Please welcome my good friend Simon Withington, who is here to explain the financial benefits and the possible mistakes to avoid when moving to Dubai from UK. He has been living in Dubai for 2 years and so has a lot of really useful first-hand experience to share. Over to you Simon…

As an avid reader of moneystepper, I was honored (and a little surprised) when I was asked to write an article for the site. Sadly, he was not interested in me writing about my guaranteed get rich quick scheme (it’s definitely not a “pyramid scheme”), but rather my experience of living and working in the Middle East. I have been a resident in Dubai for 2 years now after moving to Dubai from the UK and I hope I can shed some light on what makes this a great place to live, as well as some lessons I have learned since being here.

So, here is my moving to Dubai from UK advice:

 

A Short Intro To Dubai

First I thought I’d mention a little about the United Arab Emirates and Dubai in particular, since the history of the Middle East can be complex and confusing. The UAE is a combination of 7 Emirates (Dubai and Abu Dhabi being the most famous) founded in 1971 and located at the edge of the Arabian Peninsula, sandwiched between Oman and Saudi Arabia:

The creation of the UAE signaled the end of British Rule in the area, although there is still a British influence in Dubai to this day. The recent discovery of oil (mainly found in Abu Dhabi) has transformed Dubai from a small fishing port to a modern and wealthy multicultural city – practically all of the record breaking mega structures that currently exist today are less than 15 years old.

Dubai has big plans for future growth, with planned infrastructure projects including Expo 2020, full scale replicas of the Taj Mahal and Eiffel Tower, underwater hotels and countless other outrageous skyscrapers. English is widely spoken, and there is a high demand for talented expats to work in the region (approximately 90% of the workforce in Dubai is expat).

So today Dubai is a destination of the rich and famous, of supercars, spectacular buildings and the hustle and bustle of a major metropolis. Sadly I’m neither rich nor famous, my European Sports car is a Peugeot and my Arabian Palace a modest one-bed flat in the City’s Downtown district. However, I still think it can be an awesome place to live.

Here is why.

 

 

Moving to Dubai Benefit 1 – Tax? What’s That?

There is no direct tax on income or social security in the UAE for individual residents. Therefore for the majority of expats in the UAE the annual tax bill is $0. I think I could just stop this section here! However as this is a personal finance blog, and in the interests of making UK tax payers jealous, I thought I would drill into the math on this to show really what impact this has.

A person earning the equivalent of 31,000 GBP gross in the UAE takes home 100% of those earnings – i.e. 31,000GBP (and transfer money from UAE to UK for less than 0.5% cost).

A person earning 30,000GBP in the UK ends up paying 20% tax on everything over 10,000GBP – i.e 4,000GBP. As well as this, Class 1 National Insurance contributions will set you back a further 2,900GBP making the total annual tax bill 6,900GBP. In total you kindly donate George Osbourne 6,900GBP of your hard-earned payroll cash before you can even touch it, meaning your net take-home pay is actually 23,100GBP. Hmm.

Oh and most employers will also pay the equivalent of council tax for their employees in Dubai (known as a housing fee). In the interest of simplification let’s say the annual council UK tax bill is 1,100 GBP, meaning that the real annual net income on a 30,000GBP salary is 22,000GBP before you hit the pub.

In order to earn the UAE net salary (i.e. pay net of income, social security and council tax) of 30,000GBP, a person in the UK (assuming no other income/tax shields) would need to earn approximately 47,000GBP. Of course earning 47,000GBP would push this person into the 40% tax band (which starts at 41,865GBP), meaning George takes an additional 40% of every single penny earned on top of this. Ouch. For our London readers and those in higher earning jobs the taxable benefits of a 0% fiscal policy are clearly attractive.

 

Moving to Dubai Benefit 2 – Petrol’s Cheaper Than Water 

Dubai is one of the most expensive gulf countries that you can buy petrol in. Having said this, the price of one litre of petrol is currently running at 1.79AED (a litre of bottled water will cost around 2AED). This is around 29 pence per litre. My Peugeot hatchback will cost me about 60AED (9.72GBP) to brim from empty. It would cost me 43.25GBP in the UK. This low price of fuel is largely subsidized by the government, who own the majority of fuel stations across the Emirate.

The fuel cost has been creeping up in Dubai, amid protest from some of the local population. However this cost will be considerably lower than practically anywhere outside of the Middle East. As a result order of the day on Dubai highways is 4x4s, muscle cars and sports cars…and my Peugeot.

For non-drivers the knock-on benefit is that taxis offer an extremely cost effective means of travel – the cost of taxis is approximately 30 pence per kilometer. Further, all taxis are licensed and metered under tough regulations from the Dubai authorities. Although Dubai has a good public transport system, taxis are a simple, safe, convenient and cheap alternative.

 

Moving to Dubai – Benefit 3 – Safety Is A Priority

Whilst stories of Brits being banged up abroad for committing minor offences are common within the UK tabloid press (usually because of drug offences for which there is zero tolerance in the UAE, and for having sexual intercourse in inappropriate places), the reality is that the UAE is an incredibly safe place to live. Quite simply the deterrents (serious jail time followed by certain deportation) are sufficient to deter all but the most foolhardy criminals. Speaking as somebody who lived most of their life in the North East of England I’m still amazed to see people leaving IPads and handbags on tables without supervision, keys in car ignitions and front doors wide open. There are no concerns when walking the streets late at night, bars and nightclubs are incredibly secure and physical altercations are practically unheard of. In fact, I am yet to see any form of physical violence or criminal activity in my 2 years – compare this with Newcastle where fights, criminal damage and anti-social behavior are depressingly common.

Safety is good for the wallet too. Home and car insurance premiums are low, and since there is no theft there is no need to replace any stolen items. Furthermore, homes and business do not need to shell out on physical or surveillance security in the way they would in other western economies.

One thing regular visitors to Dubai mention is that there does not appear to be an obvious police presence in the city – even at the major tourist landmarks such as Burj Khalifa. One thing to bear in mind is that there is a huge undercover police presence in Dubai (one UAE resident told me that 20% of taxi drivers are also undercover cops), so it is important to behave respectfully in public places.

However, certain police cars in Dubai are a little more obvious:

 

Moving to Dubai – Benefit 4 – It’s Ladies Night…

Dubai is not a cheap place to live (see mistakes to avoid). However it is possible to live a fun social life without breaking the bank – the simple answer is to make sure you never pay full price for anything!

The social scene in Dubai is big business, and as a result competition between bars, restaurants and other attractions is fierce. Consequently they will all try to outdo each other with various happy hours and other promotions. A favorite within this household is the phenomenon known as “Ladies Night” – essentially on a given night of the week women get to drink all they want for free at certain bars. In some venues this even includes champagne, and there is actually no catch assigned (although for men the drinks will be full price). It’s relatively easy to scour the local press to find the best deals on any given night. Ladies nights are also very popular with men, for reasons which I think are probably obvious!

Groupon is hugely popular and well received in bars and restaurants, as is the money saving bible known as “The Entertainer”. This enormous voucher book costs around 70GBP but is full of thousands of vouchers for buy one get one free offers at hotels, attractions, restaurants and bars. There are very few things I do in Dubai without being armed with at least one of these vouchers, and I estimate they save me 50 GBP per week – nearly 2,600 GBP per year!

Finally the Middle East is still a land where bartering and negotiation is common. If you don’t want to pay full price don’t be scared to negotiate for stuff, particularly in the various souks and markets.

 

Moving to Dubai – Benefit 5 – Cheap Labor

Whilst for some the idea of home help feels a little uncomfortable, in Dubai it is a way of life. The reason is that rates for hiring these services in the Emirate are incredibly low, due largely to an influx of expatriates from developing nations (particularly India, Pakistan, Bangladesh and The Philippines). For locals and expats from wealthier nations home help is extremely affordable, which is particularly beneficial for those with families. It is not uncommon for families on relatively modest incomes to have an entourage of nannies, cleaners, gardeners and drivers – something that would be well out of reach for a normal UK family. This labor force is generally reliable and speaks good English, although there is very little regulation around these services.

Incidentally low labor rates are also a driving factor for economic growth in the region – major infrastructure projects are built by a workforce on very low salaries, typically under 3,000AED per month (500GBP). As a result armies of workers are thrown at construction projects in order to get them finished as quickly as possible. However, migrant construction workers do suffer similar conditions to those highlighted in other gulf countries highlighted in the Qatar 2022 world cup preparations.

With all the benefits Dubai offers it is an extremely attractive place for western expats. However here are a few things to lack out for and (try to) avoid.

 

 

Moving to Dubai – Mistake 1 – Rent!

I got a lovely letter from my landlord the other day – it was to inform me that the rent on my small one bedroom flat in the Downtown area was increasing this year by only 10%. My rent for 2014/15 will be a mere £19,000 per year. Plus, there is a £425 estate agent fee just for the pleasure of shelling out my £19,000.

Sadly, for people moving to Dubai from UK, rents are very high due to a recent explosion in demand since 2010 (following a crash between 2008 and 2010), and you will typically end up paying top dollar for popular Western expat areas such as The Marina, Downtown and Jumeirah Beach Residences. Rents in popular areas will continue to rise 5-10% per annum for the foreseeable future. According to Dubai Land Department’s Real Estate Regulatory (RERA) Index the following guideline rent values exist in the Marina (all per annum):

1 bed apartment – 15,250 – 20,300 GBP

2 bed apartment – 23,700 – 28,800 GBP

3 bed – 33,900 – 39,000 GBP

4 bed – 42,000 – 50,800 GBP

The vast majority of landlords will apply these rates to their apartments – however helpfully RERA do offer a degree of rental control which means that landlords cannot legally charge over the guide prices for existing tenants. For example if you currently paid 20,000GBP for a one-bed flat in The Marina and your landlord wanted to raise this to 21,000GBP, you could rightfully take your landlord to court. This law is enforced and generally adhered to. I would urge all prospective tenants to check the RERA rates to check if they are paying too much.

Other than to use RERA the only other piece of advice I can offer is look away from the traditional expat areas. 2 or 3 years ago people living in Dubai would not consider moving away from the traditional expat heartlands – however improved accommodation, infrastructure and amenities in areas such as Silicon Oasis, Sports City and Dubailand are making these areas extremely attractive from a cost perspective – typically they will be between a half and two thirds of the more popular areas, and the values are unlikely to increase at the same rate.

 

Moving to Dubai – Mistake 2 – Public Services And Welfare

So why is income tax so popular in the majority of the Western world? Probably because it pays for stuff – expensive stuff like education, health and welfare. In the UAE you need to pay for these things yourself, which is great if you have a full time job, no dependents in full-time education and generally are in good health. If not, here are some things to bear in mind when moving to Dubai from UK:

Health – you must ensure that your employer provides a good standard of medical cover in the terms of employment that covers not only the main provider, but the family as well. Happily my employer sorts this out for me and the medical care in the UAE is generally very good. If you have no plan provided for by the employer, you must but find and take out a reasonable healthcare plan. The consequences of not doing so could be catastrophic.

Education – similar to healthcare most employers will offer a package that contributes toward education for dependents, and it’s a good idea to push for this in any salary negotiation as it could be deal-breaker. Again the quality of education provided in UAE private schools is good – however fees can be upwards of 15,000GBP per year:

Welfare – unlike other western economies there is little support for those out of work – there are no ‘Benefits Streets’ in Dubai. Basically if you lose your job, you lose your visa and you are forced to go back to whatever country you came from. If you give birth (which is illegal out of wedlock!), statutory maternity leave is only 45 days (paternity leave is about 2 days) and there is no concept of child support. One thing to watch out for here however is gratuity payments. Under UAE employment law every single employer must accrue an end-of-service benefit for all employees, equating to roughly a month’s salary for each year worked. You should receive this irrespective of the circumstances of the termination of employment.

 

Moving to Dubai – Mistake 3 – Cost Of Alcohol

Despite having highly westernized influences, Dubai is still a Muslim country that does not look kindly on substance abuse. Any form of drug taking is banned, and tourists should be careful about bringing certain medications (such as Codeine) into the country. Alcohol on the other hand is not banned – however it is heavily taxed. There is a 30% duty levied on all sales of alcohol, with a full price pint of lager or large glass of wine well over 6.50GBP (see benefit 4 for ways to avoid this). A bottle of wine in a restaurant tends to cost at least 30GBP

Further, purchase and consumption of alcohol without an alcohol licenses outside of a licensed premises is also technically illegal. Alcohol licenses cost about 30GBP and last for a year and allow access to liquor stores – these are the only places that you are allowed to purchase alcohol for personal use. Liquor stores are generally reasonably priced, with a bottle of wine starting from around 7GBP.

The best deals however tend to be found on so-called Barracuda runs which are a real tradition in Dubai and involve crossing into another Emirate in order to purchase large quantities of tax free alcohol. To this day I’m not 100% on the legality of this practice so I cannot condone it in a published article, however what I can recommend is purchasing Alcohol at Dubai duty free every time you enter the country. The duty free is located next to the baggage claim and everything is generally 20% cheaper than you could get in Dubai itself!

 

 

Moving to Dubai – Mistake 4 – The Weather

Just to clear this one up, between September and April Dubai has for me the best climate of any country in the world. The temperature rarely gets below 20 degrees Celsius in the darkest months of winter, sun is almost a guarantee (apart from the odd sandstorm) and extremes of weather are extremely uncommon.

Between May and August however the weather becomes rather more oppressive, with temperatures over 40 degrees Celsius before 9:30am and rising to over 50 on some days. For instance, the current weather forecast in July has every day over 40 degrees Celsius and “lows” of over 33:

There are two impacts of this. Firstly stuff that you might normally do outside (sport, walking to work, days out with family) have to move indoors. For instance, my walk to work (free) has now been replaced by a 5GBP per day taxi fare. My weekly football has had to move to a more expensive air conditioned location, while kids must be entertained in other ways rather than letting them play in the park.

Secondly I have the air conditioning on. All the time. And this is where the lesson comes in – ensure that your accommodation includes air conditioning costs in the rent. If not you end up with having a choice between living in a sauna, or receiving a hefty monthly air conditioning bill!

 

Moving to Dubai – Mistake 5 – Road Safety

UAE has one of the highest mortality rates per capita of drivers anywhere in the world. The Jeremy Clarkson quote that the majority of the world “still hasn’t got the hang of it” when it comes to driving definitely applies to Dubai. More worryingly still expat drivers who move to Dubai from the UK develop shocking practices (speeding, undertaking, not stopping at crossings etc) that they would never use in the UK.

There is only three pieces of advice I can offer here.

1) If you buy a car, buy a 4X4. It is almost inevitable that you will be in an accident at some point if you are a regular commuter and you need to ensure the safety of yourself and your family.

2) Renting a car will buy you piece of mind. I have decided to rent rather than buy, purely for the peace of mind that, if anything does happen, the rental company will deal with any of the fallout (I hope!)

3) If you are in an accident, ensure the police are called and that everybody is present (all drivers and witnesses). If you do not follow this protocol it could invalidate insurance and make life very difficult. You need to obtain a piece of paper from the police (red if the accident is deemed to be your fault, green if not) that is used in any claim.

 

Moving To Dubai From UK – Conclusion

In summary, Dubai is a place with plenty of great opportunities for anybody who wants to start a new life for themselves. I have pointed out a few schoolboy errors that you can try and avoid to make your potential move even better.

If you want even more information on the ins and outs of moving to, and living in, Dubai, then I would recommend reading the following book:

So, if you are moving to Dubai from UK, I hope that this helps you a little, and most of all…have fun!