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Legally Avoid Paying UK Taxes

Table of Contents
Introduction

Running a business is challenging, and taxes can add an extra layer of complexity. In this article, we will demystify the UK tax system and explore legal ways to minimize your tax bill. From understanding progressive tax brackets to exploring tax-efficient accounts, we’ll delve into the intricacies. But, for those seeking a more global approach, we’ll reveal a game-changing strategy – relocating your business to the UAE, particularly Dubai, to benefit from the enticing 0% income tax.

Understanding UK Tax Brackets

Before diving into tax reduction strategies, it’s crucial to comprehend how the UK tax system operates. Contrary to a common misconception, entering a higher tax bracket doesn’t mean your entire income is taxed at that rate. The UK follows a progressive tax system with different brackets. 

The Association of Chartered Certified Accountants has listed certain regulations for managing the lifestyle of the people. This entirely depends on the tax that is paid by the residents. Must note that a taxpayer will not get a personal allowance on taxable income above £125,140.

United Kingdom Tax brackets are managed every year. The table shows the data for the financial year 2021-22 for your reference.

Band Tax Income Tax Rate
Personal Allowance
up to £12,570
Zero per cent
Basic rate
£12,571 to £37,770
Twenty per cent
Higher rate
£37,710 to £150,000
Forty per cent
Additional rate
Above £150,000
Forty-five per cent
Legal Ways to Reduce Taxes in the UK

Leveraging Tax-Efficient Accounts: Explore the benefits of tax-efficient accounts, such as ISAs and pensions, which can shield your income from certain taxes.

Contributing to Your Pension: Directing funds into your pension not only secures your future but also offers tax relief, making it a strategic move for both small and large earners.

Deducting Business Expenses: Every legitimate business expense contributes to reducing your taxable income. Properly documenting and deducting these expenses can significantly impact your tax liability.

The Ultimate Strategy – Relocating to the UAE

For those seeking substantial tax savings and a global business perspective, relocating to the UAE, specifically Dubai, is a game-changer. This move is especially lucrative for digital businesses or those that can operate remotely. Here are key considerations for a successful relocation:

Eligibility: To be a taxable resident in the UAE, you need to spend at least 3 months per year there.

Business Operability: Your business should be adaptable to operate from anywhere globally, making it feasible for relocation to Dubai.

Passport Validity: Ensure your passport is valid for at least 6 to 7 months.

Upfront Investment: Be prepared for an initial investment to set up your business in Dubai. While it may seem significant, the tax savings often far outweigh this cost.

Freezone & Mainland – Which one is the ideal choice for your business?

One of the most important thing to be checked before registering a company either in the mainland or in Freezone in Dubai are the Tax Rates. From 1st June 2023 – Companies located in the Mainland pay Corporate Tax @ 9% on their profits above the threshold of AED 375,000 p.a. However, No Tax would be levied on companies which are located in the Freezone.

Thus, if you intent to avail of Corporate Tax exemption – you should register in the Freezone and not in Mainland Dubai as Freezone Companies are exempted from payment of Corporate Tax for a period of 50 Years.

As 9% Corporate Tax is applicable in all the emirates of UAE (incl. Dubai), a lot of companies have started shifting from Mainland to Freezone (wherever possible)

FAQs

FAQ 1: Is UAE tax-free for business?

Business set up in the UAE mainland will be subjected to a certain amount of taxes, although free zones in Dubai, such as IFZA Free Zone allow 0% corporate and personal tax to be levied upon business profits.

FAQ 2: Who pays corporate tax in the UAE?

All businesses operating in commercial activities and other businesses are subjected to paying corporate tax with a few business models having exemptions. Ex- Businesses involved in the extraction of oil.

FAQ 3: Why is corporate tax introduced in the UAE?

A detailed and extensive corporate regime in the UAE was introduced in order to amplify Dubai’s global position as a hub for investment and innovative startups, with affordable registration costs, inclusive of no corporate taxes.

FAQ 4: How much is corporate tax in the UAE?

Dubai follows a progressive corporate tax system with rates between 9% to 55%.

Conclusion

Tackling UK taxes as a business owner requires a strategic approach. Understanding progressive tax brackets and implementing legal tax reduction methods is the first step. For those aiming for substantial savings and global business opportunities, relocating to the UAE emerges as a powerful solution. The UAE, with its 0% income tax policy, offers an attractive environment for businesses to thrive. 

If you’re considering this move, our expert team at GenZone is ready to guide you through the process. Book a consultation and embark on a journey to a tax-friendly and business-friendly 

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