The surprising personal finance pitfalls of relocating from the UAE to the UK

After 15 years of living in Dubai, Alice Haine is adjusting to Britain’s challenging economic landscape

Returning to life in Britain poses particular challenges after years abroad in a tax-free environment. Getty Images

By the time I spotted the giant stag to the right of my car's headlights, it was already too late.

I slammed on the brakes but the inevitable thud as my blue Mini hit the male deer during its dash across the road was a distressing sound.

As the car shuddered to a stop, I jumped out expecting to see a severely injured animal, but it had simply disappeared into the night. My car, on the other hand, is now booked in for an expensive repair.

Personal finance surprises such as these have become commonplace over the past 18 months as I adjust to life back in my home country.

As a family of four, we relocated to the UK in August 2020, a decision spurred by the age of my UAE-born children – now 15 and 12 – who I felt needed to reacquaint themselves with their home country.

The prospect of more time with the grandparents, the sound of rain and sledging in the snow was a big draw for the children, while I was excited about living in our own home after 15 years of renting in the Emirates.

There’s no doubt our decision to relocate was the right one at our stage of life, but the timing coincided with an extremely challenging period for the UK economy.

At first, the Covid-19 crisis was the dominant issue, with the country suffering the highest death toll in Europe and the subsequent lockdowns causing output to contract 9.4 per cent in 2020.

Now Britain is in the grip of a cost-of-living catastrophe, with inflation hitting 5.5 per cent in January after last year's sharp recovery coupled with supply chain disruption sent consumer prices spiralling upwards..

Fighting price increases has become a daily battle for Britons, according to Myron Jobsen, personal finance campaigner at interactive investor, as the cost-of-living squeeze overshadows the buoyant growth in jobs and wages.

“Many cash-strapped households simply cannot tighten their belts any further,” Mr Jobsen said.

While these economic hurdles are not something I could have predicted when I left the UAE, they have heightened the unexpected personal finance challenges during my first 18 months back in the UK.

The upfront costs are heavy

While expatriates moving to the UAE are often surprised by the upfront costs of setting up in the Emirates, the same applies when you return home.

Landlords require references or credit checks from new tenants – something an expatriate may struggle with if they have been away a long time.

Thankfully, by keeping a UK account and credit card open during my time in the UAE, my credit rating was high and my Emirati landlord gave me a positive review of the 15 years we spent living in his Dubai villa.

Other friends, however, were forced to shell out up to a year’s rent in advance to secure a rental home.

There was also the consideration of a winter wardrobe – we didn’t have one – which meant buying four sets of coats, jumpers, hats and boots and there was the cost of two new sets of school uniform.

A private healthcare scheme also became essential once I realised one of the things I miss the most about the UAE, apart from the sunshine, is easy access to specialist doctors.

While the UK’s National Health Service offers free health care to all, the system has become overburdened by the demands of the pandemic, with routine operations pushed to the bottom of the priority list.

Bigger costs, including forking out for two cars, a necessity when you live in the countryside with two jobs and two schools to which children have to be delivered – which we purchased second-hand from local dealers.

While we secured good deals in 2020, second-hand cars have accelerated in price over the past 12 months, growing 28.7 per cent in January on the same month a year earlier because of the global shortage of semiconductors needed to produce new vehicles.

There is also car insurance to factor in – cheaper if you pay the year upfront in full – as well as road tax, which is £155 ($211) per car and rises by £355 if your car’s value exceeds £40,000.

Other hefty outlays included council tax, an annual fee your local council charges you for the services it provides, with the average Band D rate in England for 2021-2022 coming in at £1,898, although the levy can be much higher because it is tied to the value of your home.

Paying income tax hurts

Road and council tax is one thing, but paying income tax was a hard pill to swallow after 15 years of a tax-free salary.

When negotiating your UK wage, don’t forget to use a tax calculator to work out exactly what your take-home pay will be.

Income tax can be as high as 45 per cent of your salary if you earn more than £150,000 and there is National Insurance on top – a tax on earnings to ensure you qualify for benefits such as the state pension.

This will rise to 13.35 per cent of earnings from 12 per cent at the start of April after the government mandated the increase to help pay for the soaring cost of health and social care in the UK in the wake of the coronavirus pandemic.

There is also the mountain of property taxes to consider if you plan to buy a home on your return.. We sold a home in London prior to our relocation, which saved a huge sum on capital gains tax – because our offshore status meant the tax applied only to the gain we had made since 2015.

The UK property market is nuts

If you do want to buy your own home in the UK, you will need your wits about you.

Britain’s property market ended 2021 on a record high with the average house price hitting £254,822, a rise of £24,000 since the start of the year and up 10.4 per cent since December 2020 in the biggest full-year rise since 2006, according to mortgage lender Nationwide.

So, when it came to purchasing a family home, we found ourselves competing against several buyers during the pandemic-induced “race for space” – only securing our pad by putting in an offer at full asking price within 30 minutes of viewing the property.

When buying a home, you must factor in stamp duty, a tax levied on the property's value that ranges from 2 per cent to 12 per cent of the purchase price.

We got lucky, because the government rolled out a stamp duty holiday during the crisis, offering a saving of £15,000 on the first £500,000 of a purchase price – but that tax break ended on September 30 with buyers now liable for the full cost.

Running your own home is less cost-effective than renting

The cost of running a home – with the mortgage, maintenance, council tax and utility bills – has been an expensive surprise after years of simply calling out our favourite repair team in the Emirates with all costs covered by the landlord.

Thankfully, we shipped home the majority of our furniture and white goods, meaning we had little to buy at first.

However, none of our Dubai curtains fitted and there were lots of niggling costs, such as lampshades, replacing missing loo roll holders and maintenance issues such as blocked drains in the summer caused by tree roots and fence panels that blew down in the wind.

The biggest expense, however, has been heating. Energy bills have been on the rise in the UK for several months during a surge in wholesale gas prices caused by the pandemic-induced surge in demand.

The squeeze on living standards will only worsen in April when the energy price cap – the maximum suppliers are allowed to charge in a year – goes up by £693, which will lead to a bill increase of 54 per cent.

While we use electricity for our household energy needs, our rural location in West Sussex means our heating is powered by an outdoor oil tank – an expensive proposition as oil prices leap ever higher.

To keep costs down, we are part of a village syndicate that orders oil in bulk, but we have run out twice, partly because of a faulty gauge but also because our tank size is insufficient to meet the family demand.

This is why the run-in with the stag is even more significant. I was actually driving home from picking up electric fires from my parents to heat our freezing home because I refused to buy emergency oil – double the price of the syndicate rate – because our regular delivery was imminent.

The other challenge has been cleaning. While the UAE offers the luxury of affordable domestic help, a cleaner in my area earns about £15 per hour and that’s at the lower end of the scale – some charge £22 an hour.

After wrestling with a vacuum for several months, we decided a cleaner once a week was an “essential household expense” – mainly to avoid family arguments over chores.

Inflation eats into your salary

There is no way to sugar-coat it, inflation is hurting Britons at every level of the income range, with the Bank of England expecting the rate to peak at 7.25 per cent in April when the cost-of-living squeeze really kicks in.

Despite unemployment holding at 4.1 per cent in the three months to the end of December, the average wage excluding bonuses rose 3.6 per cent on the year – well below the 5.4 per cent inflation rate recorded in the final month of last year, according to the Office for National Statistics.

This leaves wages down 1.2 per cent after being adjusted for inflation, the biggest decline since 2014, as households face the biggest drop in their disposable income for at least 30 years.

When I first entered the country, my weekly supermarket shop averaged £100 ($136) for a family of four – a delight compared with the Dh1,200 ($326) or more I racked up in the Emirates.

Towards the end of last year, the UK bill began rising sharply, sometimes hitting £200.

“Food prices remain on the up, with food manufacturers and supermarkets announcing price hikes for 2022, citing the higher costs of ingredients, transportation, worker shortages and higher wages,” Mr Jobsen said.

Financial planning has become a necessity

I quickly took action, drawing up a monthly budget – a practice adopted in the Emirates to hit my saving goals – to ensure my tax-hit pay could cover monthly bills as well as savings, luxuries such as holidays and those never-ending unexpected costs.

The new budget flagged expenses I never paid attention to in the Emirates: heating, petrol and commuting.

Britain has been working from home during the crisis, but restrictions are easing with workers slowly returning to offices, which means paying for parking and train fares – much more expensive than filling up a tank to drive from Dubai to Abu Dhabi.

With UK fuel prices hitting a new record high of 148.02 pence a litre at the pump last weekend, filling up a 55-litre family car now costs an "eye-watering" £81.41.

"With the oil price teetering on the brink of $100 a barrel and retailers keen to pass on the increase in wholesale fuel quickly, new records could now be set on a daily basis in the coming weeks," said Simon Williams of the roadside assistance organisation RAC.

This is a double hit for me with the oil tank at home, encouraging me to switch to greener ways of driving and heating my home – but that's an expense in itself.

One thing I have found much easier here though is investing, swapping my portfolio of exchange traded funds using an offshore brokerage in the UAE for low-cost self-invested personal pensions and tax-free individual savings accounts here.

The stag may have dented my car, but it has certainly not dented my spirits or my enjoyment of my new life back in Blighty.

After a long, cold winter I love watching the first hints of spring with green shoots breaking through the earth from the bulbs I planted last year.

I’m also enjoying having family near by and watching my children thrive in their new schools.

But like anyone who enjoyed an extended stay in the Emirates, I will always have fond memories of my time in Dubai and its easy way of life.