Tax on foreign savings and investment income :Cross Stitch – Money, tax and benefits

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.

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 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.

You’ll get relief on the lower of:

  • the foreign tax payable under the terms of the agreement
  • the 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’). Contact HM Revenue & Customs (HMRC) if you need further advice.

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 ‘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’ 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 on the HMRC website.

Provided by HM Revenue and Customs