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.
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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:
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 - 'foreign tax credit relief' - from double taxation by completing the foreign pages section of the tax return. The UK has signed many double taxation agreements with other countries. These are arrangements that aim to prevent double taxation. Find out more by following the links below.
'RDR1 - Residence, domicile and the remittance basis' is a guide for residents and non-residents on the residence, domicile and remittance basis rules for tax years 2012-13 onwards. It replaces the booklet HMRC6.
Use the 'HMRC6 - Residence, domicile and the remittance basis' booklet as a resident or non-resident for information on rules affecting your tax liability in the UK up to the end of tax year 2012-13 only.
You'll get relief on the lower of:
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'). Contact HMRC if you need further advice.
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 amount. You can find a list of these rates in the 'DT digest' - Digest of Double Taxation Treaties.
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 withholding tax rate.
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.
You must report your overseas income on the foreign pages of your tax return.
It's possible that you may not have to pay tax on your overseas income. This will depend on whether you are classed as a '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 your 'ordinary residence'(only for tax years up to and including 2012-13 - see HMRC6) and 'domicile' position.
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 by following the links below.