transition for relocating families.

Other tax havens, like Bahrain, are also gaining popularity among those seeking similar financial advantages.

India: A Viable Alternative for NRIs

India, with its lack of inheritance tax, is another option for NRIs holding British passports. However, the transition requires careful planning to avoid complications related to Indian tax residency. The historic estate duty treaty between India and the UK might offer relief, but its applicability under the new UK IHT rules remains uncertain.

Strategic Residency Planning: The New Normal

To avoid UK tax residency, many affluent families are designing precise schedules:

• 89 Days in the UK: Staying below the 90-day threshold to evade UK tax residency.
• 119 Days in India: Capitalizing on India’s tax-friendly environment while staying connected to their roots.
• The Rest of the Year in Tax Havens: Spending the remaining time in destinations like Dubai or Bahrain.

Such intricate planning ensures minimal exposure to the UK’s tax regime and maximum preservation of wealth for future generations.

Conclusion: A Paradigm Shift in Tax Strategy

The UK’s impending tax reforms are rewriting the financial playbook for Indian-origin millionaires and NRIs. The rise of tax travellers highlights the lengths families are going to safeguard their global assets. Relocating to tax havens like Dubai or meticulously crafting residency schedules are becoming essential strategies in this new era of global taxation.

As these changes take effect, staying ahead with expert financial advice is more critical than ever. For in-depth guidance on NRI tax planning, estate management, and wealth preservation, visit Dinesh Aarjav & Associates. Let us help you navigate the complexities of cross-border taxation with ease.