A free trade agreement between Britain and India will be signed on Thursday giving a long-term boost to both countries’ economies amid the global hit of US tariffs.
At stake are significant prizes for the UK, achieving its first major deal following Brexit, and the formerly protectionist Indian economy, as its government lands its first trading pact with a European state.
India's Prime Minister Narendra Modi, who is visiting the UK on a state trip, is set to sign a free trade agreement with British Prime Minister Keir Starmer.
Under the agreement, India will get duty-free access to British markets for its textile products and electric cars, while Britain will see a reduction of duty on its vehicles, food and whisky.
The deal, which needs to be approved by the UK Parliament and India’s federal cabinet, probably next year, will see even greater bilateral trade which reached $55 billion last year, said officials.
Downing Street has heralded the agreement as a “win” worth £6 billion to the economy that will also create a further 2,200 jobs, with Indian companies expanding their operations into Britain.
"We both know this is the biggest and most economically significant trade deal that the UK has made since leaving the EU," Mr Starmer told Mr Modi. “And I think I can say that it’s one of the most comprehensive deals that India has ever done."
UK officials said the deal will drive jobs in high-growth sectors such aerospace, technology and advanced manufacturing, the UK government said, and lead to cheaper high street prices with greater choice on clothing, shoes, and food products.
India’s average tariff on UK products will drop from 15 per cent to 3 per cent allowing British companies that sell products to India from soft drinks, cosmetics to cars and medical devices to expand into the subcontinent’s market.
This could see British exports to India increase by 60 per cent “in the long run”, Downing Street said, with a projected addition £16 billion in exports by 2040.
Mr Modi alluded to the England and India cricket test series, ongoing as they met, to add the sport was “a great metaphor for our partnership”.
“There may be a swing and a miss at times but we always play with a straight bat,” he said. “We are committed to building a high-scoring, solid partnership.”
India too claimed a win on the deal with the country gaining access to Britain’s market for electric and hybrid vehicles in a quota system.
Furthermore, Indian commerce ministry officials said, 99 per cent of Indian exports would not have any duties.
British car exports will see their duties cut from 100 per cent to 10 per cent in a quota system as well as tariffs on whisky reducing to 75 per cent from 150 per cent.
There will be further tariff relief for the UK on aircraft parts, electronics and medical devices, it was reported.
Britain has invested $36 billion in India − making it the sixth biggest investor there. More than 1,000 Indian companies operate in the UK, employing 100,000 people and investing $20 billion, a figure now expected to grow.
Mr Modi has gained some credibility from the three-year negotiations after India held to its red lines by winning concessions on work visas and professional qualification recognition, reinforcing India’s growing global services and skills position.
India also managed to keep its agricultural products out of the agreement, as the industry employs 40 per cent of the country. It is also an issue that has dogged trade talks with America.
The agreement can also demonstrate, perhaps worryingly to Washington, that US President Donald Trump’s global tariff wars are pushing other countries to make bilateral deals, potentially at America’s cost.
The specs
Engine: 3.0-litre six-cylinder MHEV
Power: 360bhp
Torque: 500Nm
Transmission: eight-speed automatic
Price: from Dh282,870
On sale: now
UAE%20SQUAD
%3Cp%3E%0D%3Cstrong%3EMen%3A%3C%2Fstrong%3E%20Saif%20Al%20Zaabi%2C%20Salem%20Al%20Marzooqi%2C%20Zayed%20Al%20Ansaari%2C%20Saud%20Abdulaziz%20Rahmatalla%2C%20Adel%20Shanbih%2C%20Ahmed%20Khamis%20Al%20Blooshi%2C%20Abdalla%20Al%20Naqbi%2C%20Khaled%20Al%20Hammadi%2C%20Mohammed%20Khamis%20Khalaf%2C%20Mohammad%20Fahad%2C%20Abdulla%20Al%20Arimi.%0D%3Cbr%3E%3Cstrong%3EWomen%3A%3C%2Fstrong%3E%20Mozah%20Al%20Zeyoudi%2C%20Haifa%20Al%20Naqbi%2C%20Ayesha%20Al%20Mutaiwei.%3C%2Fp%3E%0A
Our family matters legal consultant
Name: Hassan Mohsen Elhais
Position: legal consultant with Al Rowaad Advocates and Legal Consultants.
MATCH INFO
Juventus 1 (Dybala 45')
Lazio 3 (Alberto 16', Lulic 73', Cataldi 90 4')
Red card: Rodrigo Bentancur (Juventus)
Our family matters legal consultant
Name: Hassan Mohsen Elhais
Position: legal consultant with Al Rowaad Advocates and Legal Consultants.
The specs: 2018 Chevrolet Trailblazer
Price, base / as tested Dh99,000 / Dh132,000
Engine 3.6L V6
Transmission: Six-speed automatic
Power 275hp @ 6,000rpm
Torque 350Nm @ 3,700rpm
Fuel economy combined 12.2L / 100km
Ten tax points to be aware of in 2026
1. Domestic VAT refund amendments: request your refund within five years
If a business does not apply for the refund on time, they lose their credit.
2. E-invoicing in the UAE
Businesses should continue preparing for the implementation of e-invoicing in the UAE, with 2026 a preparation and transition period ahead of phased mandatory adoption.
3. More tax audits
Tax authorities are increasingly using data already available across multiple filings to identify audit risks.
4. More beneficial VAT and excise tax penalty regime
Tax disputes are expected to become more frequent and more structured, with clearer administrative objection and appeal processes. The UAE has adopted a new penalty regime for VAT and excise disputes, which now mirrors the penalty regime for corporate tax.
5. Greater emphasis on statutory audit
There is a greater need for the accuracy of financial statements. The International Financial Reporting Standards standards need to be strictly adhered to and, as a result, the quality of the audits will need to increase.
6. Further transfer pricing enforcement
Transfer pricing enforcement, which refers to the practice of establishing prices for internal transactions between related entities, is expected to broaden in scope. The UAE will shortly open the possibility to negotiate advance pricing agreements, or essentially rulings for transfer pricing purposes.
7. Limited time periods for audits
Recent amendments also introduce a default five-year limitation period for tax audits and assessments, subject to specific statutory exceptions. While the standard audit and assessment period is five years, this may be extended to up to 15 years in cases involving fraud or tax evasion.
8. Pillar 2 implementation
Many multinational groups will begin to feel the practical effect of the Domestic Minimum Top-Up Tax (DMTT), the UAE's implementation of the OECD’s global minimum tax under Pillar 2. While the rules apply for financial years starting on or after January 1, 2025, it is 2026 that marks the transition to an operational phase.
9. Reduced compliance obligations for imported goods and services
Businesses that apply the reverse-charge mechanism for VAT purposes in the UAE may benefit from reduced compliance obligations.
10. Substance and CbC reporting focus
Tax authorities are expected to continue strengthening the enforcement of economic substance and Country-by-Country (CbC) reporting frameworks. In the UAE, these regimes are increasingly being used as risk-assessment tools, providing tax authorities with a comprehensive view of multinational groups’ global footprints and enabling them to assess whether profits are aligned with real economic activity.
Contributed by Thomas Vanhee and Hend Rashwan, Aurifer
What the law says
Micro-retirement is not a recognised concept or employment status under Federal Decree Law No. 33 of 2021 on the Regulation of Labour Relations (as amended) (UAE Labour Law). As such, it reflects a voluntary work-life balance practice, rather than a recognised legal employment category, according to Dilini Loku, senior associate for law firm Gateley Middle East.
“Some companies may offer formal sabbatical policies or career break programmes; however, beyond such arrangements, there is no automatic right or statutory entitlement to extended breaks,” she explains.
“Any leave taken beyond statutory entitlements, such as annual leave, is typically regarded as unpaid leave in accordance with Article 33 of the UAE Labour Law. While employees may legally take unpaid leave, such requests are subject to the employer’s discretion and require approval.”
If an employee resigns to pursue micro-retirement, the employment contract is terminated, and the employer is under no legal obligation to rehire the employee in the future unless specific contractual agreements are in place (such as return-to-work arrangements), which are generally uncommon, Ms Loku adds.
