UAE-based taxpayers face £1,000 bill to top up UK state pension from abroad

People living abroad will have to pay more than five times as much as they currently do to keep their full UK pension due to a crackdown on state benefits announced in the budget.

Chancellor Rachel Reeves said those who relocate outside the country will no longer have access to the class two voluntary national insurance contributions system, which allowed people to pay a weekly amount to plug the gaps in their contributions and still qualify for the state pension.

The bill will change from £182 a year to a £1,000 annual fee from April 6, 2026 to boost their state pension payouts.

The shift would appear to be intended to clamp down on people who live in the UK for as little as three years before returning home, but would also affect UK citizens who choose to move abroad.

Last year, more than a quarter of a million British taxpayers relocated abroad, with many choosing the UAE due to its favourable tax-free status.

A poll by The National also found those who had opted for life in the UAE appreciated what they saw as a better lifestyle, stability and quality of life as defining factors behind their preference over living in the UK.

Many respondents said the rising cost of living, concerns about crime, and a perceived decline in safety were major reasons why they would hesitate to live in the UK.

Among other changes in the budget, which is due to raise £26 billion in tax measures, were the introduction of a so-called “mansion tax” expected to raise £400 million in 2029-2030 through the imposition of a £2,500 a year fee on homes valued above £2 million.

Other personal tax changes include £4.7 billion through charging National Insurance on salary-sacrificed pension contributions, and £2.1 billion through increasing tax rates on dividends, prop