Tax on foreign savings and investment income
If you receive savings and investment income from abroad, you'll usually need to declare this on a Self Assessment tax return. You may have to pay UK Income Tax, but if you've paid foreign tax on the income you may be able to offset (deduct) this.
What counts as overseas income?
Income counts as 'overseas income' if it comes from outside England, Scotland, Wales and Northern Ireland. So income from the Channel Islands and the Isle of Man counts as overseas income too.
Overseas savings and investment income includes:
- interest from overseas bank or building society accounts
- dividends and interest from overseas companies
- rent from overseas properties
If you've already paid tax in the country of origin
If you find that you're being asked to pay tax both in the country of origin and in the UK, you may be able to claim relief from double taxation by completing the foreign pages section of thetax return. The UK has signed many double taxation agreements with other countries.These are arrangements that aim to prevent double taxation.
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How much foreign relief will you get?
You'll get relief on the lower of:
- the minimum foreign tax payable under the terms of the agreement
- the maximum amount of UK tax due
So if the foreign tax you're due to pay is more than that payable as UK tax, you'll still only get relief on the amount of UK tax payable.
Even if there is no double taxation agreement between the UK and the other country, relief may still be given for the foreign tax payable (called 'unilateral relief'). Your Tax Office will help you if you need further advice.
Foreign tax on dividends and interest
Double taxation agreements usually set out a rate of tax (called 'withholding tax') that a country can charge on a UK resident receiving certain types of income from that country - for example, dividends from companies or interest on savings.
Any claim that you make for relief against UK tax must be restricted to this minimum tax payable under the relevant double taxation agreement.You can find a list of these rates in the notes to the foreign pages of the tax return.
If you've paid foreign withholding tax at a higher rate than is listed for that type of income, you'll need to approach the overseas tax authority for a refund of the tax paid above the agreed rate.
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Rent from overseas property
If UK tax is due on rental income from an overseas property, you can deduct certain expenses and allowances in the same way as you can from income from UK property.
You can claim relief for tax paid in the other country in the foreign pages section of the tax return.
- Tax on overseas property lettings
Reporting your overseas income
You must report your overseas income on the foreign pages of your tax return.
Effect of residence, ordinary residence and domicile on your tax liability
Its possible that you may not have to pay tax on your overseas income. This will depend on whether you are classed as resident in the UK for tax purposes in a tax year. The amount of income on which you pay tax may also be affected by whether you are treated as having an ordinary resident status in the UK and your country of domicile.
You can read more about how your residence, ordinary residence and domicile can affect the UK taxation of income from your overseas investments and savings interest on the HM Revenue & Customs (HMRC) website.
More useful links
- How to file your tax return online
- Planning your personal finances
- Savings and Investments - an overview
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