The UK is hoping to attract more from the UAE as the war challenges Dubai’s bid

The UK government is trying to turn the weather into an opportunity, encouraging thousands of Britons to rethink life in Dubai, as war in the region threatens the city’s reputation as a tourist destination.

About 240,000 Britons live in the UAE. For years they have been attracted by the zero taxes, safety, international schools, and luxurious lifestyle. Now, with missiles barred over the Gulf peninsula and air travel disrupted repeatedly, the long-term stability of Dubai’s livelihood is being called into question.

Last week, Rachel Reeves, the UK finance minister, recommended a “competitive tax system” in an interview with CNBC’s Sara Eisen on their “Invest in America” ​​forum.

“We have the lowest corporate tax rate in the G7,” he said, referring to tax incentives and investment, encouraging firms to list in London, where they will not have to pay stamp duty on shares for the first three years.

Reeves hopes to position Britain as a “safe haven economy” for wealthy immigrants, and said the Treasury will also review tax rules, Reuters reported, citing an unnamed official. The UK Treasury did not respond to CNBC’s request for comment.

Early signs suggest that the war has already caused a stir among British citizens living in the UAE, even if they are not returning to the UK.

According to data provided by the Financial Times, about one in eight Britons living in the UAE, about 30,000 people, have left since the war broke out in Feb. 28. CNBC reached out to the British Embassy and the Dubai Media Office, which could not confirm the numbers.

While many of the moves may be temporary rather than permanent, the figures point to a break in what has been a steady flow of migration from Britain to the Gulf.

Some families have returned to Europe for a while, gravitating to riches like Switzerland or sunny, low-cost places like Spain and Portugal to wait out the conflict. Whether Britain benefits from such a reassessment may depend on how long the war lasts and whether the UK’s economic supply actually improves.

Those leaving the UAE include families worried about security, professionals dealing with repeated flight cancellations, and businessmen reviewing long-term plans in a region that feels suddenly volatile.

The pressure has increased in households with children. Schools across the Emirates were closed for weeks after the start of the war, shifting students to remote schools, prompting some parents, whom CNBC has spoken to since the start of the war, to send their children back to their home countries to finish the term in private schools.

Dubai’s appeal has never been purely financial. It sought to attract Westerners with the promise that they could enjoy the opportunities of the Middle East without the instability of the Middle East.

UK costs are high.

Nearly 6,000 high-growth British business owners moved abroad between January 2024 and January 2026, according to a February study by Rathbones, citing entries in the UK’s official company register. The UAE was the single most popular destination, followed by Spain and the United States.

Migration was concentrated in London and the South East and was dominated by the technology sector, where one in ten founders moved overseas, according to the analysis.

Taxation remains the central fault line.

While the UAE does not pay personal income tax or capital gains tax, Britain has strengthened its long-standing “non-domicile” rule for taxpayers whose permanent tax home is outside the country. It ended the remittance basis from April 2025 and replaced it with a residence-based system that charges most long-term residents their global income and benefits.

Under the new rules, only newcomers to the UK who have spent at least 10 consecutive years abroad are eligible for a four-year limited exemption on foreign income and benefits. After that, global income is fully taxed, a sharp break from the previous system that allowed wealth to remain offshore indefinitely.

The UK also increased employer National Insurance contributions from 13.8% to 15%, while lowering the threshold of benefits to which tax applies.

The government also reduced investor relief, reducing the lifetime allowance on profits that qualify for preferential treatment from £10 million to £1 million, or about $1.35 million, weakening the incentives for founders to back start-up companies.

“I doubt that Rachel Reeves’ review will be enough to bring back rich people from the UAE,” said Stallone Shaikh, founder of Alliance Street Consultancy, which helps entrepreneurs set up businesses in the UAE.

“For high-net-worth individuals, these changes don’t move the needle,” Shaikh told CNBC. “The UK is punishing people for making money instead of encouraging them.”

Personal income tax in Britain now rises to 45% on earnings above £125,140. Capital gains tax can be as high as 24%, while the UAE offers 0% corporate tax on profits up to $100,000 and 9% beyond that.

Mahesh Patel, a 60-year-old British citizen who moved to Dubai in 2023, helps UK clients set up businesses in the UAE through Melrose Consultancy. While some of his contacts have discussed exit plans, Patel told CNBC he has no plans to return.

“I’m always there,” he added. “If anything, I would look at Bangkok, Phuket or Bali – where the cost of living is a fraction of Dubai or the UK”

Patel said lifestyle, schools, and global connectivity are always a bigger focus than taxes alone.

Few observers are expecting a major return of Britons from Dubai. The UAE remains attractive, and many who have left may return if the conflict subsides.

Henley & Partners, which helps the wealthy relocate, previously told CNBC that Dubai remains strong, but clients tend to keep their options open amid the uncertainty.

“Cases like this reinforce a key principle we often discuss with clients: the importance of global choice,” said head of private client group Dominic Volek.

Volek said “international families on the move” often have choices in the Americas, Europe, the Middle East and Asia, adding: “These decisions are often strategic and long-term in nature rather than reacting to short-term events.”