All about UK Tax on Foreign Dividends

UK tax on foreign dividends is a topic that may interest you if you are a UK resident who receives income from shares in overseas companies. Foreign dividends are generally subject to UK income tax, but there are some rules and reliefs that may apply depending on your circumstances.

Foreign dividends are taxed as part of your total income, along with your earnings, pensions, savings interest, and other sources of income.

You have a tax-free dividend allowance of £2,000 per year, which means you do not have to pay tax on the first £2,000 of dividend income you receive from any source.

You also have a personal allowance of £12,570 per year, which means you do not have to pay tax on the first £12,570 of your total income, including dividends.

If your dividend income exceeds your dividend allowance and personal allowance, you have to pay tax at different rates depending on your income tax band. The rates for 2021/22 are 7.5% for basic rate taxpayers, 32.5% for higher rate taxpayers, and 38.1% for additional rate taxpayers.

You may be able to claim foreign tax credit relief if you have paid foreign tax on the dividends you receive from overseas companies. This means you can reduce your UK tax liability by the amount of foreign tax you have already paid, up to a certain limit.

You may also be able to benefit from double taxation agreements that the UK has with many countries. These agreements can reduce or eliminate the foreign tax that is deducted from your dividends before they reach you.

You usually need to report your foreign dividend income on a Self Assessment tax return if you are a UK resident. You can use the 'foreign' section of the tax return to record your overseas income or gains and claim any reliefs or credits that you are entitled to.

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