Dubai versus London: known limitation 1

It compares two tax positions, not two buildings. A buyer who is or becomes UK tax resident faces a completely different calculation, and one who is already UK resident may find the surcharges do not both apply.

Dubai versus London: known limitation 2

Personal allowance eligibility for non residents is not universal. British citizens generally keep it, others depend on the treaty. Assuming it applies can flatter the London number by a few thousand pounds a year.

Dubai versus London: known limitation 3

Mortgage interest relief for individual UK landlords is a basic rate credit rather than a deduction, which changes the arithmetic sharply for a leveraged buyer and is not modelled above.

Playbooks / Property

Dubai versus London

A Dubai resident buying a London rental pays roughly ten percent of the purchase price in stamp duty alone once the additional property and non resident surcharges are added, then pays UK income tax on the rent and UK capital gains tax on the exit, none of which exists in Dubai, which is why a lower headline yield in Dubai often survives contact with reality better than a higher one in London.

The rule

The comparison is almost always made on gross yield, and gross yield is the one number where London can look competitive. Outer London boroughs advertise six and seven percent. Dubai advertises six to eight. On that basis a buyer concludes the two markets are similar and picks on sentiment.

They are not similar. They differ at three separate points, and each one takes a bite the headline never mentions: what you pay to get in, what the tax authority takes each year, and what it takes when you leave.

Getting in

In Dubai the entry cost is roughly six to seven percent of the price. Four percent to the Dubai Land Department, two percent agency commission with five percent VAT on the commission, a trustee office fee of around four thousand dirhams, and an administrative charge. There is no purchase tax beyond the transfer fee.

In England the entry cost is stamp duty, and for the buyer this site is written for it is not the headline rate. A UK resident buying their only home pays the standard bands. A Dubai based investor buying a rental pays those bands plus five percentage points for owning another property plus two percentage points for not having been in the UK for 183 days. Both surcharges apply to every band, including the band that would otherwise be zero.

On a six hundred thousand pound flat that works out as follows.

The first 125,000 at seven percent: 8,750
The next 125,000 at nine percent: 11,250
The remaining 350,000 at twelve percent: 42,000

Sixty two thousand pounds, which is 10.3 percent of the purchase price in tax alone, before conveyancing and survey. Dubai's entire round trip in costs a buyer less than London's stamp duty on its own.

Holding it

This is the part that is usually left out entirely. Rental income from a UK property is UK taxable income wherever the landlord lives. Under the Non-resident Landlord Scheme the agent or the tenant deducts basic rate tax at source unless HMRC approves you to receive rent gross and file a return instead. Either way the tax is due.

Dubai levies no personal income tax on rental income.

Take the six hundred thousand pound flat at six percent gross, so thirty six thousand a year, and strip it the way the net rental yield framework does. Service charge on a leasehold flat, management at ten percent plus VAT, a month of void, a maintenance reserve. Call it twenty four thousand of taxable profit. Basic rate tax takes roughly five thousand of that.

Against a total outlay near six hundred and sixty five thousand, the flat nets under three percent. The Dubai worked example in the net yield framework, on a market advertising a seven percent gross, lands at 4.3 percent net and pays no tax on it.

Leaving

A non resident selling UK residential property pays UK capital gains tax on the gain, at eighteen or twenty four percent depending on where the gain sits against the income tax bands, with an annual exempt amount of three thousand pounds. There is also a sixty day reporting deadline, and missing it is its own penalty.

Dubai charges no capital gains tax. The exit cost is the agency commission and the transfer, which the transaction cost drag framework covers.

So what is London actually for

Three things, and they are real.

Currency. The dirham is pegged to the dollar. A portfolio denominated entirely in dollars is a bet, even if it does not feel like one. Sterling assets are a hedge against that, and for someone whose children may study or settle in the UK they are a liability match rather than a speculation.

Institutional depth. Title, planning, dispute resolution and a rental market with centuries of case law behind it. Dubai's framework is good and improving fast, but it is decades old rather than centuries.

Debt. UK mortgage markets for non residents are narrower than for residents but they exist, and long fixed rate money in a low yielding market behaves differently from short money in a high yielding one.

None of those three is a yield argument. That is the point. The same test applied to Singapore reaches the same conclusion by a much blunter route, because there the entry cost settles the yield question before it is asked. If the case for London is diversification, say so and size it as diversification. If the case is income, the arithmetic above is the case against.

The arithmetic

Dubai, entry Transfer fee 4.00% of price Agency commission 2.00% + 5% VAT on the commission Trustee and admin roughly AED 4,500 Purchase tax none Annual tax on rent none Capital gains tax on exit none England, entry, non resident buying an additional property SDLT band rate + 5 pp additional property + 2 pp non resident applied to every band, including the nil rate band Worked, GBP 600,000 125,000 x 7% = 8,750 125,000 x 9% = 11,250 350,000 x 12% = 42,000 Total SDLT = 62,000 (10.3% of price) Annual tax on rent income tax on the net profit, deducted at source under the NRL scheme unless HMRC approves gross payment Capital gains tax on exit 18% or 24% on the gain, GBP 3,000 annual exempt amount, reportable within 60 days

Where it breaks

It compares two tax positions, not two buildings. A buyer who is or becomes UK tax resident faces a completely different calculation, and one who is already UK resident may find the surcharges do not both apply.
Personal allowance eligibility for non residents is not universal. British citizens generally keep it, others depend on the treaty. Assuming it applies can flatter the London number by a few thousand pounds a year.
Mortgage interest relief for individual UK landlords is a basic rate credit rather than a deduction, which changes the arithmetic sharply for a leveraged buyer and is not modelled above.
Corporate ownership changes everything in both directions, including stamp duty at the fifteen percent flat rate in some cases, and is a question for a tax adviser rather than a framework page.
The yields quoted are indicative market averages from secondary sources. Your building is not an average.
It says nothing about capital growth, which is the argument most London buyers are actually making. The costs above are certain; the growth is not.

When to use it

Before treating a London gross yield and a Dubai gross yield as comparable numbers, which they are not. Also before assuming that a portfolio held entirely in a dollar pegged currency is diversified.

Run it on your own numbers

The Net Rental Yield does this arithmetic for you, in your currency, in about thirty seconds.

Open the calculator

Sources

Last reviewed 26 August 2026. Commercial relationship disclosure: the author works in Dubai real estate brokerage. See the disclosure standards. Disclosure standards.